The dawn of 2012 has brought with it several economic and financial debates. However, none of them have grown to be as significant as the European crisis. Many experts have been giving their opinions on the eventual outcome – whether countries will fall or become victors of their own state. Some experts are assuming that, just like the American crisis of 2008, the European crisis will be overcome. On the other hand, others have credited the central federal budget of the Americans for their ability to overcome their crisis. What does this mean for the euro zone? Will the lack of a central government be the major undoing?
In order to be able to effectively analyse the crisis, you need to know some of the contributing factors.
The European crisis has mainly been fuelled by the debt crisis that is facing Europe. This can be attributed to the difference in the financial capabilities of the Euro Zone countries. Some of these countries are far more developed and have financial independence than the rest, for example, compare Germany to Greece. The differences resulted in the Euro Zone members relying on debt to fund the projects that were being pioneered by organisation. This led to rampant borrowing from the banks by several countries in the Euro Zone.
However, other experts also attribute the debt to the increasing social expenses of the European countries especially, due to an increase in the aged population, their pension funds. These countries now have to decide who to deal with this increasing problem.
If the aforementioned factors are some of the causes of the euro crisis then the solution is not impossible. One idea is that the euro zone countries need to reduce their over-reliance on debt. First, they need to reduce their social expenses and experts believe that this can be done by increasing their retirement age. Statistics from the UN show that around 20 per cent of Europeans are over the current retirement age of 60.
Once the retirement age has been increased and pension funds reduced, then governments can focus on paying their principal payments. These debts form a huge part of the Euro Zone crisis. If all the countries can manage their debts then the Euro Zone can survive.