The document summarizes several financial crises: - The Eurozone crisis began in 2009 when Greece revealed large budget deficits over 3% of GDP allowed. Private debt was transferred to sovereign debt in countries like Greece and Ireland. - Mexico experienced crises in the 1980s ("Lost Decade") and 1994 ("Tequila Effect") due to large deficits, government borrowing, and peso devaluations. Both crises were resolved through IMF loans. - The 1997 Asian Financial Crisis began in Thailand and spread due to fixed exchange rates and credit bubbles fueled by foreign capital inflows. Countries faced bankruptcies and withdrawals of credit after devaluations. Thailand was rescued by IMF loans.

1. International financial crisis
Study of Euro, Mexican & Asian financial crisis.
- By
Pawan KumarYalla
Gagan Bakshi
IIT Roorkee – Process eng with Management

2. EURO CRISIS

3. Euro financial crisis
 The Eurozone crisis is an ongoing crisis that has been affecting
the countries of the Eurozone since early 2009, when a group of 10
central and eastern European banks asked for a bailout.

4.  In 1992, members of the European Union
signed the MaastrichtTreaty, under which
they pledged to limit their deficit spending
and debt levels.
 no greater than 3% of GDP.

5.  Private debts arising from a property bubble were
transferred to sovereign debt.
 In Greece, high public sector wage and pension
commitments were connected to the debt increase.
 The structure of the Eurozone as a currency union (i.e.,
one currency) without fiscal union.
(e.g., different tax and public pension rules)
 European banks, now own a significant amount of
sovereign debt

6. Causes
 easy credit conditions during the 2002–2008 period
that encouraged high-risk lending and borrowing
practices
 the financial crisis of 2007–08
 international trade imbalances
 real estate bubbles that have since burst
 the Great Recession of 2008–2012
 fiscal policy choices related to government revenues
and expenses
 approaches used by nations to bail out troubled
banking industries and private bondholders

9. Video – euro crisis explained as debt ratio’s

10. Greece
 A research report, explains-
"The current Eurozone crisis has been unfolding since
2009, when a new Greek government revealed that
previous Greek governments had been underreporting
the budget deficit. The crisis subsequently spread to
Ireland and Portugal, while raising concerns about Italy,
Spain and the European banking system, and more
fundamental imbalances within the Eurozone"

11. Crisis - process
 In the early mid-2000s, Greece's economy
was one of the fastest growing in the
eurozone and was associated with a large
structural deficit. -( then fin crisis 07-08)
 **on 23 April 2010, the Greek
government requested an initial loan
of €45 billion from the EU & IMF.
 Greece's sovereign debt rating to BB+ or
"junk" status

12. Numbers
 a revision of the forecast for the 2009 budget deficit
from "6–8%" of GDP (no greater than 3% of GDP was a
rule of the Maastricht Treaty) to 12.7%
 the Greek debt exceeded $400 billion (over 120% of
GDP) and France owned 10% of that debt, struck terror
into investors at the word "default“
 Greece was bailed out in 2010 with a 110 billion euro
direct loan by the European Union and the International
Monetary Fund.
 After 2 years of fiscal austerity and Greek riots, another
130 billion euro loan was made.

13. more
 primary deficit—i.e., fiscal deficit before interest
payments—from €24.7bn (10.6% of GDP) in 2009 to
just €5.2bn (2.4% of GDP) in 2011.
 The Greek GDP had its worst decline in 2011 with
−6.9%
 the seasonal adjusted industrial output ended 28.4%
lower than in 2005
 111,000 Greek companies going bankrupt (27% higher
than in 2010).
 youth unemployment rate rose from 22.0% to as high
as 62%

14. Conditions by IMF
 reduce the Greek spendings with €3.3bn in 2012 and
another €10bn in 2013 and 2014.
 debt restructure agreement -
- private holders of Greek government bonds forced to
accept a bond swap with a 53.5% nominal write-off, partly in
short-term EFSF notes, partly in new Greek bonds with lower interest
rates and the maturity prolonged to 11–30 years
- affected some €206 billion of Greek government
bonds
 caused the Greek debt level to fall from roughly
€350bn to €240bn in March 2012

