Unfortunately however, various imbalances, especially in trade and finance, have been accumulated on the way. These imbalances have led to the current sovereign debt crisis, since the appropriate adjustment mechanism has been lacking, given that exchange rate adjustment is ruled out by definition. Nobody denies that the current Eurozone financial problems have been caused by the region’s sovereign debt crisis.
And the sovereign debt crisis is the direct result of worsening public finances caused by massive fiscal stimulus programs to support the economy and capital injections to failing financial institutions after the Lehman Crisis of 2008.