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The purpose of this paper is to examine the connection between the Greek Debt Crisis and the European Debt Crisis. For this purpose, relevance has been drawn from the financial crisis of 2008 and how it triggered the crisis in the European Union. Relevant data from the journal articles including previous researches, theories, and articles have been studied to analyse the events pre and post the financial crisis of 2008 and what are conditions of the Greek and the European debt crisis today.

In this regards, three major points have come to discussion. One of the major points is that the Greek debt crisis had been existent for a very long time and it was only the sub-prime mortgage crisis in 2008 that triggered it and brought the indicators of the European debt crisis to life. Secondly, there are many institutional problems within the European Union system, which is not letting the vicious circle of the debt crisis break. This includes the corruption problems within the Greek economy as well as the politics by the member states in the European Union that is not letting the bailout of the Greek economy to take place. Finally, the unified monetary and the financial systems in the European Union are also the financial systems in the region in any way. In fact, the debt crisis is continuing to increase because of it.

As a result of the analysis, it is recommended that total policy reform is needed for the European Union as well as for the Greek economy. Efforts must be made by all the European Union states to bring the region out of recession and fight against the debt crisis. Special attention must be paid to Greece to help it grow in terms of the GDP and not debt in the future.

Declaration i Confidentiality in Use of Data Provided by Third Parties ii Abstract iii Acknowledgement iv Table of Contents v Chapter 1: Introduction 1 1.1 Background 1 1.2 Aims and Objectives 3 Chapter 2: Literature Review 4 2.1 External Causes 5 2.2 Internal Causes 13 Chapter 3: Research Methods 17 Chapter 4: Data Description 26 Chapter 5: Data Analysis 29 5.1 Analysis of the Causes of European Debt Crisis 29 5.2 Analysis of the Current Measures to Solve European Debt Crisis 32 Chapter 6: Conclusions and Recommendations 36 References vii

The financial crisis is not a new concept in the corporate world. The first ever financial crisis dates back to the Panic of 1819 in the United States, after which the American economy collapsed. This collapsed remained until 1821 (Ammon, 2002). However, with time and technology, the understanding and knowledge related to the financial crisis has advanced and people including financial managers, investment bankers and other players in the financial world have become more vigilant due to increased awareness.

The topic for this research work is "Analyse the Causes and Implications of the European Sovereign Debt Crisis," which is one of the most extensive and widely researched topics. The primary reason for the selection of this topic is that the topic offers a wide perspective in the understanding and learning about Europe, its allies, and all the related politics around it. The topic provides an insight into the various reasons that caused the Sovereign debt crisis and what were the implications of this crisis in the aftermath.

The crisis begins with the sub-prime mortgage bubble in August 2007, which took the entire world economy into a serious slump. As a result, attempts were made by the policymakers to reduce the probability of any future financial crisis of this magnitude and devastating impact. Ultimately, the policymakers were able to introduce a set of new policies that could help protect the economies from another big financial crisis.

The implementation of these policies occurred in combination with fiscal and monetary policies. This execution provided some liquidity to the market; however, bringing liquidity to the economy had a cost in the form of huge fiscal deficits that eventually paved the way for the European Sovereign debt crisis.

The European Sovereign debt crisis had its early scars visible even before the Greek Sovereign Debt Crisis (AMADEO, 2019). The beginning of the Greek Debt Crisis occurred in the aftermath of the 2008 financial crisis. This was a huge amount of debt that Greece owed to the European Union. Iceland faced bankruptcy when its Government took over the responsibility for paying the debts of three Icelandic banks.

When Moody's passive judgement report over the European situation came out in early 2009, the debt crisis in Europe further aggravated. The local debt problem in the Central as well as Eastern Europe snowballed into a massive European Sovereign debt crisis.

According to Fitch, the credit rating for the Greece debt was A- to BBB+ in October 2009 (Smith, 2009). As a result of this rating, the market saw a surge in the selling of Government bonds and Government derivatives from the investors. This situation was particularly prominent in European countries like Greece, which were high-risk countries. This was marked as the turning point for the fierce turmoil in the global financial market.

Among the major points that were highlighted during this time were the problems in the fiscal deficits held by the European Governments. The fiscal deficits in Greece were not the only problem. Other European countries like Portugal, Italy, Ireland, Spain, etc. had huge piles of debt lined up. As a result of this, the European debt crisis continued to inflate.

There were a number of rescue programs introduced by the European Union along with the IMF to put a halt on the debt crisis that was spreading like cancer. For this purpose, new initiatives were taken. One of these initiatives included having a currency swap in April 2010 between Canada, the UK, the Swiss, the EU and the Federal Reserve so that the European Union’s reserve had the space to restart.

Similarly, other plans included reducing the debt burden as much as possible, and this resulted in the EU and IMF calling for a bailout for 750 billion euro. Given the nature of these initiatives, it is very much visible that they could only cool down the burning debt crisis furnace for the time being and the root cause of the debt crisis was still left unsolved.

Even though these overall causes for the European debt crisis remained the same across most of the European Countries, there were some key differences as well which came into play due to the different characteristics of the countries. According to one of the researchers on the pattern of the European debt crisis, there are patterns of financial and economic balances that lead to fiscal risks which are identifiable before the crisis in the Eurozone (Lane, 2012).

There are several implications of the European Sovereign Debt Crisis, such as it has led to the creation of several recovery proposals and reforms. The Crisis in Europe has not ended, and there are still debates among the politicians and the economists on how to put an end to it. Among all the European nations, Greece has been the most troublesome and its impact has been devastating on other nations in the European Union.

Hence, through this research work, it is aimed that the connection between Greece and other countries be analysed beginning with the root causes of the on-going European debt crisis, understanding how the issue has evolved and multiplied over the years and producing a set of possible solutions gauged from similar crisis in the history and how countries overcame it.

This research aims to examine the causes and implications of Greece’s sovereign debt crisis from the European sovereign debt crisis perspective.

This will be achieved through the following objectives:

· To review the relevant literature related to the Greek and European sovereign debt crisis.

· To analyse the signs and causes of the Greek and European sovereign debt crisis.

· To analyse the interactions between the Greek and European sovereign debt crisis.

· To explore the implications and impacts of the Greek sovereign debt crisis on the Eurozone, especially other troubled countries.

· To evaluate the effectiveness of Greece’s and EU’s current measures against the sovereign debt crisis.

· To study what can be done in advance to prevent or alleviate the issue in the future.

This section covers the literature review that shall form the basis for the data analysis and meaningful conclusions in the further sections of the current research work. The literature review covers data that has been gathered from different sources, majorly including from the previous journal articles, research work, and news from the online, authentic websites. For each of the data collected from the secondary sources, reference has been provided to ensure that the work is cited from the original source.

The literature review has been mainly organized to understand the various causes of the European Debt Crisis and what were the pre-existing conditions in the European countries that were previously ignored but became visible as soon as the sub-prime mortgage crisis hit the European financial system. In this regards, the emphasis has been placed upon Greece and Ireland, which are the most popular countries in terms of highest national debts in the European Union.

There has been an immense focus placed upon the causes and the impact of the European Sovereign debt crisis. Since this topic has been given a lot of attention, many economists and financiers have come up with a variety of explanations and reasoning. This chapter tries to look into each of these perspectives and tries to find the root cause for the European Sovereign debt crisis.

