In the year 2008, the global economy was hit by one of the worst financial crisis, unprecedented in history.

It was triggered by the sub-prime crisis in the US. Even before the world could recover completely , the Euro zone crisis has hit the global economy.

The crisis is already having an impact on the world order. As of now, no one really knows how long the crisis will continue, and the damage it will do to global economies.

Portugal, Ireland, Italy, Greece and Spain have huge debt-GDP ratios and unsustainably huge fiscal deficits.

Recently, the US rating agency Standard & Poor's cut the sovereign credit ratings of nine Euro zone countries.

France and Austria were stripped of their coveted Triple A status. Further, Standard & Poor's has downgraded the Euro zone rescue fund ( EESF) by one notch to AA+ from Triple A, echoing the view of Germany, the only major Euro zone member to retain a top-notch credit rating.

According to Standard & Poor's, the downgrade was all but inevitable following identical cuts in the creditworthiness of France and Austria, two of the EFSF's guarantors.

The EFSF was set up by the 17 governments that share the European single currency in May 2010 and is used to provide emergency loans to needy member countries.

The fund has an effective lending capacity of 440 billion Euros, which depends on guarantees, mainly from the Euro zone's AAA countries - Germany, Luxembourg, Finland and Netherlands.

As one of the solutions, the European Stability Mechanism (ESM), a permanent rescue fund is to be established.

It is expected to have an effective capacity of 500 billion Euros, based on paid-in capital of 80 billion Euros and callable capital of 620 billion Euros. ESM is expected to become operational in July 2012.

As Europe is a major trade partner with China and North America, it would have an impact on the global economy.

In addition to the slowdown, governments could cut their budgets and reduce their spending, leading to unemployment. These factors may take the Euro zone into a deep recession.

Analysts have warned that a default by Greece was on the cards, after Greece's talks with creditors broke down.

Greece was under growing pressures to secure an agreement with its private creditors to accept voluntary losses on their holdings of Greek bonds.

Greece risks bankruptcy when 14.5 billion Euros of bond redemptions fall due in late March.

Without a private sector bond swap involving a voluntary write-down , a 130 billion Euro second international bail-out for Greece could fall apart.