Endgame for Eurozone: Austerity, rescue or break-up?
Unfortunately, some Eurozone countries enjoyed the lowered cost of borrowing too much. The so-called PIIGS countries — Portugal, Ireland, Italy, Greece and Spain — are now facing questions of whether or not they can repay their debts. If these countries default on their debts, they could take the whole Eurozone down with them.
European leaders are now facing a quandary, as can be seen in the animation: They can, and have been, asking the PIIGS countries to go on an austerity program, cutting spending in order to improve their fiscal outlook. Unfortunately, in this global economic climate, cutting spending alone is not going to allow these countries to pay their ballooning debts.
Another option is to have the European Central Bank print Euros freely and lend them to the countries which are in trouble. The problem is this might set off inflation, and Germany and other countries who are not in economic trouble do not want to help Greece repay its debts at their expense just because they share a common currency.
Lastly, the once-unthinkable option: The Eurozone could be on its way to dissolution. Whatever happens, if the Eurozone crisis cannot be contained, it could affect the economy of the whole world.