An Analysis of The Growth In Eurozone Debt And A Prognosis

This graph appeared in this article on the causes of the crisis in the eurozone. It shows the high spreads between the risk free German bonds and riskier countries in Europe. The creation of the eurozone created the false sense that all of the sovereign debt was risk free. The spread between German debt and other sovereign debt diminished after the creation of the eurozone. The ability to borrow at low interest rates encouraged high levels of public and private debt in the eurozone. The debt spreads have gone back to where they were prior to the development of the eurozone. However, the eurozone has been left with a weaker banking sector, and heavily indebted public and private sectors as a result of recession. Some of the problems of recovering from the eurozone crisis are discussed in the article. Weaknesses in the structure of the eurozone have been made apparent by the crisis, and they limit the ability to respond to the crisis. The prognosis is for an extended period of low growth in the eurozone.