From late 2009, fears of a sovereign debt crisis developed among investors concerning rising government debt levels across the globe together with a wave of downgrading of government debt of certain European states. Concerns intensified early 2010 and thereafter making it difficult or impossible for Greece, Ireland and Portugal to re-finance their debts. On 9 May 2010, Europe's Finance Ministers approved a rescue package worth €750 billion aimed at ensuring financial stability across Europe by creating the European Financial Stability Facility (EFSF).
In October 2011 eurozone leaders agreed on another package of measures designed to prevent the collapse of member economies. This included an agreement with banks to accept a 50% write-off of Greek debt owed to private creditors, increasing the EFSF to about €1 trillion, and requiring European banks to achieve 9% capitalisation. To restore confidence in Europe, EU leaders also suggested to create a common fiscal union across the eurozone with strict and enforceable rules embedded in the EU treaties. While the sovereign debt increases have been most pronounced in only a few eurozone countries, they have become a perceived problem for the area as a whole.
Nevertheless, the European currency has remained stable. As of mid-November 2011 it was trading even slightly higher against the Euro bloc's major trading partners than at the beginning of the crisis. The three most affected countries, Greece, Ireland and Portugal, collectively account for six percent of eurozone's gross domestic product (GDP).
Dec 13 - The intensifying European debt crisis drove the euro down to its lowest level against the dollar since January. The euro traded at $1.3043 late in New York Tuesday. Earlier it sank as low as $1.3008. Late on Monday, it was worth $1.3186.
European leaders agreed last week to tighten rules on government spending in an attempt to contain the debt crisis, but investors remain wary of possible defaults by heavily indebted countries like Greece. Leaders put off until March a decision on whether to add more money to a bailout fund for euro countries. Analysts say more is needed to help calm jittery bond investors. Parliaments in some countries may also oppose the pact.