The European Debt Crisis: A Brief Discussion of its Causes and Possible Solutions

Abstract

The aim of the discussion paper is to define primary sources of European debt crisis and to identify the facts to be taken into account when providing solutions. The paper notes that heterogeneity of Eurozone countries, the lax fiscal policy and the application of different monetary policies have contributed to the emergence and spread of the crisis. The joint implementation of macro-prudential policy with the emphasis on prudential fiscal policy, the introduction of an effective system of fiscal transfers, or a compromise between interventionism and laissez-faire approach are some of the necessary solutions to the Eurozone crisis.