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What Really Caused The Eurozone Financial Crisis?

In 2011, world leaders, but even more specifically, European leaders spent more time worrying about the eurozone crisis. Unfortunately, 2012 looks like it will be more of the same. Sure, the eurozone governments are establishing new rules and guidelines to limit their borrowing, but are they missing the point of the crisis altogether?

Read The Entire Eurozone Crisis Story from the BBC New Business.

The eurozone has agreed a new "fiscal compact."

Eurozone leaders have agreed to a tough set of rules - insisted on by Germany - that will limit their governments' borrowing each year to just 3% of their economies' output. This is supposed to stop them accumulating too much debt, and make sure there won't be another financial crisis.

But didn't they already agree to this back in the '1990s?

Believe it or not, they just agreed to exactly the same 3% borrowing limit back in 1997, when the euro was being set up. The "stability and growth pact" was insisted on by German finance minister Theo Waigel (centre of image). What happened?

Which Eurozone countries followed the established rules?

Italy was the worst offender. It regularly broke the 3% annual borrowing limit. But actually Germany - along with Italy - was the first big country to break the 3% rule. After that, France followed. Of the big economies, only Spain kept its nose clear until the 2008 financial crisis; the Madrid government stayed within the 3% limit every year from the euro's creation in 1999 until 2007. Not only that - of the four, Spain's government also has the smallest debts relative to the size of its economy. Greece, by the way, is in a class of its own. It never stuck to the 3% target, but manipulated its borrowing statistics to look good, which allowed it to get into the euro in the first place. Its waywardness was uncovered two years ago.

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Read The Entire Eurozone Crisis Story from the BBC New Business.