Financial Crises In Europe

                          

What is the financial crisis? Why does it happen? Developing countries are at a loss to understand why developed countries are facing financial crises. These are the questions that have become common in the last two decades.

In a broader sense, financial crises is the inability of a country to generate income and leading it to halt the wheels of the economy. The most important question arises that there are several regulatory authorities around the world that have chalked out modus operandi to drive the economy in a smooth and efficient way. Still countries fail to stand strong and end up in financial crisis. There are two major reasons for this. The first one, is the incompetence of the ruling government and turning blind eye to major problems like tax evasion and corruption. In the long term these string of setbacks leads to financial crises. And the second reason, a war which reduces the consumption capacity of the country and hence leading to crises.

The most common causes of financial crises are among countries of Europe especially “The Pigs Nation”, which includes Portugal, Italy, Ireland, Greece, and Spain. The major reason for the crises was ambitious plans of their manufacturing without gauging their capacity to which they can push themselves. The government encouraged high-risk lending and borrowing of loans from the bank. The government took a surplus of loans from the IMF to inject liquidity in the economy to robust their manufacturing sector. After the 2008 global crises these countries were unable to compete with other European Union countries and lead to another financial crisis of its decade.

The same was the case with Greece which was in the news after the IMF declared it bankrupt as it was not able to repay the installment of its loan in 2015. It did not take any leaf out from the global crises of 2008 and continued to collect the toxic cauldron of tax evasion and corruption and challenging the rules and regulations of  Bank of international settlement(BIS).

Sine qua non to deal with the financial crises is to strictly follow the guidelines like BASEL I, II, III of the Bank of international settlements, and it should be the duty of the ruling government to take all sorts of essential majors so that the economy runs smoothly and efficiently.