Global Financial Crisis and Its Effects on European Financial System

Abstract

The effects of the global financial crisis are widespread. Looking at the global level, consequences of the crisis: the decline in economic activity, productivity, employment, foreign direct investment exports, liquidity, weakening the banking sector, the deterioration of the fiscal position due to measures to stimulate consumption, laded to the rapid growth of the debt of many countries, which reached unsustainable levels. The consequences can be seen depending on the degree of development of the country. This work analyzes effects of the crisis in financial sector. In developed countries, the crisis led to the fall of liquidity due to the weakening of the banking sector, which results in lower consumption and investment, and hence the reduction in GDP growth and employment. In the case of developing countries the crisis has affected the reduction in foreign direct investment by developed countries, the decline in exports due to lower demand from developed countries and weakening of the banking sector. In poor countries, the crisis has resulted in a lack of credit and grants by developed countries, reduced exports and foreign direct investment.