The potentially calamitous effect on the euro zone and the global economy has now entered into a more dangerous stage as euro countries now face the debt of nearly €6, 500 billion while governments show no signs of effective solutions. What makes the issue more challenging is that the weaker sovereigns are unable to cope on their own and the major countries have been “dealing with the emerging crisis so incompetently,” such as tolerating huge imbalances and failing to coordinate banks.
The crisis that euro members face resulted from the inadequacy of budgetary, solvency, and governance. The governments’ failure to run the budget in equilibrium or in surplus caused the nations to overspend, ultimately bearing the public debt. Secondly, the assets were not enough to pay off the entire amount due. In addition, governments’ inability to provide guidance, cohesive policies, and positive decisions deteriorated the crisis to a further extent.
Euro members are not only in a financial meltdown in which any decision can cause further devastating results to their own nations, they also have the burden that any step they take to incur the opportunity cost will vastly influence the global economy as well.