Talk:Causes of the European debt crisis

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cause and effect[edit]

Some basic root causes for the debt crisis in several euro states seem to be missing. The important ones are

Selection "cheating": The treaties between the EU members states said that only countries could join the Euro that really met the convergence criteria for a conservative and sustainable economic and debt development for several years and that are as performant as the top three economic performers (with certain thresholds). There were enough professional comments beforehand that devastating debt crisis would emerge in those states who cheat to join or to join too early. In the meantime it has become clear that almost all debt crisis states cooked the books in their countries to mask problems, be it the government books, be it that the national financial sector supervisions were relaxed so that they could cook the books (and the state only gets the final bill and has to balance the financial sector bail-out).

Destruction of competitiveness: Many of the Euro debt crisis states had already a competitiveness disadvantage at the beginning of the Euro start and masked it by cooking the books (see above). Additionally, the debt crisis states had above-average costs increases in their national economies (wages, state wages) after joining the Euro. Because there was no underlying economical rational for these cost increases (like above-average productivity gains through innovations and so on) these states decreased their competitiveness even further.

Further deteriorating of public financials: After joining the Euro the euro states were obliged to keep their public debt and deficit continuously in certain ranges. The debt crisis states did not try to make on good (e.g. through structural reforms to get a healthier economy and less public deficit) on certain selection cheatings but worsened the situation by still accumulating even more unsustainable public deficits and debt and wait with reforms until the bail-out funds now in place reminded them (10-15 years late).

no insolvency or exit mechanisms: As it was not foreseen that the above-mentioned contract violations with its devastating consequences would happen all tools to prevent or handle debt crisis in member states are being build right now (10+ years late). As we can read now, in many debt crisis states the problems were already known far before the debt crisis started - but also because of missing tools to manage the problems nobody dared to speak out in the public.

Some of the causes currently mentioned in the article (like trade imbalances) are consequences of the above mentioned additional root causes.--EconomicsEconomics (talk) 16:25, 21 December 2014 (UTC)[reply]

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