The European Union has been struggling in debt as the International Monetary Fund has warned that its debts are on an “explosive” path. All in all there are five European nations who have bigger debts that their economic output and 21 nations that have debts that is larger than the 60 percent GDP limit that is set out by the Maastricht Treaty.
There was an increase on debt across the continents which show that the countries are struggling to control their public expenditures, while the countries with the smallest total amount of debt are often those that have seen the largest increase wince over recent years.
Although many European countries are deep in debt, there are nine countries from the European nations have managed to reduce their debt, in proportion of their country’s GDP since 2012. These countries are namely; Czech Republic, Denmark, Germany, Ireland and Latvia have managed to do so in real terms. While countries like The United Kingdom, Italy, Germany, France and Spain have an outstanding debt of over € 1 trillion.
Although these five were seen as the countries that are in immediate danger of a possible crisis, the crisis would extend beyond their borders and even reaching the world as a whole.
In June last year, the United Kingdom voted to leave the European Union this has fueled sceptics all across the world. It is often perceived that this movement have gained stronger support during the debt crisis which led to the campaign describing the European Union as a Sinking Ship, referring to the EU’s economy to be a lost cause. The U.K. referendum sent shock waves through the economy.
European banks remain one of the largest holders of region’s government debt, although they reduced their positions throughout the second half of 2011. For the banks, this could mean a sharp reduction in the number of assets on their balance sheet and possible insolvency.