17. Greek
nation
al
accou
nt
1970 1980 1990 1995 1996 1997 1998 1999 2000 2001a
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013b
2014b
2015b
2016c
Public
revenu
ed
(%
of
GDP)[8
5]
N/A N/A 31 37 37.8 39.3 40.9 41.8 43.4 41.3 40.6 39.4 38.4 39 39.2 40.7 40.7 38.4 40.6 42.4 44.6 44.6 45.1 44 TBA
Public
expen
ditured
(% of
GDP)[8
6]
N/A N/A 45.2 46.2 44.5 45.3 44.7 44.8 47.1 45.8 45.4 45.1 46 44.4 45 47.2 50.5 54 51.3 51.9 53.6 58.2 47.1 45.1 TBA
Budg
et
balan
ced
(%
of
GDP)[3
9][87]
N/A N/A -14.2 -9.1 -6.7 -5.9 -3.9 -3.1 -3.7 -4.5 -4.8 -5.7 -7.6 -5.5 -5.7 -6.5 -9.8 -15.7 -10.7 -9.5 -9 -13.5 -2 -1.1 TBA
Real
GDP
growt
hh
(%)[
92][93]
8.9 0.7 0 2.1 2.4 3.6 3.4 3.4 4.5 4.2 3.4 5.9 4.4 2.3 5.5 3.5 −0.2 −3.1 −4.9 −7.1 −6.4 -4 0.6 2.9 3.7
Public
debti
(
billion
€)[94][95
]
0.2 1.5 31.1 86.9 97.8 105.2 111.9 118.6 141 151.9 159.2 168 183.2 212.4 224.9 239.5 263.3 299.7 329.5 355.1 303.9 322.2 322 323.2 322
Nomin
al
GDPi
(
billion
€)[96][97
]
1.1 6.8 43.4 88.7 97.5 107.9 117.3 125 135 145.1 155.2 170.9 183.6 193 208.6 223.2 233.2 231.1 222.2 208.5 193.7 182.8 183 189.1 199.5
Debt-
to-
GDP
ratio (
%)[43][9
8]
17.9 22.5 71.7 97.9 100.3 97.5 95.4 94.9 104.4 104.7 102.6 98.3 99.8 110 107.8 107.3 112.9 129.7 148.3 170.3 156.9 176.2 175.9 170.9 161.4

18.  On 10 April 2014, Greece returned to
international capital markets, issuing
bonds worth €3 billion , though its still
severely affected and situation is bleak.

19. Mexican Financial Crisis
The “Lost Decade” 1980’s and the “Tequila Effect”
1994

20. 1982 – 1986 Causes
 Current Account deficit
 Heavy government borrowing of short
term loans
 Depletion of government foreign reserves
 Higher U.S. interest rates due toVolcker's
anti-inflation policies
 Falling oil-prices
 Large capital outflows
 Peso devaluation

21. Gross Domestic Product
0
100000
200000
300000
400000
500000
600000
700000
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
GDP (millions)
GDP (millions)

22. Solutions
 IMF injection of $4.55 billion to keep
from defaulting
 $3.625 billion from United States to be
repaid in 1 year
 Long process of stagnation and slow
growth for years
 Crisis spread throughout most of Latin
world

23. 1994 - Causes
 Political upheaval, assassination, and loss
of confidence
 Current account deficit and Capital flight
 Peso devaluation
 Large amounts of credit flow domestic
and foreign
 Liberalization of the then privatized
financial sector

24. Peso Devaluation

25. Mexican Import and Export
0
2000
4000
6000
8000
10000
12000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Exports
Imports

26. Solutions
 $48.8 billion from IMF
 $20 billion from U.S.
 Loans were repaid rapidly
 Mexico quickly recovered and returned
to global markets
 Spread to other Latin countries did not
occur to a great extent
 End of crawling pegged exchange rate
policy and beginning of floating system

27. Conclusion
 Mexico learned to not get itself that position
again with a current account deficit and
easily retractable capital in-flows.
 They learned not to overvalue their
currency for fear of another great
devaluation and start floating exchange rate
policy
 Privatized many industries opening them up
to foreign markets and reaping the rewards
of FDI

28. 1997 Asian financial crisis
The crisis started in Thailand.
- Financial collapse of theThai baht after
the Thai government was forced
to float the baht due to lack of foreign
currency

31. Effects
 Foreign debt-to-GDP ratios rose from
100% to 167% in 4 of ASEAN countries
 in 1993–96, then shot up beyond 180%
 May 1998 in the wake of widespread
rioting that followed sharp price increases
caused by a drastic devaluation of
the rupiah
 1998 the Philippines growth dropped to
virtually zero

32. Dynamics
 Until 1999,Asia attracted almost half of
the total capital inflow into developing
countries.

33. Credit bubbles and fixed
currency exchange rates
 Thailand's economy developed into an economic
bubble fueled by hot money.
 The short-term capital flow was expensive and often
highly conditioned for quick profit.
 had large private current account deficits and the
maintenance of fixed exchange rates encouraged
external borrowing and led to excessive exposure
to foreign exchange risk

34. Next -
 the devaluation of the Chinese renminbi
and the Japanese yen.
 raising of US interest rates which led to a
strong U.S. dollar
 the sharp decline in semiconductor prices

35. Last -
led to a large withdrawal of credit
from the crisis countries, causing
a credit crunch and further
bankruptcies.

36. Numbers - Thailand
 From 1985 to 1996,Thailand's economy
grew at an average of over 9% per year.
 Inflation was kept reasonably low within
a range of 3.4–5.7%.
 The baht was pegged at 25 to the US
dollar.

37.  On 14 May and 15 May 1997, the Thai
baht was hit by massive speculative
attacks.
 reached its lowest point of 56 units to the
US dollar in January 1998.
 the Thai stock market dropped 75%.

38. Measures
 On 11 August 1997, the IMF unveiled a
rescue package forThailand with more
than $17 billion.
 The IMF approved on 20 August 1997,
another bailout package of $3.9 billion.
 By 2001,Thailand's economy had
recovered theThai baht continued to
appreciate to 29 Baht to the Dollar in
October 2010