For this reason, many different types of research and theories have been studied to understand the complete story of the European debt crisis from different angles and form meaningful analysis and the recommendations that can help the policymakers introduce changes that will help eradicate the crisis form its roots. One of the common explanations that come up for the European debt crisis is the introduction of Euro in countries where higher inflation rates determined the higher interest rates. The following image shows the secondary market yields of government bonds in different countries in the European Union.

Figure 1: Secondary market yields of government bonds with maturity closed to ten years (2006 – 2014, June)

The above graph shows the market yields for government bonds that had a maturity of 10 years. At the beginning of the debt crisis, which is 2009-2010, the Government bonds in Greece, Spain, Italy were not significantly different from that of Government bonds issued in Germany.

The two major categories that the causes can be divided are internal and external causes. Each of them has been discussed in detail below.

The US Sub-Prime Mortgage Crisis

The signs for the debt crisis can be traced back to as early as the second half of 2006. This is the period when the sub-prime mortgage crisis had begun to elevate and go out of control as a result of excessive risk-taking and leveraging in the US. The scale of relaxation in the policies was severely criticized by the political agencies in the country, but no actions were taken to prevent the mass financial destruction.

Combined this with the increasing inflation bubble, the US authorities decided that the interest rates should be increased. This move resulted in the decline of household prices and a dramatic increase in the default rates. Furthermore, the increased interest rates had another major impact on the economy, which came out in the form of a tremendous reduction in the real sector investment (Bénassy-Quéré et al., 2009).

The conditions continued to worsen when the increase in interest rates and lower growth rate in the investment side raised unemployment rates as a result of which, it became difficult for people to pay their mortgages. This further increased the default rates, which ended up in increasing numbers for non-performing in the bank. In order for the banks to compensate against these non-performing loans, the homes were taken down, but due to the falling household prices, the banks suffered from huge losses (Bénassy-Quéré et al., 2009).

There are many different arguments proposed by economists as to how the sub-prime mortgage crisis could have been avoided. One of the major arguments posed is the fact that there was too much reliance on the securitization. This heavy reliance on only one industry paved the way for the failure of the US financial system (Ari, 2014).

In this regards, simple securitization was not the only type of activity happening; rather, various levels had been created that could facilitate the initial securitization. For instance, mortgage-based securities were created into structured assets that ultimately negatively affected the market for asset-backed securities as well (Bénassy-Quéré et al., 2009).

As a result of the lost liquidity until August 2007, the interbank rates rose sharply. During this time, two large hedge funds went bankrupt that intensified the situation. Even the central bank could not bail out the institutions. In September 2008, Lehman Brothers went bankrupt, and the tensions quickly spread to the rest of the world.

The financial crisis of 2008 had caused millions of dollars' worth of loss. In this regards, the Governments and the financial institutions in both the US and EU adopted aggressive interest rate policy and used the expansionary fiscal policy extensively. Attempts were made to improve the liquidity and production in the market, but the market needed time to heal from its wounds (Blanchard, 2009).

IMF provided help to the economies around the world, and finally, in 2010, the world economy began to show the signs of growth. However, some of the countries in the European Union still suffered, which is today referred to as the European Sovereign Debt Crisis (Ari, 2014).

The sub-prime mortgage crisis is believed to be one of the most important factors in the European Debt Crisis by many economists. According to research by Noyer in 2010, European Debt Crisis can be considered as the manifestation of the financial crisis that is only specific to the Eurozone. Even though the countries had the already existing fiscal deficits, but the conditions worsened given the supremacy of the debt crisis (Noyer, 2010).

Another researcher, Grammartikos (2010), also agrees with the same theory that the European debt crisis is due to excessive government debt. The fact that the financial crisis has brought problems to the national debt that the governments are still trying to recover. As a result of these problems, the national debt has exceeded 100% of the 2011 GDP in the US. In order to get rid of the problems, some companies have adopted rescue plans and have initiated several crises solving programs (Grammatikos, 2010).

There are a number of major points that must be noted for the sake of understanding the entire situation of the European Sovereign Debt Crisis. When it is said that the financial crisis of 2007 was the major triggering point, it is assumed that it was the US from which the financial crisis spread to the rest of the world. One of the main channels that connected the financial system of the US with the rest of the world was the banking system (Saccomanni, 2011).

The connection between the US sub-prime mortgages and the European Debt Crisis

The process began when the US sub-prime mortgage crisis hit the financial instruments. As the number of transactions began to increase, they became out of regulatory control (Saccomanni, 2011).

Hence, it was the subordinated loans via which the US subprime mortgage crisis hit the European financial market. When the defaults in the US subprime mortgage loans increased and got out of control, there was a huge downfall in the value for the European bank assets as a consequence of which, the banks in the Eurozone suffered from a large number of losses.

In an attempt to help the European financial system from the fall, the European Monetary Union decided to make huge sums of the investment into the system so as to ease the liquidity in the system which had been contracting ever since the crisis had hit the Eurozone. However, these investments came at the cost of the increases in the public financial debt on the government's shoulder as the burden of the defaults from the local banks also shifted to the central bank (De Grauwe, 2010).

Another important part of the crisis in the European financial system could be considered as the consequence of the Expansionary Fiscal policies. The expansionary fiscal policies meant an increase the subsidies and a reduction in the taxes and the gap that occurred in the national budget were fulfilled by the borrowings from the external sources. This further aggravated the European public debt.

The fact that the expansionary fiscal policy was put into execution was primarily because of the period of recession that the European Union faced after the sub-prime mortgage crisis in 2009. The economic activities had slowed down tremendously, and in order to resist the adverse impact on the economy, expansionary monetary policies were introduced by the European Government (Noyer, 2010).

Subsequently, as the economic activity slowed down in the Eurozone because of the recession period and expansionary fiscal policy led to the drastic reduction in government revenue. Due to this reason, the impact of financial downturn had not only been restricted to the US and the European Union; rather it had spread to the rest of the world as well because of the interconnection between the nations through trading activities (Vlamis & Karousos, 2010).

Furthermore, the banking system has also been one of the contributing factors to the European Debt Crisis. There had been several failures within the banking system that acted as hurdles in the smooth execution of the monetary policy in the country. The amalgamation of the traditional with the banking system caused confusions and doubts within the market that increased the volatility of the prices of financial instruments (Ari, 2014).

Various studies have looked into the main areas that called for a smooth transfer of credit risk through which the investors could have some hope for bailout from the crisis. Most of these expectations are developed on the basis of the market spreads received from the trading of the certificate of deposits, which are a short-term trading instrument. The transfer of the risk from the public to private is largely dependent on the financial system of that country (Dieckmann & Plank , 2012).

State of the European Countries before the Sub-Prime Mortgage Crisis

Even though the sub-prime mortgage crisis appears to be the most crucial factor in determining the state of the European Debt Crisis today, but there were other factors as well that came into play. Long before the financial crisis in the US, the conditions of the countries in the Eurozone had been deteriorating, and it can be said that the European Debt Crisis could not have been avoided even if the US financial crisis of 2008 had not come (Beker, 2018). The connection shows that the financial crisis of 2008 had only made the European debt crisis quickly than its usual pace.

It was in early 1996 that the economies of Italy and Greece had already been heavily indebted. In fact, even before the introduction of the Euro currency, Greece, Italy, and Belgium had been highly indebted (Beker, 2018). The following table shows the evolution of Government debt in the Eurozone between 1996 and 2007 to 2010.

