The Euro and sovereign debt crisis and its impact on southern Europe

Abstract

The US financial crisis had a major impact on the European Union. The national approach to the banking sector and the subsequent sovereign debt crisis of the southern European countries exposed the loopholes in Economic and Monetary Union (EMU). Southern European economies, the weak link of EMU, became the primary victims of the asymmetric shock. In this chapter, we analyse the origins and development of the Euro and sovereign debt crisis and its impact on southern Europe. We focus here on the political economy of austerity and the impact on European integration. In the next chapter, we will discuss the political and social consequences of the crisis. The chapter starts by briefly delineating the origins of the disaster, which began with the banking crisis related to speculation on subprime mortgages. The subsequent section reconstructs the creation of the Troika; a section on the impact of the Troika programmes on the southern European countries, Ireland, and Cyprus follows. The chapter closes with some conclusions.