The Eurozone crisis is the decline of economic growth of the Eurozone countries. The cause of the Eurozone crisis is due to excessive spending during the period of easy credit, governments of the euro countries are in a difficult position to repay the loans with high interest rates back to the financial institutions. Therefore, governments chalked up large amounts of sovereign debts and yet, unable to get loans due to high borrowing cost from the financial institutions. Thus, leading to economic instability and affecting the economic growth in the Eurozone.
Due to the economic slowdown in the Eurozone, recession is expected and this will lead to high unemployment rates, lower levels of investment, smaller government budgets and ultimately as people will be more inclined to save money, it makes the recession even worse because it causes a further decline in consumption. Thus, it will lead to a fall in the real in the GDP (Gross Domestic Product). Furthermore, as the euro currency weakens against other foreign currencies, the cost of export-goods and services will be more expensive and thus, demand for exports goods will decline compared to domestic goods.
The Eurozone are one of the largest importers of export goods. Hence, when the economies of the euro zone countries slows down due to the Eurozone crisis, export-oriented countries (I.E: Singapore) faced a significant drop in demand for exports to the Eurozone. Therefore, when the demand is lower, the GDPs (Gross Domestic Products) of these export-oriented economies will take a hit as it has a strong correlation with the economies of the Eurozone.
In a report published from Asian Development Bank (2012), states:
“A prolonged or deeper euro zone sovereign debt crisis will affect the region through the trade channel as demand from developed countries falls. During the 2008/09 global financial crisis, economic growth in the region collapsed as demand for Asian exports contracted due to weak global growth....