Table 1: General Government Debt between 2007-2010

The table above clearly shows the increasing debt in the European Countries. Further analysis shows that the two groups of European countries can be identified. One that had already been in great debt and the other group which could be referred to as the newly indebted countries such as Ireland and Iceland as highlighted above which are had their government debt increased dramatically in 2010 (Beker, 2018).

Table 2: Specific Government Debt, GDP and Unemployment between 2002, 2007-2012

The above table provides an overview of the pre and post-crisis period. The figures for 2002 provides an insight into the financial conditions of Greece and Ireland. From the table, it can be seen that it was during the time of the 2008 financial crisis that Ireland began to develop its debt, whereas the debt for Greece had been there before. The debt only increased during the financial crisis of 2008 with an increasing rate for unemployment as well (Bitzenis et al., 2013). The case for the two groups has further been discussed below.

Old Indebted Group: The Case of the Greek Government

As is visible from the table above, the financial conditions of Greece had not been very stable even before the financial crisis had hit. In 2001, Greece had its debt to GDP ratio of 103.7, after which it declined in 2003 to 97.4 but then kept on increasing until 2010 when it had its Debt to GDP ratio of 144.9 (Beker, 2018).

Greece entered into the Eurozone in 1996 and entering into the Eurozone meant the introduction of the Euro currency. This means that Greece had to suffer from the devaluation of the currency, and this would increase the burden of the national debt. In one of the studies, the researchers found that there had been a relationship between the exchange rates and the budget deficits for Greece. The study was conducted over a period of 30 years, from 1980 to 2009. The study concluded that around 83.97% of the variance n the budget deficits can be explained by the nominal exchange rate movements (Georgantopoulos, 2011).

As the Euro continued to revalue, the condition of the Greece debt in 2000 worsened. The positive relationship between the budget deficit and the exchange rate can be explained by the theory of trade. The Greek economy became uncompetitive as the value of the euro appreciated. As a result of euro appreciating, the values of imports began to increase, and the value of exports decreased. Furthermore, the tax revenue also declined, and the deficit continued to rise due to the slowdown of economic activity.

Hence, in the case of the Greek economy, the causality did not run from the budget deficit to the nominal exchange rate. The increasing indebtedness of the Greek economy had been majorly triggered by the appreciation of the Euro, and the statistics show that the entrance of Greece into the Eurozone led to the falls in the overall public revenue (Leachman & Francis, 2002).

The above theory that relates to the increasing deficits as a result of the exchange rate is called the regional imbalances theory. According to this theory, changes in the exchange rate in a country leads to current account deficits. This is primarily because the increasing exchange rate makes the country more uncompetitive in the international market and hence, a rise in imports and lower exports causes current account deficits (Pérez-Caldentey & Vernengo , 2012).

These regional problems that exist in the Eurozone is a classic example of the sort of economic issues that exists in many countries. Hence, in such scenarios, it is required that the regional convergence policies be introduced by the European Union in order to increase the competitiveness as well as harmony among the Euro states (Beker, 2018).

Moreover, there is also evidence from the historical records that the Greek government has not been particularly very friendly with regards to encouraging investment and entrepreneurship in the country. According to a report by the World Bank Survey in 2010, Greece's rankings have been very poor. It is among the worst 27 countries to do business. As a result of this, foreign investors are not willing to invest in the Greece business market. This reduces the Foreign Direct Investment (Abboushi, 2011).

The occurrence of the worsening of the fiscal conditions in Greece was the price that the country had to pay as a result of joining the Euro Zone. Hence, even though the financial crisis of 2008 came long afterwards, the conditions of the Greek economy had already been crushed due to the increasing national debt, caused by the appreciation of the Euro.

New Indebted Group: The Case of Irish Government

One of the major sectors over which the economy of Ireland had been heavily dependent on was the construction and housing industry. This dependency had been primarily due to the collection of revenue in terms of taxes as well as economic growth. The extent of dependency had been such that any additional borrowings were made from the external loan institutes, in order to encourage the construction industry. One of the major features of the construction industry in Ireland was the specific tax incentives that gave a further boost to the sector. From 2003, the new loans were taken out on the basis of mortgaged securities (Beker, 2018).

As the dynamics of the global economy changed in 2007 after the financial crisis, the construction industry in Ireland also received a major setback. The Irish household prices had begun falling and continued to fall until 2008. Major construction companies, as well as Irish banks, suffered major losses.

The major reasons that have been highlighted by the Governor of the Irish Central Bank himself was that even though proper credit rating checking and other related systems for due diligence had been kept in place, the only reason that had been a major contributing factor to the failure of the entire system was the fact that the models produced for financial analysis during this time and the stress testing completed had not been appropriate enough to foresee the worsening conditions of the economy's financial system ahead (Governor of the Central Bank of Ireland, 2010).

The results of the indebtedness could be easily compared to the period before and after the financial crisis of 2008. Before the crisis in 2003, Ireland had its national indebtedness of 10% of the total GDP, while in 2008 (the period after the major financial crisis had hit the economy) the national indebtedness had increased to 60% of the total GDP (Beker, 2018).

An institute was established by the Irish Government in April 2009 called National Asset Management Agency. The sole purpose of this organization was to purchase all the development related loans from the banks. This was one of the ways through which the Government attempted to bring liquidity to the market. Through this program, another organization was created in order to park the loans and reduce the level of evolving indebtedness in the economy.

Subsequently, the government also had to provide with a scheme through which the local Irish banks could recapitalize their assets. For this purpose, the government had to take huge loans in order to get the local banks into the running conditions. Obviously, the increased indebtedness came with higher capitalization costs, and by the end of 2010, concerns began to raise regarding the fiscal sustainability of the recapitalization programs introduced by the government. As the financial conditions of the state worsened, the Irish government had to resort to the EU and IMF for help and to avoid defaults on the public debt (Beker, 2018).

Apart from some of the very obvious external causes, there have been a lot of internal causes i.e., problems within the European Union, that had led to the European Sovereign Debt Crisis. In this regards, many researchers have studied the factors that have been specific to the European Region and therefore, form the basis for the financial crisis.

One of the root causes has been identified to be within the European financial system in terms of how the financial policies and procedures are managed for all the countries that lie in the ambit of the European Union. As a result of the inherited issues within the system, the market confidence has been damaged several times and has become a major obstacle in the economic cooperation among the Governments in the EU region (Panico, 2010).

One of the major internal factors that have led the multiplication of the European debt several times is the fact that the interest rates in the European Union, before the major financial crisis of 2008 period, were lower. This led European countries like Greece, who had already been in debt and had been facing severe exchange rate issues to borrow huge sums of money at lower interest rates (Panico, 2010).

Furthermore, there are also patterns in the economic activity in the Union that suggests that there had been lower labour productivity and higher labour costs. The results show that the output of the combined economy from all the European countries remained lower than its optimal capacity. All of these problems became more visible during the times of economic crisis that called for action to resolve these internal issues.

There is a unified monetary policy system implemented by the European System. This system is controlled by the European Central Bank (ECB), and the system allows the countries to have different fiscal policies, but a single monetary policy is to be maintained. Due to these policies, it is not possible for the European states to have their own monetary policy which can help to adjust for their budget deficits and ultimately the burden of national debt (Milne, 2011).

