Eurozone crisis explained
What Really Caused the Eurozone Crisis?
World leaders probably spend more time worrying about the eurozone crisis than anything else nowadays.
But as eurozone governments struggle to agree the best way out of the crisis, are they missing what caused it?
The eurozone has agreed a new “fiscal compact”Eurozone parliaments are in the process of ratifying a tough set of rules - insisted on by Germany - that will limit their governments’ “structural” borrowing (that is, excluding any extra borrowing due to a recession) to just 0.5% of their economies’ output each year. The pact, which will come into force once 12 out of the 17 eurozone member states have ratified it, will also limit their total borrowing to 3%. These rules are supposed to stop them accumulating too much debt, and make sure there won’t be another financial crisis. But didn’t they already agree to this back in the ’90s?Hang on a minute. They agreed to exactly the same 3% borrowing limit back in 1997, when the euro was being set up. The “stability and growth pact” was insisted on by German finance minister Theo Waigel (centre of image). What happened?