The European Sovereign Debt Crisis

Abstract

More than 60 years ago, in the wake of two disastrous world wars, European leaders set into motion what would eventually become a grand experiment—a pan-European currency union. The objective was noble: to implement measures that would provide the economic benefits of increased integration of European national economies and to thereby also help reduce the ancient enmities that had divided Europe for centuries. The process of integration began with a gradual dismantling of tariffs and other restrictions on trade within Europe. It culminated in 1999 with the replacement of such national currencies as the German mark, Spanish peseta, and ten other currencies with a single new currency, the euro. The European Central Bank (ECB) was created to conduct monetary policy for the entire bloc, which initially consisted of 12 nations. The newly formed euro zone increased to 17 members by 2013, with several additional nations in the queue for possible admission in coming years.1