(20 points) Why were European banks caught in the middle of the crisis? Were they victims or culprits? Can the Eurozone Survive? Between late 2009 and early 2013, separate fiscal and debt crisis in several member states of the Eurozone, the common currency area composed of European Union (EU) members that had replaced their national currencies (e

Eurpean debt crisis also known as the eurozone crisis or the European sovereign debt crisis.

Eurpean banks caught in the middle of the crisis , between late 2009 and early 2013 by the following reason-

(1) It was caused by a balance of payment crisis as a effect is that sudden stop of foreign capital into the countries.

(2) The crisis was badly worsed by the inability of states to resort the situation of devaluation. the meaning of devaluation is the reduction in the value of national currency in relation to others countries.

(3) A poor coordination of fiscal policy among the eurozone member also contributed to the imbalanced capital flows in the eurozone.As meaning of fiscal policy is that govenment adjusts its spending (expenditure) and tax rates(revenue) to monitor the economy.

(4) The ECB also contributed by following ways to solve the crisis by lowering the interest rate and providing cheaper loans as it flows and maintain the money in the european banks.

(5) It had a signifiacnt addverse effect on the economy and labour market effects.

(6) It also includes the globalisation of finance that encouraged high risk lending and borrowing practices.

(7) International trade imbalances also gave rise to crisis in the european states.

(8) Accumumlation of deficits in the south , by private economic actors.

(9) one of the consequences is also to curtail domestic demand and reduce borrowing from the north.

(10)Govenment is pledged is to limit their deficit spending and the debt as is also contribute to the crisis of the states.

(11)The european debt crisis also gave rise to the great recession in the around late 2009.

(12)The main root causes of the european debt crisis are competitive weakness,weak potential growth.

(13) As the economic growth rates were low,when percentage of debt is high in the foreign creditors ia also one of the reason of the crisis.

(14) To fight with the crisis, it can be focused on raising taxes and lowering expenditures.

(15) This crisis have negative effect on the trade as it harmed the export sector.

(16)Financial stability is improved by properly and successfully implementation of fiscal policy.

(17) Also lowered its bank rate for the possibility of recovering the debt amount.

(18) The situation of european state lead to speculation.

(19)Credit rating falling in the estimate of banking losses.

(20)In my opinion , it is victim as poor coordination of fiscal policy, competitive weakness, lower potential growth ect, are the reasons that contribute to the crisis of the European states.