European sovereign debt crisis
From late 2009, panic and fears of a sovereign debt crisis developed among fiscally conservative investorsconcerning some European states, with the situation becoming particularly tense in early 2010.This included eurozone members Greece, Ireland, Spain and Portugaland also some EU countries outside thearea. Iceland, the country which experienced the largest crisis in 2008 when its entire international banking system collapsed has emerged less affected by the sovereign debt crisis as the government wasunable to bail the banks out. In the EU, especially in countries where sovereign debts have increased sharply due to bank bailouts, a crisis of confidence has emerged with the widening of bond yieldspreads and risk insurance on credit default swaps between these countries and other EU members, most importantly Germany.
While the sovereign debt increases have been most pronounced in only a feweurozone countries they have become a perceived problem for the area as a whole. In May 2011, the crisis resurfaced, concerning mostly the refinancing of Greek public debts. The Greek people generallyreject the austerity measures and have expressed their dissatisfaction through angry street protests. In late June 2011, the crisis situation was again brought under control with the Greek governmentmanaging to pass a package of new austerity measures and EU leaders pledging funds to support the country.
Concern about rising government deficits and debt levels across the globe together with a waveof downgrading of European government debt created alarm in financial markets. On 9 May 2010, Europe's Finance Ministers approved a comprehensive rescue package worth €750 Billion (then almost atrillion dollars) aimed at ensuring financial stability across Europe by creating the European Financial Stability Facility (EFSF).
In 2010 the debt crisis was mostly centered on events in Greece,...