The European Union’s Debt Crisis (Essay Sample)

The European Union’s Debt Crisis
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The European Union’s Debt Crisis
Establishing correct standards, checks, and balances for the procedural acquisition, utilization, administration, and repayment of public debt is the first step toward financial security for any state, region, or labor union. According to (Rahman et al., 2019), public debt has three different types of linkages to economic growth, depending on how it is acquired, used, managed, and repaid: positive, nonlinear, and negative correlations. Because of its power to deploy monetary resources for the building of infrastructure aimed at economic growth, strategic management of public debt is typically a crucial driver of gross domestic product within any region, nation, or trade union's financial prosperity (Saungweme & Odhiambo, 2018). However, the debt situation in the European Union is dire. Since 2008, when the banking sector partially collapsed, a major debt catastrophe has been brewing. Between 2010 and 2012, it reached its apex. Any jurisdiction's economic soundness is ensured by strategic planning, timely and careful mitigating actions by banking and supervisory structures.
As the European Union's money controller, banks and government officials first agreed that the crisis would take a long time to settle, so they devised the best plans for a long-term, gradual recovery. According to Sikora (2018), the government decided that providing Greece additional money would only worsen their financial condition, therefore they agreed to let the Greek banking system tackle the problem on its own. However, careful surveillance was carried out to ensure that if Greece's banks were unable to address the crisis, France and Germany would come to her help. To achieve a safe recovery from the debt crisis, the European Commission established over 30 rules to ensure that all markets, financial actors, and products were effectively regulated and supervised (Brescia Morra, 2019). These regulations provide a fundamental framework for 28 EU Member States, as well as a foundation for a functioning financial industry.
The Eurozone finalized and launched a banking union in 2012, based on a three-pronged approach that includes a European Deposit Guarantee Scheme, a Single Supervisory Mechanism, and a Single Resolution Mechanism responsible for accurate and timely regulation of the crisis' effects. These pillars were established to reduce the difficulties of the European Union's operation, to solve structural choices that are unique to the European Union, and to provide financial stability to depositors as their nations leave the Eurozone (Maylis & Henri, 2014). Most significantly, the banking union was entrusted with recapitalizing banks in accordance with the European Commission's 30 rules.