The consequences of U.S. financial crisis of 2008 include slow growth of global economy. The crisis was caused by the unsustainable fiscal policies of European countries. Greece was the first European country that was severely weakened by the globe debt crisis. Its unsteady economy and unsuccessful fiscal reforms lead the country in the “wrong” direction. In late 2009, the Prime Minister George Papandreou announced that previous governments had failed to expose the true size of the nation’s deficits. Actually, Greek debt was so large that it exceeded the size of the entire economy. The country no longer conceals the problem. Investors took measures by demanding higher yields on Greece’s and caused raising cost of the country’s debt. This situation imposed to European Union and European Central Bank to make extra efforts. They granted bailouts to Greece. On the other hand, the markets began driving up bond yields in the other heavily indebted countries, anticipating similar problems.
The European Union and the International Monetary Fond were forced to allocate bailouts to all troubled European economies. Greece accepted three amounts of extra financial resources from the ECB and the IMF. They tried to help it to overcome its debt crisis by lending millions of euro in the spring of 2010, in mid-2011 and in March 2012. Other countries such as Spain and Italy accepted bailouts as well. Their financial instability is large too, but the debt crisis there is not so deep such as the Greek one.
Unfortunately, the measures of European policy helped stabilize the financial markets in the short term. For this reason, they were widely criticized. The larger issue is that Greece is a small country and its woes for European Central Bank are comparatively easy to solve, but countries such as Spain and Italy are too large to be saved. The European Union should take tough measures and maintain strong fiscal health of all its members, especially the most vulnerable ones.
The present debt crisis proves to humanity that there is nothing completely certain. Financial irresponsibility caused globe financial problems. The “Domino effect” proved that all countries play important roles in world markets and they should do it with high attention and cautious actions.