The outbreak of Euro zone crises fluttered the global economy with more intensity than was anticipated. Euro Zone consists of 18 nations who share the common currency and use Euro as their sole legal tender. Euro Zone crises can be a consequence of, absence of single banking regulatory authority, for these nations. Euro zone entered its first officially declared recession with the burst of the United States financial bubble in 2008. Albeit, the tremors were felt majorly by the European central bank, the euro zone crises can be considered as a spillover effect of the infected European economy.
Of course, huge deficits, heavy government expenditure and high debts and rising interest rates are also to be considered. Early 2010 saw the breakout of Euro zone catastrophe. Euro zone seemed on the verge of collapse, lenders were reluctant and were demanding higher rates with a fret of non reimbursement. It was a chronic occurrence of events, where the tax returns were lowered due to high unemployment and rising unemployment and sluggish markets called for high household indebtedness.
However, this was a scenario almost 4 years back. Since then countries have been seeking measures and have implemented quite a few remedial actions helping the euro zone show signs of recovery. The European economy started growing in the second quarter of 2013. Financial markets are also evidencing growth in the other ailing member states. The interest rate of 7.5 % being demanded by investors on the Spanish bonds till 2012 has now fallen to 4 %. Improving markets are expected to translate into employment creation. Steps are also being taken to make the banking sector more robust, as it is crucial for the EU’s recovery. Financial sectors are trying to figure out a single set of rules so as to establish a clear framework for the troubled nations. Blessing in disguise was that the weaknesses that were exposed during the times of recession and it called for restructuring the supervision of the financial sector. Euro zone nations also discussed about having a single supervisory mechanism for the banking sector.
ECB as another measure began a bond buying program wherein the central bank started purchasing debts to bring stability to the market and reduce borrowing costs for the ailing euro zone nations. This action of ECB increased demand for the bonds consequently keeping the cost of borrowing low and making it affordable for the troubled nations. When ECB announced its outright monetary transactions (OMT) bond buying program, the euro zone was at a risk of collapse.
However, the OMT program has proved immensely successful for the Euro zone. The euro zone economy is improving and financial institutes like Frankfurt School of Finance and Management after considering the vulnerabilities in the financial sector have directed their efforts in shaping and developing the budding financial experts and managers. With more than 50 years legacy Frankfurt school with their education, strives to shape their students and make them capable to deal with international economic conditions.