What is Eurozone crisis?

Also known as Eurozone debt crisis or Eurozone sovereign debt crisis, the term indicates the financial woes caused due to overspending by some European countries. Just like an individual, when a nation lives beyond its means by borrowing heavily and spending freely, there comes a point when it cannot manage its financial situation. When that country faces insolvency i.e. when it is unable to repay its debts partially or fully and lenders start demanding higher interest rates, the cornered nation begins to get swallowed up by what is known as the Sovereign Debt Crisis.

Eurozone indicates the combined region of 17 European countries that use Euro as their common currency. At present, Eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

The financial crisis of 2007–2008, also known as the Global Financial Crisis and 2008 financial crisis, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s. Greece is the country that has probably been the worst hit. Besides Greece, Ireland, Portugal, Italy and Spain are among the countries facing financial crisis.

Spain was strictly speaking not hit by a sovereign debt-crisis in 2012, as their financial support package was only to fund a bank recapitalization fund without containing any financial support for the government itself. As of July 2014, Ireland and Portugal had completed and exited their bailout programmes successfully. In regard to Greece and Cyprus, they both accomplished a partly regain of market access in 2014, and are scheduled to have their bailout programme periods ended in March 2016.

The crisis had significant adverse economic effects and labor market effects for the worst hit countries, with unemployment rates in Greece and Spain hitting 27%,and was overall blamed for causing subdued economic growth - not only for the entire eurozone - but for the entire European Union. As such, it can be argued also to have had major political impact on the ruling governments in 8 out of 18 eurozone countries, contributing to power shifts in Greece, Ireland, Italy, Portugal, Spain, Slovenia, Slovakia, and the Netherlands.