Euro Crisis

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Euro Crisis: Reasons,recommendations.

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Euro Crisis

  1. 1. EURO CRISIS PRESENTATION ON
  2. 2. EUROPE CRISIS <ul><li>Before one to could even think of the end of great recession of 2008, Greece gave birth to another crisis. </li></ul><ul><li>Greece debt crisis is actually an evolution of the global crisis. </li></ul><ul><li>Greece allowed deficits from Central bank and government bonds to pile up. </li></ul><ul><li>Greece debt came to light in 2009. </li></ul>
  3. 3. <ul><li>Sovereignty </li></ul><ul><li>Having supreme independent authority over a territory. </li></ul><ul><li>Supreme law making authority. </li></ul><ul><li>Debt </li></ul><ul><li>Debt is that which is owed. </li></ul><ul><li>Moral obligation not requiring money. </li></ul><ul><li>Crisis </li></ul><ul><li>When the debt level increases to a level that it cant be repaid </li></ul><ul><li>This can even lead to lower economic growth and worsen the situation of the economy in terms of recession. </li></ul>
  4. 4. SOVEREIGN DEBT CRISIS <ul><li>Sovereign debt crisis is a situation wherein a country with a powerful higher authority enters the state of not being able to repay its debts and obligations. </li></ul><ul><li>This leads to higher fiscal deficit of the economy and lower growth. </li></ul>
  5. 5. EURO ZONE <ul><li>It is an economic and monetary union of 16 European union members. Adopted EURO currency as their sole legal tender. </li></ul><ul><li>The European Central Bank (ECB) is the institution of the European Union (EU) tasked with administrating the monetary policy of the 16 EU member states taking part in the Euro zone. </li></ul><ul><li>Members- </li></ul><ul><li>AUSTRIA,BELGIUM,CYPRUS,FINLAND,FRANCE,GERMANY,GREECE,IRELAND,LUXEMBOURG, </li></ul><ul><li>MALTA,NETHERLAS,PORTUGAL,SLOVAKIA,SPAIN,SLOVENIA. </li></ul>
  6. 6. EUROPEAN UNION <ul><li>Established in 1993. </li></ul><ul><li>Currently has 27 members. </li></ul><ul><li>Committed to regional integration. </li></ul><ul><li>Ensures the free movement of goods, </li></ul><ul><li>services, people and capital in all member states. </li></ul>
  7. 7. GREECE FACTOR <ul><li>Greece is a developed economy with high standards of living. </li></ul><ul><li>It has high human development index and high purchasing power. </li></ul><ul><li>In 2009 Greece was ranked second lowest on EU’s index of economic freedom. </li></ul><ul><li>Country suffers from high level corruption. </li></ul><ul><li>Economic growth turned negative in 2009 for the first time since 1993. </li></ul>
  8. 8. CURRENT CRISIS <ul><li>The European debt crisis came into limelight with Greece. </li></ul><ul><li>This was done by the new government who took charge after the general elections. </li></ul><ul><li>Shocking role of Goldman Sachs in the fraud. </li></ul><ul><li>New government revealed the facts which actually happened in which the previous government had overspent and also reported a debt which ballooned to 12.7% of the GDP. </li></ul>
  9. 9. ISSUES <ul><li>The main issue of government is debt refinancing. </li></ul><ul><li>It had total sovereign debt of Euro 254bn and out of which Euro 50bn needs to refinanced in 2010. </li></ul><ul><li>Recent efforts to raise money through sale of bonds also failed as amount raised is too less then required. </li></ul><ul><li>If the situation is such Greece must declare itself insolvent. </li></ul>
  10. 15. CONSEQUENCES OF EURO CRISIS ON INDIA <ul><li>POSITIVES </li></ul><ul><li>Euro crisis will not impact equity investments in India. </li></ul><ul><li>Euro crisis will not have an impact on the GDP. </li></ul><ul><li>Euro crisis may trigger more capital flows : RBI </li></ul>
  11. 16. CONSEQUENCES OF EURO CRISIS ON INDIA <ul><li>NEGATIVES </li></ul><ul><li>Impact of Euro Crisis on the IT/ITES Industry. </li></ul><ul><li>Impact of Euro Crisis on Export. </li></ul><ul><li>Impact of Prolonged Euro Crisis on Capital Flows . </li></ul>
  12. 17. The Reason behind Euro Crisis
  13. 18. <ul><li>Allowing the crisis to progress, the EU could, in fact, devalue the Euro without actually issuing new currency </li></ul><ul><li>Euro crisis was allowed to evolve was to deflate the Euro </li></ul><ul><li>Government wants to pay its debt in a stronger currency; governments borrow money so that they can pay it back with cheap currency </li></ul><ul><li>Top EU members knew they were going to bail out Greece and potentially any other member that needed help, but they pretended that they would not </li></ul><ul><li>Rising Government deficit and rise in public debt </li></ul><ul><li>Two of the country's largest industries are tourism and shipping, and both were badly affected </li></ul><ul><li>Tax evasion costs the Greek government over $20 billion per year </li></ul>Reasons For Euro Crisis :
  14. 19. Solution : <ul><li>July 2011 European Council – the meeting to end the crisis by mixture of lower interest rates and some private sector rescheduling and restructuring. </li></ul><ul><li>Paying less than 4 % on the new debt it is incurring </li></ul><ul><li>Long term loans will be provided </li></ul><ul><li>  Greek government passing a package of new austerity measures and EU leaders pledging funds to support the country </li></ul><ul><li>  The Greek parliament passed the Economy Protection Bill, expected to save €4.8 billion </li></ul>
  15. 20. <ul><li>Cleaning up banks </li></ul><ul><li>Reducing the public debt in Greece, the only Euro zone country which has likely become insolvent </li></ul><ul><li>Fostering adjustment and growth in peripheral countries. </li></ul>Three Part Plan to tackle Euro Crisis :

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