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The Liquidity of the Financial System and the Sovereign Debt Crisis in Europe – Is There a Solution?

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  • Nedelcu Monica Letitia

    (Faculty of Economics and Business Administration, ”Alexandru Ioan Cuza” University of Iasi, Romania)

Abstract

The financial crisis of 2007-2008 has brought to light the liquidity problem of the financial system. Trying to solve this challenge, the members of the European Monetary Union were confronted with the sovereign debt crisis, which exacerbated the gravity of the initial situation. This paper analyses the causes and effects of the sovereign debt crisis as well as the measures taken by the European Central Bank to minimize the negative effects. The analysis is used in order to identify possible solutions for this critical situation. The findings reveal the fact that there is no panacea solution, that situations differ from country to country and that there is no measure only with positive effects. The broader question is which steps have to be taken in order to avoid a worse situation in the long run

Suggested Citation

  • Nedelcu Monica Letitia, 2013. "The Liquidity of the Financial System and the Sovereign Debt Crisis in Europe – Is There a Solution?," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 238-243, May.
    • Handle: RePEc:ovi:oviste:v:xii:y:2012:i:1:p:238-243
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    financial crisis; sovereign debt crisis; European Central Bank; liquidity risk; fiscal policy;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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