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What really caused the eurozone crisis?

World leaders probably spent more time worrying about the eurozone crisis than anything else in 2011.

And that was in the year that featured the Arab Spring, the Japanese tsunami and the death of Osama Bin Laden. What's more, 2012 looks set to be not much different. But as eurozone governments hammer out new rules to limit their borrowing, are they missing the point of the crisis?

   * The eurozone has agreed a new "fiscal compact"
   * Eurozone leaders have agreed to a tough set of rules - insisted on by Germany - that will limit their governments' "structural" borrowing (that is, excluding any extra borrowing due to a recession) to just 0.5% of their economies' output each year. It will also limit their total borrowing to 3%. These rules are supposed to stop them accumulating too much debt, and make sure there won't be another financial crisis.
   * But didn't they already agree to this back in the '90s?
   * Hang on a minute. They agreed to exactly the same 3% borrowing limit back in 1997, when the euro was being set up. The "stability and growth pact" was insisted on by German finance minister Theo Waigel (centre of image). What happened?
   * So who kept to the rules?
   * Italy was the worst offender. It regularly broke the 3% annual borrowing limit. But actually Germany - along with Italy - was the first big country to break the 3% rule. After that, France followed. Of the big economies, only Spain kept its nose clean until the 2008 financial crisis; the Madrid government stayed within the 3% limit every year from the euro's creation in 1999 until 2007. Not only that - of the four, Spain's government also has the smallest debts relative to the size of its economy. Greece, by the way, is in a class of its own. It never stuck to the 3% target, but manipulated its borrowing statistics to look good, which allowed it to get into the euro in the first place. Its waywardness was uncovered two years ago.
   * 3/9 Italy
     Worst offender
   * 5/9 Germany
     First to break rules
   * 6/9 France
     Offender
   * 9/9 Spain
     Top of the Class
   * But the markets have other ideas
   * So surely Germany, France and Italy should be in trouble with all that reckless borrowing, while Spain should be reaping the rewards of its virtue? Well, no. Actually Germany is the "safe haven" - markets have been willing to lend to it at historically low interest rates since the crisis began. Spain on the other hand is seen by markets as almost as risky as Italy. So what gives?
   * So what really caused the crisis?
   * There was a big build-up of debts in Spain and Italy before 2008, but it had nothing to do with governments. Instead it was the private sector - companies and mortgage borrowers - who were taking out loans. Interest rates had fallen to unprecedented lows in southern European countries when they joined the euro. And that encouraged a debt-fuelled boom.
   * Good news for Germany...
   * All that debt helped finance more and more imports by Spain, Italy and even France. Meanwhile, Germany became an export power-house after the eurozone was set up in 1999, selling far more to the rest of the world (including southern Europeans) than it was buying as imports. That meant Germany was earning a lot of surplus cash on its exports. And guess what - most of that cash ended up being lent to southern Europe.
   * ...bad news for southern Europe
   * But debts are only part of the problem in Italy and Spain. During the boom years, wages rose and rose in the south (and in France). But German unions agreed to hold their wages steady. So Italian and Spanish workers now face a huge competitive price disadvantage. Indeed, this loss of competitiveness is the main reason why southern Europeans have been finding it so much harder to export than Germany.
   * ...and a nasty dilemma
   * So to recap, government borrowing - which has ballooned since the 2008 global financial crisis - had very little to do with creating the current eurozone crisis in the first place, especially in Spain (Greece's government is the big exception here). So even if governments don't break the borrowing rules this time, that won't necessarily stop a similar crisis from happening all over again.

     Spain and Italy are now facing nasty recessions, because no-one wants to spend. Companies and mortgage borrowers are too busy repaying their debts to spend more. Exports are uncompetitive. And now governments - whose borrowing has exploded since the 2008 financial crisis savaged their economies - have agreed to drastically cut their spending back as well. But...
   * Cut spending...
   * ...and you are pretty sure to deepen the recession. That probably means even more unemployment (already over 20% in Spain), which may push wages down to more competitive levels - though history suggests this is very hard to do. Even so, lower wages will just make people's debts even harder to repay, meaning they are likely to cut their own spending even more, or stop repaying their debts. And lower wages may not even lead to a quick rise in exports, if all of your European export markets are in recession too. In any case, you can probably expect more strikes and protests, and more nervousness in financial markets about whether you really will stay in the euro.
   * Don't cut spending...
   * ...and you risk a financial collapse. The amount you borrow each year has exploded since 2008 due to economic stagnation and high unemployment. But your economy looks to be chronically uncompetitive within the euro. So markets are liable to lose confidence in you - they may fear your economy is simply too weak to support your ballooning debtload. Meanwhile, other European governments may not have enough money to bail you out, and the European Central Bank says its mandate doesn't allow it to. And if they won't lend to you, why would anyone else?