The above internal problem for having a unified monetary policy system is the reason why the debt crisis has been going on for years. There is no way to stop it or reduce it. For the individual European Governments in the Eurozone, the only option left to improve on their current accounts is through the adjustments in the fiscal policies.

A study by Vehelst (2011) shows that there are a number of EU indicators that show the lack of flexibility that the countries in the European Union have in terms of policy setting. This lack of independence has caused millions of euros of loss to the EU as a whole. There are a lot of doubts in terms of the data provided by the member states when reporting their financial condition. Since the European Statistical Office cannot modify any data received from the member states, there is no way that the reliability of data can be measured (Mora et al., 2007).

Another important factor that contributes to the growing burden on the government regarding the debt within the European region is that the aging population is increasing. This increase in the old age means that there is an increased number of dependents that must be provided with social welfare such as unemployment and retirement benefits, national medical care, etc. If these national expenses are not fulfilled through taxes, then, they have to be fulfilled via additional loan (Schuman, 2010). This is one of the growing population segment in the European Union and is a burden on the country's finances as well as socio-development (Zhang, 2011).

Furthermore, there are many areas that require action from the European Union Government simply because nothing else could be done. The situation of Greece is the best example in this regards. Given the current conditions of the Greece economy, there is no way that the European Union Government could punish the Greek Government for running into huge amounts of debt. Rather the only way to help them is through the financial assistance (Gurria, 2010).

In this matter, there is a lot of internal politics among the European states. For instance, Germany and France are not willing to immediately help Greece out of the debt crisis because it wants Greece to improve on its fiscal measures in order to improve the financial condition in its economy.

This shows that while the entire Eurozone is suffering from the debt crisis, the policies are still focused on fulfilling the self-interests and therefore, no proper decisions are being taken to improve the overall condition (Gianviti et al., 2010).

Also, the theory of imbalances in the region, as discussed above, is also a factor. This is a constraint that has been developed over the years, not through the conscious effort but through an unintentional dilemma.

Having a single monetary policy for all the countries in the European Union is inappropriate as countries have their own characteristics, and these characteristics call for differences in the way monetary policy should be formulated and implemented. For example, Ireland and Spain faced an excessively loose monetary policy that leads to excessive inflation and stimulates the real estate bubble (Seyfried, 2010).

Indeed, there are areas in the macroeconomic system that calls for having a unified approach with similar policies in all the European states, but monetary policy is definitely one of those macroeconomic areas (Gros, 2010). This has become one of the most difficult issues for the European Union to resolve because this issue has been in the system for a very long time, and introducing new measures will not have it immediately corrected. Rather, it will take a lot of time to restructure itself. In any case, it is time that the states be given the right to have their own monetary policies and improvise the system (Gros, 2010).

The research is comprised of Greece and its economic collapse that came as an indirect effect of the global financial crisis 2008, which led to the European Debt crisis and trickled down over to Greece. The basic aim is to examine the financial crisis of Greece in context to the European financial crisis. Efforts have been made to develop an understanding of the Greek and European debt crisis in theory as well as empirically using various tools and techniques.

The research had been conducted as a joint research of not just the Greek financial crisis, but also the European debt crisis from which it originates as discussed in the literature review (European Greens, 2010). Greece is a country known by the world by the world as a beautiful, independent nation that governs itself under the more general European Union. What dynamic this adds is that the European Union has a centralized monetary policy and bank with its own currency as well, the Euro.

This creates a natural connectedness to all the countries that are a part of the European Union and that one economy is strongly interconnected with one another. This interconnectedness was a big part of the global financial crisis of 2008 and hence is very important for our research.

Therefore, our research will be covering the whole European debt crisis and some parts of the global financial crisis as well. The study of the interconnectedness is critical to this paper in order to clearly understand what actually happened with Greece during this period and how it found itself in the trap that it was in. The research will study the complex relationships that come from this situation.

Various techniques and methodologies have been used to try and examine the Greek Debt crisis in conjunction with the European debt crisis. These have been reviewed in the literature review section above. Different perspectives to carry out primary and secondary research to clearly understand the signs of the crisis before it actually came about, when and how it became apparent and revealed the situation to the rest of the world.

Studies have been added for what were the actual causes and what mistakes the stakeholders were made that caused this crisis to occur and the internal and external stakeholders involved and their role in the worsening of the crisis (Bitzenis, Papadopoulos , & A. Vlachos, 2013).

Also, its aim is to study the effect of the crisis to the people, the Greek economy, the Greek government, the European economy, the European Union, the global economy and the rest of the world. Research analysis have been used to examine the peak of the crisis when it came to its absolute worst state, the turning point and who initiated the saviour policies, the policies that were implemented, the effect of those policies on the people, the effect of those policies on the government and the effect of those policies on the economy of Greece.

The research is completed in conjunction with the study of the effect of the policies on the economy of Europe, the effects on and the movement of the Euro throughout this time, the point where the crisis started to end and the economy started to recover along with the short term effects of the crisis, the long term effects of the crisis, the recovery that has been made and the future implications of the crisis and the policies it followed (Bitzenis, Papadopoulos , & A. Vlachos, 2013).

With the following research objectives in place, relevant data has been collected from different sources such as literature samples, books, articles and use them for in-depth research analysis and use different analytical methods and techniques for a detailed inductive analysis.

Different but relevant financial theories have been used that apply to a country’s economy and try and understand exactly what was going on throughout the crisis at different points and will also be studying the crisis in context of the macro-economic indicators that explain the crisis better and help us understand from a layman’s perspective the European and Greek sovereign debt crisis.

Further data has been collected through various material available related to the European and Greek sovereign debt crisis related researches. Various economic articles and books have been identified that have covered the crisis entirely on its own and have captured the details of the crisis very well. Material from different academic books on economics and finance to identify the theories that directly or indirectly apply to the crisis and study the crisis in the context of those theories.

There is also plenty material on the global financial crisis of 2008, of which, the Greek and European sovereign debt crisis is also a part of and explain the relationship between the Global financial crisis which was itself a caused by the US mortgage crisis and the Greek and European sovereign debt crisis. Because it was all indirectly related, it will really help in understanding how this crisis actually initiated and deepened. The articles and books and material that cover the global financial crisis of 2008 are also good sources of collecting data for this research.

The research will also explore the timeframe from which all of these complications started, which is mainly after the formal formation of the European Union in 1993 and the common monetary policy of the European Union in 1999. However, the roots for the European Union goes back to the end of the second world war when the countries of Europe decided to remove trade barriers between countries for quick recovery from the war (Lane, 2012).

The research will focus on the time period after the establishment of the unified monetary policy and the formation of the Euro after 1999 because that is when the dangers of a possible domino effect began. A further focus of our research will be placed on what happened after the crisis actually hit in 2009 with the details of what happened, why it happened, how it could've been prevented, what it caused for the future and more.

It is also an interesting factor in the research that despite an incredibly fast growth rate and good development throughout the country and Europe, the financial crisis was just a matter of time. The research will focus on what was holding the financial crisis bubble until it finally blew. Through research, data is collected to do a complete detailed analysis of the Greek financial crisis from start to end to now (Noyer, 2010).

Since the research is mostly based on the analysis of the crisis, a lot of data and research will be obtained from secondary sources published on this event and further strengthened by my own empirical tests and analysis. The research data will be obtained from various literature reviews of different published papers on this event, many news articles, academic and research books and government documents that have been made public for the world to learn.

