This document discusses the sovereign debt crisis in the Eurozone. It outlines several causes of the crisis, including the collapse of the US housing market and Greece's high levels of borrowing. The impacts included rising public debt, unemployment, GDP declines, and the potential break-up of the Eurozone. Solutions from the European Central Bank involved lowering interest rates and implementing bond-buying programs. Lessons for the future are the need for fiscal discipline, structural reforms, and stronger financial regulation to prevent another crisis.

1. SOVEREIGN
DEBTS CRISIS
GROUP II

2. GROUP
MEMBERSStd1. Pham Ngoc Khanh
Std2. Nguyen Thi Cam Van
Std3. Le Ha My
Std4. Le Quynh Mai
Std5. Nguyen Thu Uyen
Instructor Mrs. Nguyen, MBus
Class TCHE303.1

3. OUTLINE
A.CAUS
ES
B.IMPAC
TS
C.SOLU
TIONS
D.LESS
ONS

4. OVERVIEW
S EURO ZONE
EURO CENTRAL BAN

5. CAUSES

6. EXTERNAL CAUSES
FROM USA
1. US HOUSING
MARKET COLLAPSED
2. BOUGHT BAD
MORTGAGE LOANS
FROM US

7. INTERNAL CAUSES
FROM GRECE

8. INTERNAL CAUSES
FROM EUROZONE

9. INTERNAL CAUSES
GERMANY CREDIT CARD
• Germany & other big
economies of Europe would
step in to repay debts if
Greece cannot because they
are bound by a common
currency.
• Greece borrows a lot because
of lower interest rate ->
spending increases -> repay by
borrowing more -> borrowing
continued & debt increases
gradually

10. INTERNAL CAUSES
CONTINUOUS LENDING

11. IMPACTS

12. IMPACTS
THE EU
#1 PUBLIC DEBT AS A
PERCENTAGE OF GDP

13. IMPACTS
THE EU
#2
UNEMPLOYMENT RATE

14. IMPACTS
THE EU
#3 THE GDP DECREASE

15. IMPACTS
THE EU
#4 DEPRECIATION OF THE EURO

16. IMPACTS
THE EU
#5 THE POSSIBLE BREAK-UP OF EUROZONE
- Central banks: switching over to national currencies again ->
difficult & costly.
- No free trade zone.

17. IMPACTS
THE WORLD ECONOMYVIETNAM ECONOM
#1. A BREAK-OUT OF GLOBAL RECESSION
#2. EFFECTS SPREAD TO AFRICA
#1. EXPORTS DEMAND REDUC
#2. DEPRECIATION OF THE EU
#3. GOLD PRICES ROCKETED

18. SOLUTION
S
Eurosystem and
EBC

19. SOLUTIONS
STANDARD MEASUREMENTS
Lowering the key interest rate
8th Oct 2008, the cut by 50 basis points.

20. SOLUTIONS
NON-STANDARD MEASUREMENTS
Jul 2009 May 2010 Dec 2011 Nov 2011 Sep 2012
The
First
CBPP
The
New
Bank
Crisis
OMT
The
Second
CBPP
SMP

21. SOLUTIONS
* Started: 2 July 2009
* Purpose: putting the stable to liquidity problems in primary
market
* Euro system used the tools of:
+ Extension of the maturity of liquidity provision: longer-term
refinancing operations (LTROs) was temporarily extended from
three to twelve months
+Collateral eligibility requirements
Succeed in June 2010 => Eurosystem decided to end up the first
CPBB.
THE FIRST COVERED BOND
PURCHASE PROGRAMME
(CBPP-I)

22. SOLUTIONS
* Started:14 May 2010
* Purpose:
+ Calm the market down
+ Support a better functioning of the monetary policy
transmission mechanism
* Three main channels of potential disruptions induced by
malfunctioning government bond markets:
+ Price channel
+ Liquidity channel
+ Balance sheet channel
SECURITIES MARKETS
PROGRAMME

23. SOLUTIONS
PROS &
CONS
SECURITIES MARKETS PROGRAM
Avoiding for some time an uncontrolled
increase in sovereign bond yields
=> Financing costs for the economy with
adverse implications for price stability
Financing costs for the economy with
adverse implications for price stability
=> Shielded monetary policy transmission in
large parts of the euro area
=> Stabilisation in markets as well as to an
immediate + substantial decline of
government bond yields.
Temporary; governments did not take
sufficient measures

24. SOLUTIONS
 Two LTROs (one in December 2011 and one in February
2012) with a maturity of three years each.
 Reduction in the minimum reserve ratio requirement from
2% to 1%.
 Increase in collateral availability by allowing national central
banks
 Encouragement of the development of alternative credit
assessment sources for use in the selection of eligible
collateral.
THE NEW BANKING CRISIS – ADDITION

25. SOLUTIONS
* Started: November 2011
* Purpose:
+ New requirements for European governments
+ Encouragements to financial institutions
=> Develop the lending to investors
PROS AND CONS
THE SECOND COVERED BOND PURCHASE
Contributed positively to bond
market with the restoration of
transmission system
Not increased the liquidity of
European Banks much than
after CPBB-I

26. LESSONS

27. LESSONS
FOR FUTURE
MONETARY POLICY MUST REMAIN FOCUSED ON ITS KEY O
OF DELIVERING PRICE STABILITY.

28. LESSONS
FOR FUTUREEURO AREA GOVERNMENTS MUST BRING FORWARD
NECESSARY STRUCTURAL REFORMS AND ENGAGE IN
SUSTAINABLE FISCAL POLICIES WITHIN
A STRENGTHENED EURO AREA GOVERNANCE
FRAMEWORK.

29. LESSONS
FOR FUTURE
DON’T FORGET FINANCIAL SECTOR
Financial supervision and regulation is
CRUCIAL!!!

30. LESSONS
FOR VIETNAM ECONOMY
03
02
01
The model of economic development
Reduce public spending and deficits
Transparency of information
on the state budget and
public debt, publish
information and exact policy
Lesson 01
Lesson 02
Lesson 03

31. LESSONS
FOR VIETNAM ECONOMY
• Vietnam should give the right message and
explain clearly
• The Government should introduce a clear
legal framework and assign responsibilities to
a specialized agency
• The relationship between the regional
administration and the business sector also
needs to be transparent
• The spending power of the government
should be made public in a report on the
state budget, as well as the annual financial
statements

32. THANK YOU FOR
LISTENING
Group II