European Debt Crisis: Causes & Impact on Industries

Europe has been tormented by the sovereign debt crisis since 2009.?? This paper analyses the causes behind the crisis and its impact on manufacturing, automobile and construction sectors. Unchecked capital inflows and asset bubble, integrated banking operations and lack of fiscal discipline were identified as the major causes. Weak demand, declining consumer and investor sentiments and pessimistic global outlook owing to the crisis have led to the slowdown in the industrial demand and production. The Sovereign debt crisis has to be resolved swiftly in a collective manner for a disorderly exit will not only jeopardize the European region, but the entire global economy. The past few months have been an extremely challenging period for those charged with shaping Europeï¾Ãƒâ€šÃ‚Æ’??s fiscal and monetary policies. Global Financial markets have been in turmoil and sovereign debt marketsï¾Ãƒâ€šÃ‚Æ’?? conditions have drastically worsened by the so called ï¾Ãƒâ€šÃ‚Æ’??Eurozone Crisisï¾Ãƒâ€šÃ‚Æ’?ï¾Ãƒâ€šÃ‚. Governments and the ECB have taken extraordinary steps that will set precedents which will affect the landscape of European macroeconomic policy for many years to come. Europe has been tormented by two unified crises: (i) ï¾Ãƒâ€šÃ‚Æ’??a banking crisisï¾Ãƒâ€šÃ‚Æ’?ï¾Ãƒâ€šÃ‚, curtailing from losses in capital market securities (including US subprime and other structured products), as well as home-grown, boom-bust problems in the real estate markets of some EU countries; and (ii) ï¾Ãƒâ€šÃ‚Æ’??a sovereign debt crisisï¾Ãƒâ€šÃ‚Æ’?ï¾Ãƒâ€šÃ‚ exacerbated by recession, transfers to help banks, and in some cases very poor fiscal management by member countries over a number of years that was inconsistent with the principles laid down in the Stability and Growth Pact and the Maastricht Treaty. This paper explores these issues from the fiscal and monetary perspective, and reviews the impact of the crisis and emerging threats to the global economy.