Macroeconomic Theory and Macroeconomic Logic: The Case of the Euro Crisis

The last 7 years have been a tumultuous period for Europe and the unrest is far from over. The global crisis that began in 2007 led to a sharp financial shock in 2008-9, which ushered in a recession across the world. Europe-including Germany-was hit hard as credit contracted and international trade shrunk. The real crisis in Europe, however, commenced in 2009-10 as the recession induced a worsening of public finances that triggered off a gigantic crisis in the Eurozone.