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The Euro Debt Crisis and Networks

The resource that I have decided to look at was an MSNBC article that is about the current European debt crisis, which could pull the entire world economy into a downward turn. As mentioned in the very beginning of the article, the main components of this current debt crisis are the 17 nations who use the euro. Greece, in particular, has caused much unrest as speculations grow that the country may default or possibly leave the euro altogether. The main correlation between this article and our class thus far is the number and expanse of the networks that are created here with the economic ties of the work. The article mentions that the IMF, World Bank and G20 meetings have all been affected by the potential collapse that could result from this debt crisis. However, I would like to focus primarily on the ties within those 17 countries that use the euro and the borrowing that caused this debt to develop.

The introduction of the euro created unified interest rates, which resulted in a boom of borrowing, particularly with a great amount of money flowing into Greece and housing booms in Spain and Ireland. With the large amount of money that flowed into Greece at that time, the discovery a few years later, that the former Greek government had lied about borrowing shocked investors and left Greece with a colossal amount of debts. Slow reactions by politicians prompted investors to withdraw even more money out of Greece and look to other countries for investments, however by this time many of these countries were also struggling to stay out of debt the same as Greece. Overall the web of borrowing and debt has substantially grown since the introduction of the euro in 1999, which has led to an extremely complicated network of connections between those 17 countries and investors.

The last half of this article predicts the possible outcomes with a Grecian default or other potential solutions. It occurs to me, that the way that economists and analysts approached this situation was to examine the euro as a network of exchanges between countries and investors, and to look at the changes that would occur in different situations, for example if Greece were to default on the euro. In class, we have examined large social networks and smaller exchange networks; however, this network is an extremely complex, large exchange network that has much more at stake than the simple examples given in class.

This network is severely threatened by this debt that could cause defaults and even the abandoning of the euro altogether. The final paragraphs of this article present some options for the European governments to consider and what the consequences of such actions would be. Either way, this extreme network of lending and borrowing may change the world economy for the coming years.



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