This paper researched on the causes, current consequences and potential implication of the European debt crisis. The crisis was found to be a result of factors including international trade imbalances, the effects from the global crisis 2007-2012 and the failure in bailout approaches to cure Europe from the global financial distress. This has caused panic across the world due to the fact that negative financial situations in peripheral countries in Europe might further demolish the global financial markets. Even though significant growth was presumed from the introduction of Euro, the financial crisis resulted in sharp rise in bond yields, CDS, cross-correlation and spillover effects across bond markets of the Eurozone. Yield curves of the GIIPS countries acted as a cluster; differentiating from stronger and more stable economic forces. In addition, crisis resulted in significant dip of market confidence on Euro and depreciation of Euro against major currencies. Commodity prices i.e. spot price of gold rose to almost 300% over the time crisis period, utilized by governments as a defense mechanism against the economic downturns. Potential problems that might arise from this severe crisis and financial prospects of European states as well as governments over the world are also assessed and discussed.