European debt crisis resulted as some of the European nations were not capable of paying their sovereign loans. This crisis originated from the 2008 US subprime crisis. Some of the European nations were facing bankruptcy and if they defaulted on their payments it could have led to a domino effect and affected many other countries and institutions.Post the 2008 crisis the weaknesses of the financial systems were out in the open and this also started affecting the European nations as they started to feel the heat of the crisis. Especially the PIIGS nations had used to their advantage the benefits of the Euro currency and borrowed heavily from the Germany and other France banks due to the cheap money being available.
Following paragraphs explains the Euro debt crisis in detail.In the year 1992 there was treaty which was signed by the members of Europe known as Maastricht Treaty under than they pledged that they will limit the deficit spending of their nations and keep their debt levels in check. However nations like Greece and Italy did not stuck to that treaty and took more levels of debt through avoiding the best practices and using accounting techniques to hide their debt levels.