Ⅰ A brief review and analysis to sovereign debt crisis

In response to the financial crisis originated in the U.S.，the Euro zone promotes overall recovery of Euro zone economy by taking expansionary fiscal policy and unconventional monetary policy. But the decline in economic growth and increased financial expenditure has caused some European countries’ sovereign debt crisis，triggering new turbulence in market. Under the influence of the overall rescue program in the Euro zone，the most difficult time of the European sovereign debt crisis is over.

1.The institutions of Euro zone is the systematical cause of sovereign debt crisis

There are two main institutions in the Euro zone：Firstly，to establish European Central Bank，controlling the inflation rate below and nearly 2%，targeting only to keep price stability within the Euro zone without responsibility for economic growth. Secondly，to unify financial discipline in Euro zone. According to “Stability and Growth Pact”，the fiscal deficit of member states should be no more than 3% of GDP，and the balance of government debt should be no more than 60% of GDP. It’s the factor of economic success for Euro zone to adopt this unique system，but also the root of economic problems.

Euro zone carrying out such a relative strict system would probably lead to the dilemma of policies coordination，which inhibits economy growth. Member states of lower economic growth will find the high interest rate increased by European Central Bank to prevent inflation gets in the way of their economic recovery，so they have to resort to fiscal policy to regular economy for a short time when lost the monetary policy autonomy. One solution is to break “Stability and Growth Pact” to carry out economy stimulus policy. States al