Abstract: Based on the theoretical frameworks of international economics and new political economics, this study has found that the root of European debt crisis lies in the democratic overload of both European countries and the United States. The inevitable result of European democratic overload is inefficiency of economic operation and enormous fiscal deficit. American democratic overload has given birth to the current disequilibrium of the international monetary system which is dollars-led and Euro-followed, and finally caused the European debt crisis by magnifying the structural problems of European economies through the two mechanics of international trade and international finance.

Key words: European debt crisis; international monetary system; new political economics; democratic overload