Cyber Times International Journal of Technology & Management

The global economy had experienced sluggish growth since the U.S. financial crisis of 2008- 2009, which had exposed to unsustainable fiscal policies of countries in Europe and other countries. Greece, which spent energetically for years and failed to accept fiscal reforms, was one of the first to experience the slower growth. The European Central Bank plays a bigger role in the euro zone sovereign debt crisis with the help of rate cuts, bond purchases and liquidity facility. ECB provides resistances against a boom of the crisis like policies to maintain demand in the short run and fend off weakness to inflation as well as measures to ensure monetary transmission. The ECB also oversees the tight co-operation between central banks in the 17 EU countries that have implemented the Euro as their official currency, the so-called Eurozone countries. The primary objective of this research paper is to understand the role of European Government and European Central Bank during sovereign and debt crisis and to understand the major challenges faced by European Central Bank. The European Central Bank’s non-standard measures prevented the destructive self-sustained forces. It also helped to discourse the dissimilarity in the transmission mechanism of monetary policy across different euro area countries. It is importance that governments and European policy makers carry out all needed steps to describe the major sources of the crisis.