Most of the research is obtained from published journalistic articles, which gave the best details and technical knowledge of the Greek financial crisis and European debt crisis in a well-versed and chronological manner. Further data were obtained from different media outlets that published seriously informative columns on the event. Some data was also obtained from data repositories such as Reuters etc. to get a more accurate and technical view on the event.

However, it should be noted that a lot of these sources have collected data and presented it based on their understanding and has been used by us as a matter of common perception and normally accepted views on the event by everyone. Whatever material has been used as part of the secondary research is public and accepted by all.

Different economic journal articles are also used that was published on the Greek and European financial and debt crisis and carefully explored the financial performance and macro-economic situation of Greece and the European Union before, during and after the crisis. However, some of these may have some bias, but it is solely based on facts and figures and have been used by us on the same capacity.

A few documents released by the government were also found during this time and provided some valuable information for our research regarding the economic conditions of Greece and the different policies, reforms, and restructuring which was done as a result of the crisis. They were published by the government of Greece, by the IMF, European Central Bank, and other investigators. These are important documents because they were mainly created official representative of the countries and the banks and can be assumed to have some political essence to them (Vehelst, 2011).

There was also a good amount of material published from the political perspective that explains the policies in detail that led to the worsening of the crisis. The writers covered a lot of subjective and qualitative data on the Greek and European Sovereign debt crisis, which was incredibly helpful in our research. There were a lot of key elements and data points crucial to this research covered in the current affairs and politics that really harshly affected the Greek and European debt crisis.

In an effort to not reinvent the wheel and focus on the analytical and implicative side of the research we will be using data mostly from secondary research through literature summaries from the different articles, books, news publications, economic research forums which will give us a good insight on the crisis to understand it clearly and analyse the text to uncover the overlooked aspects of the crisis that were of crucial importance and uncover the qualitative and quantitative data that we will further analyse analysis to give implications and apply the economic and financial theories from the academic perspective and find implications that support the research.

Data were extracted from these sources and apply analytical techniques to systematically study and understand the signs of the crisis before occurred and was unveiled to the rest of the world and started showing its harmful effects, the actual cause that triggered the crisis and the background of its build-up, the mistakes various leaders made regarding the monetary and fiscal policies from internal and external sources and how it basically worsened the crisis, the effect on the people, the local economy, the local government, the European economy and Euro, the policies and leaders in the European Union and the rest of the world.

The absolute lowest time during the crisis, the eventual ray of light that helped it back up and the policies that helped and its effect on the people, the government and the economy, the effect on Europe and the Euro, how the crisis straightened out and how it is now and the eventual recovery, the short term and long term effects and how the future holds as a result of the crisis (Beker, 2018).

A lot of qualitative data and quantitative measures and have applied procedures to extract the most out of that data. The primary objective for and during this research is to basically study Greece and its economic collapse while studying the rest in relation to this.

For Greece, analysis involves how it was before the crisis erupted, the exact economic situation they were in and how they were going about their business and trade, their economic indicators, their monetary and fiscal policies and look at how those policies were the actual dangers that eventually led to the collapse. A look at those policies in isolation helped to understand how they were wrong and negatively affecting the economy.

Furthermore, a look at the economic structure and the macro-financial ratios that give a hint of what might possibly go wrong in a cause and effect manner. The social structure was studied as well, as to study the conditions of the people before the crisis and how a possible collapse would affect them (Bénassy-Quéré A., 2009).

Then the initial causes were studied that gave the first scare to the country regarding the position it was in, the political and social situation after the first signs of danger and the eventual main causes of the outbreak. The analysis includes the causes of the specific events that acted as the main triggers for the crisis in Greece internally. In this regards, events were examined, including and further policies that deteriorated the crisis.

The research also aims to understand the mistakes that were made and have implied on what should have been done in those cases that may have possibly saved the economy from collapsing and will also be discussed what might have helped to control the situation.

The research will also use various methods to learn, understand, and explore the impact of the crisis in Greece and the implications with which it follows on the more holistic European Sovereign Debt Crisis. Different European countries involved in this crisis were studied and how they got involved and how their situation was before and after the crisis.

Given the availability of the resources and the areas from which data has been attained and research, the institutional dynamics of the European Union are also explored including how and why it was formed and how it basically was in danger of this situation from the very beginning.

Various articles on the formation of the European Union as well to understand the economic relationship between the countries and how each country is interconnected, and one discrepancy could lead to a domino effect and possibly cause the whole European Union to collapse. Given the use of the Euro throughout Europe. It is basically the tying knot between the countries for all the good and bad reasons. Many theorists had long before suggested how a common currency and monetary policy could endanger the whole continent.

Different econometric related researches have also been used to understand the patterns before, during, and after the crisis to understand the different relationships and cause / effect metrics of the Greek and European Sovereign Debt Crisis. Similar techniques used by other researchers and their conclusions have been added to the literature review to understand the relationships of the policies enforced after the crisis while also discussing the problems with those policies and how they made the situation even worst and how they could have been avoided. They have been used to learn more about the future impact and implications of the crisis, first for Greece’s crisis and then for the whole European Union crisis (De Grauwe, 2010) .

By exploring the various academic and non- academic material, journals, articles, research papers, news, and media publications that give a very detailed view, facts and figures in the appropriate chronological manner and explain the Greek financial crisis and European debt crisis as it happened from one event to another and as it came about to the rest of the world, that explain the macro-economic and financial indicators of Greece and the European Union

It also teaches about the reforms and policies taken up by the government to recover from the effects of the crisis, the conclusions show successful outcome and form a detailed research paper that covers the crisis in its entirety from top to bottom, from start to end, covering every single aspect of the Greek financial crisis and the European Debt Crisis.

The main source for data and research will basically be secondary data as there is no real need to reinvent the wheel. Plenty of research has already been done, but the view aims to give it a bit more perspective and connectivity to other factors and players. The data for the country is widely available, and there is no need to focus on collecting primary data for this topic and shall mostly be focusing on the implications and analysis of what we collect.

A detailed analytical analysis of the Greek Financial Crisis and the European Debt crisis in conjunction with each other is completed. The analysis is basically based on secondary research and different papers published on the Greek financial crisis and the European debt crisis. For the analysis, few research questions were set out on the basis of which this whole paper is designed, and that question is of the causes and implications of the Greek Financial crisis and the European Sovereign Debt Crisis.

The literature reviewed and studied for the causes and implications of the Greek financial crisis and the European debt crisis without the knowledge of the complete sequence of events and the chain timeline is difficult. Everything within this crisis is so jumbled up with one country interdependent on the other and whole Unions working together with common monetary policy, a single currency, one central bank but different fiscal policies and governments. Hence, its main focus is on the historical background to the European Union and Greece as well.

However, the understanding of the crisis requires deep economic and financial understanding as well which is why we have also given reference to certain academic papers that clearly explain what was happening with some context to financial and economic theories. Therefore, our analysis takes from these theories and knowledge of finance and economics and answers the research question in perspective.

Since the research method focuses on secondary material, it is important to know their standing as well. It was understood that most of these papers would lay emphasis on the debt-to-GDP ratio, which gives us an understanding of exactly how much sovereign debt had been accumulated for excessive deficit spending. Where things like sovereign debts are a thing, the interdependency becomes a problem as indicated by the different papers we have examined. It becomes an even bigger problem when the debt givers also owe a debt to someone else. This creates a circle. If one pays, other pays, if one fails to pay, others also fails to pay. Most of this situation is explained further in the context of the crisis.

