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BACK GROUND AND REASONS´ Interest rate risk´ Government default´ Monetization of debt´ Contagion Effect´ Renegotiation of Debt´ Roll over risk/Bad equilibrium´ Depreciation of Euro´ Restructuring of debts´ Lack of federal treasury and budget´ Attack by speculators on Greece
STATE OF VARIOUS COUNTRIES ANDFUTURE OUTLOOK IX. LuxembourgI. Belgium X. MaltaII. Cyprus XI. NetherlandsIII. Finland XII. PortugalIV. France XIII. SlovakiaV. Germany XIV. SloveniaVI. Greece XV. SpainVII. Ireland GDP 8.4 trillion euro (ContributesVIII. Italy Worlds 14.6% GDP) Interest rate 1% Inflation rate .3% Unemployement 10% Trade balance 22.3 bn Surplus
ROLE OF RATING AGENCY´ On 27 April 2010, the Greek debt rating was decreased to the first levels of junk status by Standard & Poors amidst fears of default by the Greek government.´ agencies have been accused of giving overly generous ratings due to conflicts of interest.´ Raters downgrade securities in reaction to plummeting government-bond values, which in turn causes further bond market declines.´ European leaders are planning to set up a European ratings agency in order that the private U.S.-based ratings agencies have less influence on developments in European financial markets in the future
ROLE OF IMF´ The IMF¶s initial crisis response for EU members has been fast and efficient, later developments reflected country specific issues.´ The IMF also played a key role in the European Bank Coordination Initiative, together with the EU, the EBRD and others.´ he IMF has paid close attention to the social dimension of the programs.´ Issue bailout packages
BAILOUT PACKAGES´ ½ 110 Bn for Greece´ ½ 85 Bn for Ireland´ ½ 62 Bn for Portugal´ emergency loans for Hungary , Ukraine , Iceland , Belarus , and Latvia worth more than $39 billion´ IMF given $200 Bn to various economies and $283 Bn in SDR
RECOVERYShould also strengthen economic policy coordination « Currently, the major policy frameworks in Europe² macroeconomic, financial, and structural²are relatively independent of one another. « One of the lessons of the crisis in Europe is that a single currency without enough economic policy coordination may lead to huge imbalancesReigniting growth and tackling unemployment ² European countries must work together to sustain the economic recovery
RECOVERY´ Banks would have to be nationalized and public control extended over utilities transport energy and telecommunication´ Improve productivity´ Shift in the balance of political power in favor of labor´ Issuing pan euro zone sovereign bonds´ SPV ² European financial stability facility
CREATION OF FULL FUND MAY 2010BY EU 750 BN Fund 60 Bn from 440 Bn from emergency 250 Bn Euro Eurozone states European from IMF commission funds
ANALYSIS´ Countries should avoid too much debt leverage.´ An investor should not rely too much on credit rating agencies.´ Long term stability in a country requires a common fiscal policy rather than controls on portfolio investment.
IMPACT ON INDIA´ "I don·t really see an impact of what is happening in Greece here. I think the impact of whats happening in Greece and the PIGS countries is really with regard to the euro. If the euro were to be impacted, then we need to think what could happen here. At this point in time, other euro zone members are all inclined to come together to work out a package. I am sure that will make this blow away.´ - KV Kamath, (Non-Executive Chairman, ICICI Bank, told CNBC- TV18)