1. PRESENTATION
ON
EURO ZONE CRISIS PRESENTED BY: -
ANCHAL MATHUR
ANUP KUMAR DUBEY
GITANJALI JOSHI
MANISHA CHOURASIA
RONAK DOSHI
PRAMIL KUMAR GUPTA
2. 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
3. STATE OF VARIOUS COUNTRIES AND
FUTURE OUTLOOK
IX. Luxembourg
I. Belgium X. Malta
II. Cyprus XI. Netherlands
III. Finland XII. Portugal
IV. France XIII. Slovakia
V. Germany XIV. Slovenia
VI. Greece XV. Spain
VII. Ireland GDP 8.4 trillion euro (Contributes
VIII. Italy Worlds 14.6% GDP)
Interest rate 1%
Inflation rate .3%
Unemployement 10%
Trade balance 22.3 bn Surplus
4. ROLE OF RATING AGENCY
´ On 27 April 2010, the Greek debt rating was decreased to the first
levels of junk status by Standard & Poor's 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
5. 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
6. 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
7. RECOVERY
Should 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 imbalances
Reigniting growth and tackling unemployment
² European countries must work together to sustain the economic
recovery
8. 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
9. CREATION OF FULL FUND MAY 2010
BY EU
750 BN Fund
60 Bn from
440 Bn from emergency 250 Bn Euro
Eurozone states European from IMF
commission funds
10. 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.
11. IMPACT ON INDIA
´ "I don·t really see an impact of what is
happening in Greece here. I think the impact of
what's 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)
