European Sovereign Debt Crisis: Its Evolution, Impact And Prospects

As the extension of the U.S. Subprime Mortgage Crisis the European Sovereign Debt Crisis is an important part of the Global Financial Crisis. It is of great theoretical and practical significance to analyze its evolution impact and prospects.This paper is divided into 5 chapters.The 1st chapter is the Introductions. Firstly, it explains the purpose and significance of this subject as well as its theoretical and practical significance. The second part is relevant research review, which describes the research of scholars from home and broad on the European sovereign debt crisis and gives a simple assessment. This part forms the theoretical basis of the research. The third part illustrates the viewpoints, contents and structure of the paper. The last part points out the possible innovations and shortcomings of the paper.The 2nd chapter illustrates the breakout and evolution of the European sovereign debt crisis. First of all, it introduces the definition of the European sovereign debt crisis and gives a review on its breakout process. Then it describes different phases of its evolution. The first phase is the sovereign debt crisis of Iceland. Its second phase emerges in the Middle and East Europe. When the Greece sovereign debt crisis breaks out and turns to a common crisis of PIIGS, European sovereign debt crisis comes to its climax. It is possible that the sovereign debt crisis would upgrades to a forth phase and becomes a global problem, because England, Japan and the USA also keep high levels of debt.The 3rd chapter analyses the external, internal and essential cause of the European sovereign debt crisis. Its external cause is the deepening of the International Financial Crisis. Its internal cause is the fiscal policy and the economic structure of the PIIGS countries. But the essential cause is the deficiencies in the system of the EMU. The mismatch of monetary and fiscal policy is the root of sovereign debt crisis, which needs to be perfected in the future.The 4th chapter analyses the possible influence of the European sovereign debt crisis on the financial development and foreign trade of European countries.The sovereign debt crisis gives a severe impact on the Europe s financial development, including heavy losses in the assets of financial institutions, great fluctuation in the international financial markets, as well as sharp depreciation of the Eurocurrency. As to the influence on foreign trade, it is positive. The depreciation of the Eurocurrency helps to promote the export of European commodities, which is beneficial to the recover of the economy in the district. If the sovereign debt crisis in PIIGS can be kept under control, the economy in Europe would keep the trend of recovery.The 5th chapter illustrates the prospects of the European sovereign debt crisis. Owing to the endeavor of EMU, ECB and IMF, the sovereign debt crisis in PIIGS is kept under control. It would lead to neither systematic risks nor breakdown of the EMU and Eurocurrency. Although the European sovereign debt crisis seems to be a tribulation to the integrating process of Europe, it can also be seen as an opportunity for EMU s system reform to some extent.The foundation of European Economic Government (EEG) and European Monetary Foundation (EMF) indicates the integrating of fiscal policies in Europe, which would help to overcome the deficiencies in the system. Some kind of exit mechanism and a common bond for Europe are also under consideration. All the above would lead to great changes in the EMU s system, which, therefore, would finally lead to a different layout of global economy.