Financial Management Literature & Language Term Paper (Term Paper Sample)

EUROPEAN FINANCIAL CRISIS
(COURSE)
(STUDENT ID)
(SUBMISSION DATE)
Introduction
This started in the year 2008 where most of the financial institutions collapsed, government debts increased and the cost of borrowing through the purchase of government bonds increased.
The European financial crisis resulted from the disintegration of Iceland’s financial system which thereafter, spread the effect to countries like Portugal, Ireland, Italy and Greece in the following year, (Carmassi, Gros & Micossi, 2009 p. 977-996).
The countries such as Iceland, Greece and Italy were unable to finance government repay or finance government's debts without the assistant from Imperial Monetary Fund, European Central Bank and the European Financial Stability Facility.
United State Congress report of 2012 stated that the European financial crisis started in 2009 when Greece government realized that the previous government had been misrepresenting budget data of the government. This led to a loss of confidence by the business sectors, ( Pisani, 2012 No. 2012/01).
Causes of the Financial Crisis
The European financial crisis was geared by misplacing confidence and assessment of risks. The countries like Greece initially offered high interest when lending loans but to encourage investors, they reduced their interest rates in that the borrowing became so cheap, enticing even private sectors to borrow leading to building up of government debts.