Institutional Analysis Of The European Debt Crisis

Since the European debt crisis broke out in the end of2009, statements about thecountries in debt crisis’s exit, the euro’s collapse, the euro area’s disintegration are allover the world.The euro area moving slowly in the economic recession and politicalconsultations. The debt crisis is not only the euro zone economic crisis, it has spreadto the political field and affects the world economy seriously. Research on the causesof the European debt crisis will help the euro zone solve the debt trouble completely,and give a debt warning sign to the other countries of the world. In this paper, Ichoose the institutional arrangements of the euro zone as the starting point, believethat the system design flaw is the root cause of the debt crisis in Europe. Firstly, Idescribe the institutional arrangements in the euro area, such as the access mechanism,monetary policy and the discipline. Followed by analysis of the defects in the system,I compare the economic differences of the member states in chart. Research showsthat the euro zone system deficiencies mainly include two aspects, the relaxed entryand regulatory mechanisms and the contradiction between the monetary policy andfiscal policy. Among them, the easy entry and regulation mainly includes lack ofqualification of accession, excessive expansion of the Member States on the budgetand the public debt, the failure of the "no rescue" terms and penalty clauses. Use aunified monetary policy in countries with different economic level may led todifficulty in determination of the interest rate. Without the monetary policy, memberstates can only use the fiscal policy to stimulate their economy, caused a sharpincrease in the scale of government debt. Thirdly, the paper analysis the political andeconomic situation of the euro zone after the debt crisis. As a group of countries, theeuro area was caught in a collective action dilemma. The game between membercountries is the key, such as game between debt countries and core countries, and thegame between Germany and France. In the end, the article gives an outlook of theeuro zone based on well-known experts’ views. Research shows that the euro zone will not collapse in the crisis. And through political reform and consultation betweencountries, the euro zone will get a rapid development after the debt crisis.