Another interesting aspect of the research is the fact that most other papers, including the ones that we use for our reference, indicate that Greece and European Union laid the foundations of their own trap and made the mistakes themselves to further worsen it. However, some articles also point to the few bailout packages that imposed strict policies that contracted the economy further and made it even worse (Silbert, 2010).

The research aims to analyze these claims and understand it better and come up with a justified explanation. In other articles, they are also giving a view that the problem with Greece was an internal problem because of internal inefficiencies that caused the problem. The data collected and research is used to compile and investigate this area as well. The research will try to accommodate all of these aspects.

With the data that is collected and research completed from different literary articles and publications that allows the understanding of the European debt crisis and the Greek financial crisis. Also, the analysis formed on the basis of the data collected through previous researchers, this research paper was formed which covers all aspects of the crisis from its origination to its inception and even before and after this, the complete background and the somewhat future outlook of this situation. The research methodology is aimed to deliver a complete picture of the crisis through detailed analysis and studies and explain the situation after 10 years of the event itself, where it stands and how the reforms have changed over the period.

The data used in this research work is purely taken from secondary sources. All used sources have been cited for reference. Since the topic chosen for the current research work has a theoretical framework; therefore, a lot of research is based on extracting the information from the previous researches on this topic.

There are many different types of researches available on the European Debt Crisis. However, there are very few that combine the connection between the European debt crisis and the Greek economy. Therefore, the primary focus of the current research work is to focus on collecting as much data as possible for two topics under consideration.

Given that the selection and focus of the topics have already been established in the research aims and objectives, the focus of the literature review in the current research comprises of data on the development of the European Debt Crisis through its origin until today as well as understanding the relationship of the Greek Economy with that of the entire European Union.

The data has been obtained from the research articles, relevant books, and journal articles. Furthermore, the sources include both the qualitative such as the relationship of the theories and studying the correlation between different variables from the European macroeconomics perspective. It also includes quantitative data such as tables that provide relevant information about the debt situation through hard figures in the European for pre and post-Sub-prime mortgage crisis period. The related data has been filtered and shall be used in further discussions in the next section.

The research required to study the causes and implication of the European Debt crisis and the Greece financial crisis that can be said to be a consequence of the US subprime mortgage crisis also known as the global financial crisis of 2008. Many sources researched in order to get a good idea of what this crisis was all about, what were the causes, what were the effects and what it eventually led to. Many different articles, journals, documents, books, news, and media publications were explored to gather sufficient data for the research. These sources provided with good detail on the crisis and how it developed and was critical to the analysis of the event.

Data collection has been mainly from secondary sources and other than the usual financial and economic indicators of a region which we will be referring to for our research, most of the data is qualitative and relies on the description of the events that occurred before, during and after the crisis. The research includes from different scholarly articles, academic and non- academic journals, news and media publications, government and official documents and other sources of published material including European Central Bank website, Europe Green Party (EGP), Cambridge articles, etc.

These secondary sources gave a good idea of what actually happened in the European debt crisis and how it further led to the financial crisis in Greece. These publications provided a proper timeline of events from the very start to the very end of the crisis and helped us to understand what the actual reasons for the crisis to occur were and what were the implications of that crisis.

The time series data for different economic and financial indicators, ratios, projections, growth rates, inflation rates, borrowing rates, debt-to-GDP percentages, HDI, Gini figures and other macro-economic indicators allowed the researchers in the current study to understand the economic conditions of the region across the period of time. We have figures on the debt taken by countries like Greece and Portugal overtime and the GDP growth rate over time that gives us an idea of their repayment ability dropped and eventually led to the crisis.

Qualitative data in terms of theories and understanding of economic crisis from different angles and perspective were included. This was very important for the understanding of the crisis and our analysis and research as well. Data that provided information about the political and social conditions that may have caused the crisis, which is discussed in detail further in the paper.

Data for political conditions is key to understanding the European Debt Crisis and the Greece financial crisis as it really elaborates on the kind of spending the governments were doing. The political situation was especially important because it enables us to understand the problems because of two different governing bodies making monetary and fiscal policies separately.

The European Union after its formation and establishment of the European central bank and the bringing of the Euro would control the monetary policy i.e., the supply and demand of money and the setting of the interest rates; and the local governments responsible for the fiscal policy i.e., the spending and collecting by the government. With the two policies not being aligned and the smaller countries in the European Union spending more than they collected, financing the deficit through debt accumulated huge sums of money they owed and hence, eventually leading to the burst of the bubble triggered by the global financial crisis of 2008.

This type of data that extracted from the sources is very crucial for the current research framework as they contain the most reasons for the financial failures and without them, the analysis would not just be incomplete but may just be useless. Beneath these qualitative factors hide the real reasons for the crisis, the European Union had to face and also help explain some of the technical and numerical figures and metrics as mentioned above. They add context to the numeric data and basically explain the numeric data in a way that is easily understandable for the common man.

The researchers used this data for our detailed analysis to help explain the European debt crisis and understand the reasons that caused this crisis to emerge, how long has this danger existed, what triggered this crisis, the implications, long term and short term effects of the policies and reforms that had to be implemented to rescue Greece and the rest of the European Union from this debt trap.

Different techniques and various methodologies that help us explain this crisis in a new light that accounts for all of the different non-internal factors of the European debt crisis and accommodates all of the different aspects and sides of the crisis through the entire period of time from the very inception of the European Union to the European Debt crisis and further moving on to date.

This section looks into the analysis of all the data that has been collected from the research. In this regards, the analysis has been formed based on the literature review conducted in the previous sections and how those apply to the aims of the current research work.

As per the research aims and objectives, in order to understand the topic and form useful conclusions, the research work has been focused on ono the connection between the Greek Debt Crisis and the European Debt Crisis. for this reason, relevant data articles and research journals have been studied in order to develop a meaningful analysis.

There are two major divisions to the current research work; causes of the European debt crisis and the implications of the European debt crisis. both of them have been studied in detail, and the following section covers the analysis for each of the two main categories. Further sub-categories to explain the internal and external causes have been created to organize the data in a way that is easy to understand.

The data analysis includes some of the new and important perspectives that have been observed during the current research work. The following section has been organized in order of the objectives that were initially established.

In this research, many different perspectives have been researched and added to the literature review for the sake of understanding the varied perspectives that come along when studying the European Debt Crisis in relation to the Greek Economy as studied by Silbert in 2010.

There are many different reasons that can be labelled as the causes of the European debt crisis. In this regards, one of the major factors that have been repeatedly highlighted by several researchers is the devastating impact of the sub-prime mortgage crisis that began in the US and spread over the rest of the world. The shocks were such that the entire world economy had gone into the period of severe recession, and many countries are still recovering, including the European Union.

However, the main point to consider here is that the relationship between Greece and the European Union had not been stable from the very beginning. This was pointed in the study by Silbert‘s study (2010). Ever since Greece had joined the Eurozone in 1996, the state has been facing severe debt issues that majorly stemmed from the adoption of the Euro currency. Furthermore, as the Euro currency appreciated, the financial conditions of the Greek economy had worsened.

