Hannah Wilson

Cite as

Germany - Eurogroup (EuroMUN 2017)

Topic A: Debt Restructuring

Following the establishment of the European Union under the Maastricht Treaty, the Eurozone was established on January 1, 1999 to address the obstacles that differing European currencies posed to trade, bringing new horizons for prosperity to the adjoined countries. The unification of monetary policies under the European Central Bank also led to a close interdependence of Eurozone economies, resulting in one country’s success or failures impacting the state of the others. Once the Euro was established, countries that were previously subjected to low borrowing allowances and high interest rates suddenly had unprecedented access to credit. Under this new abundance of cheap credit, Greece and other small countries adjusted their fiscal policies and increased spending to previously impossible levels. These huge deficit spending programs and unbalanced fiscal policies by Greece, Portugal and Cyprus accumulated large amounts of debt, only to be repaid with more borrowed money; Ireland and Spain had enormous housing bubbles from the cheap credit. Following the 2008 US housing market collapse, credit became unavailable and borrowing everywhere was halted, impeding the governments’ abilities to pay for the new jobs and benefits or pay off their old debts. The interdependence of Eurozone economies meant that bigger economies like Germany had to bailout the countries in crisis to prevent the collapse of the Euro as a whole.

As a government with balanced economic policies that are careful about spending/borrowing...