Financial Crisis and Eurozone Crisis

The 2008 financial crisis also referred to as the Global Recession, Global Financial Crisis or the Credit Crunch is considered by many economists to be the worst financial crisis since the great depression of the 1930s. It resulted in the collapse of large financial institutions, the bailout of banks by national governments, downturns in stock markets around the world. It also contributed to the failure of key businesses, declines in consumer wealth estimated in trillions of U.S Dollars, a significant decline in economic activity, pushed over 30 million people into unemployment, and consequently triggered a catastrophic turbulence around the globe and brought many countries to the edge of insolvency, leading to a severe Global Financial Crisis of 2008.

This essay will mainly focus on the causes and effects of the global financial crisis of 2008 and subsequently the action taken by Western governments in tackling the financial crisis. Furthermore, It will discuss the causes and potential impacts of the current euro zone crisis drawing recent updates on the ongoing impacts.

The key trigger of the 2008 financial meltdown was simply easy lending in the US housing market. This boom in the US housing sector took the economy to a new level. In an era of very low interest rates and large inflows of foreign funds supplemented by reduced bank regulation, the world became flooded with liquidity with funds chasing any opportunity for good returns. In the USA, low-income earners were encouraged to buy homes with little or no equity and the banks moved to providing low-income mortgages. Such opportunity gave no time for people to rethink their decisions as more and more people flocked in to take advantage of becoming a homeowner that contributed towards every American’s dream. This human stampede for securing a home increased and fueled the home prices further. As there was ample money to lend to potential borrowers, the loan agencies started to widen their loan...