Decoding the Lehman Brothers Catastrophe: Seven Global Aftershocks That Shook the World

Sovereign Debt Crisis

The second aftershock was the sovereign debt crisis that engulfed many European countries. Governments had to step in to bail out their failing banks, leading to a significant increase in public debt. The situation was exacerbated by the global recession, which led to decreased tax revenues and increased welfare spending. Countries like Greece, Ireland, and Portugal were unable to repay their debts, leading to a full-blown sovereign debt crisis.

The European Central Bank and the International Monetary Fund had to step in with bailout packages to prevent the collapse of these economies. This crisis exposed the vulnerabilities in the Eurozone's economic structure and led to significant policy changes.