Causes Of The European Economic Crisis

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Europe is known for its wealthy economy, developed societies, and advanced technologies. However, the past few decades have seen European nations slowing down or declining in many areas, including economy and politics. With the potential booming power of nations such as China and India, it is not far-fetched to say that in the future Europe will fall behind. One prominent sign of Europe's decline is the major economic crisis in 2007-2008. While it started in the United States, it has made a great impact on the European economy, creating a long period of low economic growth and rising unemployment. The economic exposed numerous problems within Europe's economy, and in particular the Eurozone. There are several factors that contributed to the economic crisis. The first is a major credit bubble in American banks. Between 2000 and 2007, there was a sharp increase in savings available for investment [1]. This tempted banks and consumers to do high-risk lending and borrowing practices. When these bubbles burst, prices of commercial property dropped, causing banks in the U.S. and Europe to fall into debt. This created a domino effect on the economy. Consumers as well as governments were no longer able to borrow and spend. Businesses had to cut back their investments as demand faltered and reduced their workforces, which then lead to increasing unemployment. Governments had to intervene to prevent the market from collapsing through policies such as cutting the interest rates of banks and introducing fiscal policies. However, the crisis was still able to inflict great damage onto the economy [2]. The economic crisis exposed critical weaknesses in the Eurozone. The first is the high economic interdependency between EU nations, and the EU... ... middle of paper ... ...ill living in poverty. China's GDP per capita, while has achieved a large growth rate from the 1960s, is still only $6000 compared to France's $39000 or Germany's $42000 (however, it is worth noticing that China's GDP per capita has been growing fairly consistently since 1990, while France's and Germany's have had multiple periods of decline, and is declining currently) [21]. On the military side, China's military is far behind European's in terms of technological advancement, however China does have a massive manpower that it can use. In conclusion, while there are numerous problems plaguing Europe currently, the future where Europe cease to be one of the major power in the global stage is not an inevitable one. If European nations fix their current problems and pull themselves out of their decline (and they do have time to do so), then this future can be prevented.

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