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What apperas to be the problem with EU's banking sectors?

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mohanprem11 | Student | eNotes Newbie

Posted February 24, 2012 at 12:42 AM via web

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What apperas to be the problem with EU's banking sectors?

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readerofbooks | College Teacher | (Level 2) Educator Emeritus

Posted February 24, 2012 at 1:00 AM (Answer #1)

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The problem of the EU is very serious and complex. The banks are largely to blame as banks always fudge their number and take risks to make more money. Corporate greed is to blame as well. What the EU is going through now is what we went through in 2008. Let me give you a few reasons why there are problems in the banking sector.

First, to make it simple, Europe is running out of money. People borrowed too much, more than they could afford, spent too much, and now it is time to pay back. The problem is that they cannot make payments. Greece, Portugal, Spain and Italy are in the worst situations.

Second, the reason why the banks are suffering is because of the nasty word, "default." When people default banks could deal with it, but when nations default this is when there is a huge problem.

Let's put it this way, if I owe the bank 1,000,000 dollars and I cannot pay them back, I have a problem. If I owe the bank, 10,000,000,000 and I cannot pay them back, the bank has a problem. That is the situation the European banks are in. This is why they need bailouts, even from China and Japan. ECB today announced that they might offer a 600 billion dollar bailout! Read the article.

Austerity is one of the solutions, but people are rarely willing to follow.

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