My Opinion on the Sovereign Bond Crisis (2009-Current) in Europe
Since the year 2009, Europe countries have encountered financial crisis which can be concluded as the second version of Asian financial crisis happened in year 1997. The European sovereign debt crisis has brought the impacts across the world and caused worldwide economic downturn. PIGS, which consisted of Portugal, Italy, Greece and Spain, are potentially encounter national bankruptcy due to inability to settle the maturing sovereign bonds.
The root of Europe Sovereign Bond crisis is due to over spending of money by government to provide unnecessarily welfares to its citizens. Especially in Greece, its citizens are too depending on their government. Most of the citizens are working as government servant who enjoying welfares and subsidies. For instance, people could receive retired pension from government after the age of forty. These welfares not only limited in public sectors, even private sectors can also enjoy them such as free medical care and education fund. Year after year, these welfares become burdens for the government and directly abating the productivity within the nation. In order to provide such kind of welfares to its citizen, these countries have to issue sovereign bond to fill up the budget gap. However, the low productivity within the nation is unable to increase nation’s GDP.
World Bank and IMF have decided to provide loan to Greece in order to avoid breach of faith on national bond. At the same time, IMF has set up strict conditions to ensure the loan will be used at the proper ways to stimulate the economic and increase the productivity within the country. One of the conditions is to cut down the public welfares. While the Greece government decided to cut its welfare budget in order to meet the conditions set up by IMF, its citizens put the pressure on government by showing demonstrations and strikes. The purpose of...