Global Journal of Management and Business Research, D: Accounting and Auditing, Volume 22 Issue 2

Ireland and Spain become the first countries to exit the bailout program respectively in 2013 and 2014 (McDonald, 2013). They will no longer have access to bailout loans, but can issue bonds again. Despite the positive effects on the financial markets, providing financial assistance did not address the budget deficit issue effectively. The bailouts were granted under the condition that the countries implement tough austerity measures to achieve budget stability; however policymakers underestimated the effects of these measures as the countries’ economic growth remain slow (Spiegel Online, 2013). Unemployment in the Eurozone has reached record highs; Greece and Spain are the most severely hit countries with rates currently above 26% as shown in Figure 17. In addition, as shown in Figure 18, the countries’ debts as a percentage of GDP are currently higher than ever. Source: Bloomberg, 2014 Figure 17: Germany and PIIGS Unemployment Rate Source: Bloomberg, 2014 Figure 18: PIIGS Debt as a Percentage of GDP Another critical aspect is the unconventional intervention of the ECB in the European sovereign bond market. Firstly, by buying government securities, the ECB is impacting the valuation of sovereign debt which is inconsistent with the main goals of monetary policy. ECB’s high level of influence in operational financial market activities could lead to the deformation of the markets over a medium or long period of time. Furthermore, the ECB is expanding the size of its balance sheet which endangers its independency (Procedia Economics and Finance 3 (2012) 763 – 768, A. Romana, I. Bilana). Lessons Learned from European Sovereign Debt Crisis 64 Global Journal of Management and Business Research Volume XXII Issue II Version I Year 2022 ( )D © 2022 Global Journals