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In February 28th theSecretary of county Party committee meeting, Jieyang Experimental Zone of the main party attaches great importance to the leadership ,pro catch deployment ,the departments at all levels to implement the responsibility ,cooperate closely ,abercrombie paris,fight in coordination ,crack down on various illegal and criminal acts ,effectively promote the region social security comprehensive rectification work in depth .
District Party committee secretary Cai Yaoqing on February 28th and hosted by area members of the party and government bodies ,direct the Department is mainly responsible for people ,towns (street ) secretary ,alcalde ( director ) attended the District Management Committee joint (expansion) conference ,communicate seriously learning conference, research deploy whole area 2009 year deepen social security comprehensive rectification work .
Requirements of the region at all levels of departments should take powerful measures ,abercrombie,deepen ten regulation ,ensure the stability and rapid economic development .In order to strengthen the regulation of &ldquo  ;ten &rdquo  ;leader ,zone established by the district commissioner ,Secretary of politics and Law Committee, Xia Wei of director of public security general command of the deepening social security ten action command ,at the same time established Jieyang test area 2009 year deepen social security ten rectification work program ,further clarify the rectification work key and all levels of various departments work .
Experimental Zone of comprehensive management of public security organs play a role as the main force ,the police mobilization ,go to all lengths ,quickly set off &ldquo  ;ten rectification &rdquo  ;action climax, has dispatched police 386 person-time ,establishment of a fixed card post 2 ,inventory of entertainment ,rental housing ,louboutin pas cher,hotels ,Internet cafes ,hogan,car repair shop and other key sites in all 262  ;cracked various types of criminal cases 6, detained 11 suspects ,5 arrested  ;destroyed 2 criminal gangs ,arresting criminal gang member 6  ;and public security cases 65 ( including gambling cases 24, punishment 125)  ;seized unlicensed no certificate ,false licenses vehicle 150; the recovery of stolen cattle farm 2 head ( value 16000 yuan ) ,the stolen car 1, rob mobile phone 3 ,collection simulation pistol in 1,woolrich outlet, more than 30 sets of devices ,control tool to commit a large number of .
In order to ensure that the &ldquo &rdquo  ;ten rectification  ;to obtain actual effect ,experimental district public security authorities insist on &ldquo  ;police followed the alarm go ,source control ,fast detection fast break &rdquo  ;working principle,, key areas ,key period for implementing the precision strike ,give full play to initiative and the spirit of continuous operation ,louboutin,has taken a a series of measures  :one is held substation leader and each unit &ldquo  ;a &rdquo  ;conference ,mobilization deployment of action ,put forward to make clear a requirement .
During the operation, Schell ,the District Public Security Bureau commissar Lin Xujian himself the supreme commander ,to the police station ,point card check ,outlet hogan,other members of the team led the Bureau of each hook station coordinated operations ,to carry out a full range of action  ;in two ,Yung East Bridge Road Wangjiang exit card ,,strengthen the past suspicious vehicles and personnel .
,michael kors outlet;three is made pilot area public security organs to carry out armed patrol work program ,give full play to the social security comprehensive forces ,strengthen road patrol and plainclothes ambush combination ,low crime ,for breaking current cases ,severe blow &ldquo  ;rob a stolen &rdquo  ;case ,to deter crime  ;four is to combat illegal gambling activities as the main line ,focus on tackling key and difficulty ,do not stay dead ,sac longchamp pas cher,not to stay hidden ,at the same time with the village police station also signed book of responsibility of ensuring that gambling ,sac longchamp,gambling problem does not rebound  ;five is a complex public places one by one check, do not stay dead ,ensure one by one pass ,hollister;six is a group of public security police ,police organization ,strengthening for dangerous goods ,explosive goods of the safety inspection ,eliminate hidden dangers  ;seven is the Criminal Investigation Brigade increase detection pursuit work force Degree of &ldquo  ;therefore ,a stolen &rdquo  ;criminal cases give severe blow  ;the eight battalion of the traffic police is a joint fishing lake of unlicensed undocumented ,false licenses vehicle seizure attack, from fountainhead keep within limits &ldquo ,louis vuitton outlet;rob a stolen &rdquo  ;cases .
Through a large number of investigation Bukong ,the District Public Security Bureau in the experimental area of armed ministry guest house successfully captured in the area had many times and prepare to go on robbery suspect Huang Mouda ( male, 23 years old ,Yangjiang city) .
The continuous interrogation ,Spaccio Woolrich,Hwang was finally confessed in 2008 12 at the end of test area the number of crimes of robbery crime; according to Huang to account,michael kors, in the experimental zone thickness and Chen Village Road side grass ,franklin marshall,extracting the tool watermelon knife 1, and captured its partner Lin Moubin ( male, 29 years old ,test Zone )  ;in the involved Huang Mourong ( male, 18 years old ,test area ,at-large ) home captured ied 2 ,hollister france,watermelon knife 1 ,motor vehicle license plate sealing 8 grains ,concentrated sulfuric acid 1 bottle ( 400 ml) .
At present, Hwang ,Lin Moubin has been arrested .February 26th morning, battalion of the criminal investigation branch and south of the river police station destroy robbery gang in 2 ,captured by Huang Moufeng and other 6 criminal suspects, seized for committing a robbery simulation pistol ,woolrich,recover the stolen mobile phone ,2 head of cattle farm ,piumini moncler.
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