Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 3 (2015), No. 3, Pages 72-88

DOI: 10.12735/jfe.v3i3p72

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Lessons and Implications from the European Sovereign Debt Crisis

Kang H. Park1 

1Southeast Missouri State University, Cape Girardeau, USA

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To Cite this Article     Article Views: 781     Downloads: 401  Since deposited on 2015-09-10


The European sovereign debt crisis entered into the stage of contagion in the late 2010 as it spread first from Greece to Ireland, and then to Portugal and Spain. The European sovereign debt crisis truly resulted from a combination of various factors, some as more precipitating causes while others as more fundamental or deep-rooted causes. They include easy credit expansion during the 2003-2007 period, the global financial crisis and subsequent global recession of 2008-2012, fiscal and trade imbalances of the European countries involved in the crisis, and inherent structural problem of the EMU. From the experience of the European sovereign debt crisis, we could confirm some early warning indicators of a crisis such growth of domestic private credit and public borrowing, worsening government balances as well as external balances. Long-term interest rate spreads and an increase in fees charged by investment banks for bond issuance would be precipitating or concurrent warning indicators for a crisis. Implication from the European sovereign debt crisis for the euro area or potential economic and financial integration of East Asia is not necessarily to disband, break up or abandon a monetary union. Instead, a better alternative is to remedy problems and shortcomings exposed by the current crisis and to move toward a deeper integration.

JEL Classifications: F34, H12

Keywords: sovereign debt, financial crisis, European crisis, contagion effect, early warning indicators

To Cite this Article: Park, K. H. (2015). Lessons and implications from the European sovereign debt crisis. Journal of Finance and Economics, 3(3), 72-88.

Copyright © Kang H. Park

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This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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Lessons and Implications from the European Sovereign Debt Crisis