The initial data shows that Greece and Spain had been the most troubled economies in the European Union who had been showing deficits consistently. The performance of the Greek economy had been continuously worsening to the extent that there had been deliberate attempts by the Greek Government to hide the authentic data and falsify performance (Velerio et al., 2016).

This implies that it was not the financial crisis of 2008 that had spurred the European Debt Crisis. In fact, conditions had been developing for many years, which became more prominent as a result of the financial crisis of 2008. The Greek economy had already been a burden on the European Union, and the burden continued to increase as the unified monetary policies of the EU were being forcefully imposed on all the member states, including Greece.

These have been described as the institutional failures in several studies. It was in 2009 that the European authorities decided to bring on the restrictive policies in order to curb the crisis and its complementary recession and slowed economic activities. This situation shows the inability of the European Monetary Unit (EMU) to take on the effective measures in order to reduce the financial instability in the region and give more independence to the states in terms of managing their own policies to deal with the recession (Velerio et al., 2016).

However, in October 2009, the new Greek Government revealed that there had been deliberate concealing of the fiscal deficits by the previous Greek Government which increased the urge of the European government to make the restrictive policies effective immediately. As a result, the credit rating of the Greek bonds fell drastically (Velerio et al., 2016).

There were many measures taken in order to call out the Greek Government and ask for the submissions of true and fair reports (Velerio et al., 2016). In April 2011, there had been plans rolled out by the European Union to help Greece in its financial conditions but the fact that due to the internal political issues among the states, German took a lot of time in approving the plan for the Greece financial support.

By this time, the interest rates on Greek Sovereign debt began to rise again, overtaking 12%. The inability of the members of the European Union to take decisions quickly and respond to the immediate execution of the financial plan gave ample space to the market players to speculate on the interest rates. This gave an impression in the market that the political interests had overcome the main purpose for which the European financial institutions had been created, i.e., to defend the financial markets from instability (Silbert, 2010).

Given the institutional problems and the inability of the European authorities to make effective decisions at the right time, further aggravated the debt crisis. The situation could have been controlled, had the decisions were taken in the best interests of the citizens rather than playing around the political interests.

Also, these tensions within the institutions had not only been restricted to the main heads of the European Governments rather they were visible to the public as well which caused severe fluctuations in the Greek Sovereign bond market. Even the unified policy decisions that were taken by the EU government could not be timely implemented, which raised further questions and doubts in the market.

As discussed in the literature review, there have been many early signs regarding the European debt crisis that were ignored. The biggest of the indication was the relationship between the exchange rate and the continuous increases in the Greek debt. As the exchange rate appreciated, the value of the Greek debt continued to rise in the market (Panico, 2010).

This shows that as the time for the sub-prime mortgage crisis approached nearer, these indicators had started becoming more visible when, in fact, these indications very well existed for a long time in the market. Perhaps it was the major reason why Greece’s financial condition hadn’t been improved over the years.

There are many different theories that revolve around one of the hot topics today, i.e., the best solution to the European Debt Crisis situation. Many scholars have researched and have suggested different policies for resolving the crisis in Europe. These policies have been categorized into different groups. However, the overall policy structure calls for huge support from the EU in order to improve the financial situation of Greece.

In this regards, one of the most important areas that are often neglected is the social side of Greece. While a lot of emphases is made on the economic and the political situation and several arguments are focused on these two sides only, there is a high need to look into the social aspect as well.

In a resolution by European Green Party (EGP) in 2010, it was agreed by all the countries that the corruption in Greece is one of the major reasons why the debt continues to pile up on the Greek national budget and yet there are no chances of it improving. However, in this resolution, it was highlighted that supplies of weapons to Greece should be stopped against Turkey because this transaction is only adding more fuel to the fire than putting it off (European Greens, 2010).

There are also indications that the European Union has a mixed banking system. This means that the traditional and the capital markets, which is influencing the Sovereign debt crisis in a negative way. The financial instruments like securities and derivatives have not been able to meet the liquidity requirement of the margin calls during the debt crisis. The situation is further damaged when the banks are not provided with enough space to recapitalize themselves, which brings downward pressure on the economy. It is for this reason that the banking issues, as well as the Sovereign debt crisis, be solved simultaneously.

The move has been visible in the capital market system. Which has a mix of high leveraged products and mark to market products? During the time of crisis, the investment banking companies and commercial banking institutes had become more relaxed in terms of the policies and procedures used to obtain the credit rating. This was not only happening in the US, but it also happened in the European Union countries as well. This proliferation of financial products has caused much to the governments in the European Union.

Furthermore, it was the ineffective policy system that was introduced in Greece by the Greek Government that led to the inefficient utilization of funds. As the corruption within the political system of Greece increased over the years, so did the tax evasion and other illegal activities by its citizens (European Greens, 2010).

In this regards, one of the key policies that have been put forward by the European Green Party is to cut down on the public spending in Greece and create pathways within the system in order to increase the tax revenue. This is possible by bringing tax reforms and tapping into the population that is involved in tax frauds.

According to the EGP resolution in 2010, there are many different ways to cut down on spending such as reducing trade related to the export and import of military weapons which is an unnecessary expense at this stage, given that there are huge sums of national debt left to be paid back. Furthermore, green taxes may be introduced in the form of green taxes, such as unsustainable tourism or levying taxes on companies that create pollution (European Greens, 2010).

Another important area that has been highlighted with regards to the support and guidance that should be provided to Greece is the tension of moral hazard. The inefficiency of the policy system has caused a lack of organization of the decision making ideas and process, which is causing further delays in the implementation of the right set of policies to correct the debt crisis. The problem of moral hazard is more of a problem in the national fiscal authorities and must be corrected before any reforms could be implemented (Valerio, 2016).

The above policies show a rightful approach towards reducing expenses and increasing income. Since the states in the EU are only allowed to change their fiscal policies rather than their monetary policies, Greece can easily introduce new taxes to increase the tax base, reduce corruption, and increase tax revenues. There are many different ways that the Greek government can improvise this, and the introduction of green taxes is one way to achieve this.

However, given the current conditions of the Greek government, there still remains doubt that the government would be willing to improve its situation. Given the trend with the past Greek government, the situation of debt and the other economic, as well as the social situation of the Greek economy, has deteriorated over the years. Expecting that the new government would be fair to its citizens will be a long shot. Hence, these policy improvements should be brought from a higher level of the hierarchy in the financial system of the European Union in order to see some positive results.

The current Economic Strategy of Europe pertains to the Europe Strategy of 2020, which was adopted in June 2010. Through this strategy, the EU aims to achieve a single market by operating the European states and their economic policies as a single unit. In this regards, attempts are being to bring a standardized fiscal policy as well, just like the single monetary policy. This shall be aligned with the EU budget and lending strategies. Finally, a new trade strategy is expected to be built that shall provide increased access to the global market (European Central Bank, 2010).

There are a few important points that must be noticed in the Europe Strategy for 2020. The three key main policies still focus on the establishment and treating the EU as a single unit with unified policies which cannot be easily implemented in the region. There is enough of the past data to suggest that the unified policy system has not been working in favour of the European countries, and the financial situation of the countries has been worsening.

This is visible from the fact that the European debt crisis is still ongoing and it cannot be seen ending anywhere near the future. A unified policy has failed for European Union because every country has its own characteristics and these differences call for customized fiscal and monetary policy, not a single policy that would be applicable to all just because all the states use the same currency.

