The Euro Zone Crisis and its Dimensions and Implications

The sovereign debt problems in the peripheral economies of the euro zone has started to pose a serious threat to the main economies of the Europe and perhaps to the future of the 'euro‘ itself. Such a situation is a far cry from the optimism and grand vision that marked its launch. This paper is an attempt to understand the implications of the ongoing euro zone crisis and the factors that make it somewhat unique as the contradictions of a monetary union without a fiscal union are coming to fore. The paper shows that the crisis is not merely related to sovereign debt and bank financials, but also rooted in the real economy with structural problems. The manner in which the crisis is dealt is likely to be of far reaching significance to Europe and to the rest of the world. The stage seems set for a change in the way in which the euro zone will need to manage its monetary, fiscal and financial system. [Ministry of Finance WP]. URL:[http://finmin.nic.in/WorkingPaper/euro_zone_crisis.pdf].