Crisis in europe

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THE ECONOMICAL PROBLEMS IN EUROPE

• THE MAIN CAUSES OF ECONOMICAL PROBLEMS

The economical problem was preceded by a long period of rapid credit growth, low risk premia, abundant liquidity,and the development of real estate bubbles. As a result, a downturn in a relatively small corner of the financial system (the US subprime market) was sufficient to topple the whole structure.

Themain causes of economic problems are the restriction of credit, higher oil prices and the sharp adjustment in the construction sector. These problems have caused the economic slowdown, inflation andrising unemployment in Europa.

The restriction of credit: There is no facility for banks to lend. It has been installed interbank mistrust. There is a lack of liquidity. The money does not flow withthe normal required. In addition, the requirements to get a loan have increased.

The economic crisis had its origins in subprime mortgages, which are those that were granted to customers with poorcredit or with little guarantee to secure the loan.

Higher oil prices: Oil reached in July 2008, the historical record to exceed 147 dollars per barrel. Then he began to retreat and is now rangingbetween 70 and 80 dollars. The continuing oil price rises, active serious inflationary processes and can seriously affect the economy. If oil price rises, it creates a whole spiral of rising prices.The sharp adjustment in the construction sector: With an oversupply, a sharp increase in house prices and interest rate hikes, which helped to significantly grow the interests of mortgage loans, itwas possible to form the real estate bubble.

• THE EU CRISIS POLICY FRAMEWORK

The current crisis has demonstrated the importance of a coordinated framework for crisis management andprevention. The EU policy framework once fully developed, would include policy instruments in the pursuit of: (i) crisis prevention, (ii) crisis control and mitigation, and (iii) crisis resolution:...
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