Secondly, the current policy structure is still looking over the interests of the key political players in the EU such as Germany and France rather than introducing policies that could actually help those European countries who have continued to find it difficult in the international market because of the competitiveness.

The most classic example is that of Greece, which is still struggling today. Indeed, there have been various internal issues that had to worsen the economic situation such as the political corruption and other illegal activities, increased focus on the military but the economic factor of exchange rates was also an important one.

This can be further described in terms of the theory imbalances in which case some regions continue to grow in GDP while the others continue to grow in debt. Within the European Union, there are several examples of this.

For instance, France and Germany are so important to the Union that they can have a strong impact on the decision making of the countries with regards to the financial bailouts. Greece is an excellent example in this case that has been stuck in debt for years, and the EU has not made any significant efforts to help the country out of debt.

Thirdly, the European Union authorities cannot simply expect countries like Greece to improve on its own or build via its fiscal policies without having any debt haircuts. This is because the current debt for Greece is massive and cannot be simply settled down. Some of it must be waived for the Greece economy to begin growing in terms of GDP and not in terms of debt.

A flexible policy statement could possibly help the economy to rejuvenate itself that will allow it to look forward to a sustainable growth pattern and to avoid similar deadly debt crisis in the future.

The above policies require some of the changes and adjustments that could cater to the needs of individual states in the European Union. If Greece is an important economy and the Greek Debt Crisis has been a huge burden on the European Union, then the decision making authorities must take steps in order to improve the financial situation of the European Union and bring it out of the debt circle. Further policy recommendations have been provided in the next section.

In conclusion, the current debt situation in Europe cannot be blamed upon the triggering of the sub-prime mortgage crisis in the US. This is mainly because the factors that could eventually erupt the European debt crisis had been existing for a long period of time. The only thing that the Sub-prime mortgage crisis in the US did was that it brought forward the timeline via which the indicators of the European debt crisis became visible, and the debt itself became visible.

There were many reasons other than the sub-prime mortgage crisis that had been part of the European financial system for quite a long time, and that had been the root cause of the growing debt crisis. These causes can be divided into internal and external causes. There are several external causes. One of these can be described as the inefficiency of the European financial system that could not absorb the shocks received from the US after the financial crisis of 2008 had hit. The fluctuating interest rates had been one of the reasons why the debt crisis continued to increase.

The issue of Greece is another major aspect of the European debt crisis. When Greece had joined the European Union and adopted Euro in the mid-1990s, the issues had already begun from that time. Greece had already been in great debt before joining the EU. The situation of the debt further worsened when the exchange rate did not turn out to be in favour of Greece.

There were many times that Greece had asked for a bailout or support from the European Union, but many meetings and resolutions even could not turn the financial situation for Greece. There had been internal political agendas that could not Greece have the end to the debt crisis.

European Union state members like France and Germany would agree to bail out Greece because they wanted Greece to bring reforms to their financial institutions and show if they would be able to redirect towards growth. This had further caused problems for Greece that were ultimately transferred to the European Union financial system.

The internal causes pertain to the flaws that existed within the European institutions. In this regards, the fact that the European Union still has a unified monetary policy system is a very big question. The European states have the option to build their own fiscal policy but not the monetary policy. This is one of the biggest factors that is not letting Greece come from the debt crisis, and so is the case with the European Union.

Each of the countries in Europe is different and therefore, demand customized or tailored policies that could actually help the financial institutions in the country. Having as a mandatory agreement to apply one monetary policy is what makes European Union lag behind the world. Hence, it is recommended that each of the countries should be given the independence to have their own policies, both the monetary and fiscal policy so that its right combination could help eradicate the crisis even if this means to pursue this policy for a short period of time until the debt completely vanishes or is reduced to a bare minimum.

Furthermore, given the current situation of the Greece financial crisis, it is necessary for the member states of the European Union to take immediate action and provide debt haircuts to Greece. This will help reduce the debt burden on Greece and will actually give it the space to think and set its growth strategies right so that the remainder of the debt is also paid off.

In addition to the above point, it is necessary for Greece to stop trading in the military weapons and divert its resources towards the upgrading of the economic system in the country. In this regards, there should be a cut down on public expenditure and the taxes should be increased. There are many different types of taxes that can be levied, including green taxes that will help boost the tourism industry as well. Greece should be provided with the guidance to increase taxes and the tax base as well in the country to end corruption and the illegal activities.

Moreover, the Greek economy must also be provided with green investments to help elevate the economy and bring in more foreign direct investments from other countries. Through this process, the government will be able to encourage entrepreneurship and innovation in the country and as a result of which the GDP will rise, and the economy will grow. The additional tax revenues could be used to pay off the debt. Also, this help increases the public and the private consumption, which will be a counter policy against the reduction in the public expenditure and therefore, both of these policies will be able to nullify their effects.

In this regards, the European Union can also play a vital role in helping Greece out of the debt crisis and grow the economy. The EU can shift the focus of the structural funds to reduce the consequences of the recession. These investments programs could perhaps focus on the improvements in the unemployment levels by introducing active employment programs. For the entire program to be executed successfully and ensure that the program yields positive results as expected, it is necessary for the European Union authorities to look into this matter actively and if needed, supervise the entire procedure.

Also, the European Union countries must also monitor the Greek Government bonds in the market and prevent it from the major fluctuations that occur in the market for financial institutions in the form of interest rate fluctuations and the transfer of risks. The Greek government should focus on the successful execution of cost-cutting programs so that the overall unnecessary costs could be reduced and the funds could be transferred towards having a more sustainable growth in terms of the interest rate speculations and the transfer of risks between the public as well as the private sector.

Since the European Debt Crisis is not just the responsibility of Greece and ending the Greece debt issue will not resolve the entire European Union crisis; therefore, efforts will have to be made by all the countries in the European Union to end the vicious debt crisis. Also, the costs of the public intervention had been a lot, and therefore, this must be compensated by the introduction of a financial transaction tax in Europe. Hence, it is the responsibility of all the countries in the European Union to work together and end the crisis while having a special focus on improving the financial conditions of Greece.

Furthermore, it is necessary that the banking regulations in the Greek economy, as well as that of the European Union as a whole, be regulated. It is very much clear from the above literature review and analysis that the risk-taking the ability of the banks and for certain instruments in the financial markets have been underrated.

It is the excessive risk-taking of the banks and other financial institutions in Europe that have caused the adopted passing crisis in the US and triggered problems in the entire financial system of Europe. The shocks had been so much intense that these could not be avoided even after the European Union governments tried to inject in more investments in order to provide liquidity to the economy. This shows the failure of the banking system.

Even though the required nutrition was being provided to the European Union economy to improve the situation and mitigate the effects of the recession but after so much of investments and changes in policies, the desired results could not be achieved. It is, therefore, recommended that the roots of the banking system in the European Union be strengthened.

The banks should not be allowed to take excessive risks and leverage, and the area of concentration in which banks could make investments should also be restricted. It is, therefore, required that the European Union authorities take the right measures to remove the institutional voids and create a smooth flow of business and banking transactions.

There is a need for financial innovation and subsequent control, as well. The fact that the financial instruments market for a certificate of deposits and the derivatives had been shattered and become meaningless and is still carrying the effects of the financial crisis of 2008, it is necessary to introduce new financial instruments to the financial markets which are being tested for sustenance. This is unlike the bitcoin currency, which is a virtual currency, and there is no proper asset backing behind it.

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