From 'belt-tightening' to 'do whatever it takes': A review of the Eurozone 'local debt' crisis

Abstract: The problem of "local debt" in the Eurozone first came to light in Greece, and Europe's hesitant and delayed responses turned this localized risk into a multi-year debt crisis that endangered the entire Eurozone.

Initially, Greece and other European countries tried to solve the debt problem through fiscal austerity. However, this led to a bigger economic downturn and higher debt risk. The "local debt" issue then spread through the "sovereign debt-banking sector" path, turning into a crisis for European banks and the Euro. In the end, the ECB had to step in with a "whatever it takes" commitment to control the debt crisis, preventing a more serious economic downturn and the potential collapse of the Eurozone.