Euro crisis

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Euro crisis : : Before one to could even think of the end of great recession of 2008, Greece gave birth to another crisis. …

Euro crisis : : Before one to could even think of the end of great recession of 2008, Greece gave birth to another crisis.

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  • 2. AGENDA The Euro Zone Benefits of a Shared Currency So, what happened? Greece… Bailouts… Spain and Italy Fear of default… No Simple Solutions2
  • 3. THE EURO ZONE The Euro is the official currency of the 17 countries that form the Eurozone The European Central Bank (ECB) located in Frankfurt, Germany isresponsible for the monetary policy of the Eurozone In early stages, the euro was used only in the stock markets, for financialtransactions between banks and for cashless shopping The euro notes and coins were introduced in January of 2002. Ten countries (Bulgaria, the Czech Republic, Denmark, Hungary, Latvia,Lithuania, Poland, Romania, Sweden, and the United Kingdom) are EUmembers but do not use the euro. Three member states - Britain, Sweden and Denmark - stayed out of this finalstage of EMU.Member countries of the Euro Zone3
  • 5. BENEFITS OF A SHARED CURRENCY Single currency in single market makes sense Price transparency Uncertainty caused by Exchange ratefluctuations eliminated Increased Trade and reduced costs to firms Strengthen the economies of euro zonemembers Borrow money from international financialmarkets and investors at a much lower rate A tangible sign of a Europen identity5
  • 6. SO, WHAT HAPPENED? First of all, many euro zone members did not adhere to the guidelinesfor borrowing which were in place Italy and Germany were the first to break the 3% borrowing rule, withFrance not far behind. The largest economies in the euro zone, only Spain kept to theguidelines until the financial crisis of 2008 In April, 2009 the EU orders France, Spain, the Irish Republic andGreece to reduce their budget deficits - the difference between theirspending and tax receipts. In December 2009, Greece admits that its debts have reached 300bneuros - the highest in modern history. Sovereign Debt: Bonds issued by a national government in a foreigncurrency, in order to finance the issuing countrys growth.6
  • 8. EUROPE CRISIS Before one to could even think of the end of great recession of 2008,Greece gave birth to another crisis. Greece debt crisis is actually an evolution of the global crisis. Greece allowed deficits from Central bank and government bonds topile up. Greece debt came to light in 2009. Poor, poor Greece In 2009 Greece was ranked second lowest on EU’s index of economicfreedom. Country suffers from high level corruption. Economic growth turned negative in 2009 for the first time since 1993.8
  • 9. EUROPEAN DEBT CRISIS-DETAIL1999On 1 January, the currencyofficially comes intoexistence.199920012001Greece joins the euro.20022002On 1 January, notes andcoins are introduced.20082008Malta and Cyprus join the euro,In December, EU leaders agreeon a 200bn-euro stimulus plan tohelp boost European growthfollowing the global financialcrisis.2009 2009 2010 20122009In April, the EU orders France, Spain,the Irish Republic and Greece toreduce their budget deficits - thedifference between their spending andtax receipts2010Concern starts to buildabout all the heavilyindebted countries inEurope - Portugal, Ireland,Greece and Spain (PIGS).2011In April, Portugal admitsit cannot deal with itsfinances itself and asksthe EU for help.2012-On 12 February,Greece passes theunpopular austerity billin parliament - twomonths before ageneral election.-March begins with thenews that the Eurozonejobless rate has hit anew high2009In December, Greeceadmits that its debts havereached 300bn euros - thehighest in modern history.2009In October, amid much anger towards theprevious government over corruption andspending, George Papandreous Socialistswin an emphatic snap general election victoryin Greece.20119
  • 10. PIIGS PIIGS is an acronym that refers to the economies of Portugal, Greece,Spain, and either or both Ireland and Italy..10
  • 11. GREECE’S DEBT DYNAMICSSource: Economist.com11
  • 13. AFFECT ON OTHER COUNTRIESContagion If Greece is not helped, it could drag down the entire EuropeanUnion Threatening economies: Portugal, Spain and Italy The impact on the common European currency 15 other euro zone economies who have agreed to help outGreece IMF announced a bail-out package13
  • 14. PROPOSED SOLUTIONS First, citizens must elect uncorrupt government officials who care for theeconomic and political growth of the country. The government must give lower wages looking at threw economic situationof the country. They should reduce the trade imbalances- Encourage exports It was not a wise economic move to borrow money while already in debt On the restructuring of the debt and the implementation of austeritymeasures-Improve Tax Collection Improve Tourism14
  • 15. VIDEO15
  • 16. Questions & Suggestions areWelcomeThanks16