European Monetary Union in Crisis

The world economy has gone through two years of a mixed but relatively strong recovery. In the European Union, however, the rebound was much less pronounced than in the rest of the world. Strong exports to the fast-growing emerging economies lead to a powerful upswing in some countries of the euro area, notably in Germany, and suggested in spring 2010 that the financial and economic crisis of 2008-09 had been overcome. The crisis seemed to continue merely in some "peripheral" countries, mostly in southern Europe, which were struggling with high budget deficits and/or high government debt. This impression was deceptive. The financial crisis had not been overcome, but, rather, passed into a crisis of confidence in public finances. It dampened growth and prevented a self-sustained upswing in the euro area. The "euro crisis" has intensified noticeably during recent months and is by now the greatest risk for the global economy. So far, all attempts of EU governments to contain the crisis have failed.