Eu and the Potential Greek Default

OUTLINE

Topic: Will/could a potential Greek default result in the end of the European Union?

The current international economic debt crisis has caused investors worldwide to fear the instability that potentially lies ahead. Specifically, the situation in Greece causes reason for concern as a potential default may have the ability to destroy the European Union. The crisis that is currently engulfing the entire Euro-zone began early in 2008 in Ireland when the Irish Government had to guarantee the debt of the six main banks in Ireland whom had become troubled due to the excessive over-lending for real estate development and speculation. As markets recovered around the world in 2009-2010, bond markets in Europe slowly began to realize that the debt of Greece and Portugal was unsustainable at current levels and began to force interest rates in those countries higher (by pushing bond prices lower). This caused Greek debt to move to interest rate levels that made defaulting on their debt a potential reality. Fear then spread to other debt markets in Europe, especially those of the weaker countries like Portugal, Ireland and Spain. Any country that has difficulty matching expenditures with a sufficient source of collections appears destined for inevitable failure. Greece's massive amount of debt has been recently looked at as insurmountable and this has struck fear in institutions such as large banks and individual investors worldwide about being repaid. Greece has been seen as unable to pay their creditors at the maturity of their bond issuances, and this has caused volatility in global markets and in the hearts of a sizable amount of investors. As a result this has caused great debate throughout the European Union in regards to next steps and solutions to this looming matter.

Many of the financial problems in the “PIIGS” (Portugal, Ireland, Italy, Greece and Spain) were the result of years of spending beyond their means, hiding debt off...