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Published by: Zingcharla Raman on Nov 05, 2012
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Euro Zone Crisis

-Ajay Kumar -Dinesh Grover -Jasdeep Chawla -Puneet Kaur

• • • • • • • What is Euro Zone? What is Euro Zone Crisis? Countries affected and impact on them(PIIGS). Effect on Greece. Present condition. Solution. Conclusion.

Luxembourg. Ireland. but came for the European consumers on Jan 1 2002. France. . Slovakia. • Euro became a reality on Jan 1.Euro Zone • It is an economic and monetary union (EMU) of 16 European Union (EU) member states • They have adopted the euro as their sole trading currency. Malta. Germany. • It currently consists of Austria. the Netherlands. Belgium. Italy. Portugal. Slovenia and Spain. 1998 . Finland. Greece. Cyprus.

Introduction to Euro Zone crisis .• It is the biggest challenge Europe has faced since 1990. a summit was held in Paris by the Euro group heads of state and Govt. • On 11 Oct 2008. . to define a joint action plan for euro zone and central banks of Europe to stabilize the economy. • The official figures were released in 2009 Jan. • Due to global financial crisis that began in 2007-08 the euro zone entered its first official recession in third quarter of 2008.

Ireland. PIIGS: Portugal. Spain. Italy. .Beginning of Crisis • Started in – Oct 2009 in Greece • Its immediate causes lie with the US crisis of 200709. • The result in Euro Zone was Sovereign debt crisis. Greece.

• Greece credit rating downgraded. . • Need for external aid from EU and IMF • The high debts and rising rate of interests was a matter of concern.What Happened and Why? • Greece: Sharp Budget Deficit • Large government and External Debts in PIIGS. • Interest rates surged on government bonds.

higher budget deficits.• Reasons for rise in External Debts • High household indebtness. • Large current account deficit:  Excessive growth in domestic demand.  Increase in wage rates. . • Reasons for rise in Internal Debts: • Rising Unemployment: Lower tax returns. • Weakening export competitiveness.  Lower exchange rate risk.








GREEK DEBT CRISIS • In the first quarter of 2010.6 billion). which is bigger than the country's economy. large budget deficit and large external debt . the national debt of Greece was put at €300 billion ($413. • Greece has the worst combination of high debt level.

9% of GDP Current Account Deficit.0% of GDP Net Foreign Debt – 70% of GDP Total Outstanding Public Debt.11.$360 billion Debt-GDP ratio – 113% of GDP Budget Deficit – 12.290 billion euro .GDP .


Countries Affected By Greek Crisis • South-eastern Europe • Neighboring Serbia. Romania. Bulgaria and Turkey . Macedonia. Albania.

IMPACT • Contagion Effect Greek crisis has made investors nervous about lending money to governments through buying government bonds. • Reduced wealth: Take-home pay is likely to fall as it is eroded by rising taxes. • Impact on private individuals .


Czech Republic. Hungary. Romania Bulgaria. Lithuania. Slovenia Estonia and Poland . Slovakia.COUNTRIES AFFECTED High Risk Moderate Risk Lower Risk Latvia .

• France agrees to pitch in with 17 billion euro. .Resolutions • European governments and the International Monetary Fund (IMF) have stunned global stock markets with a 750bn-euro.

has already taken austerity measures. aims to reduce budget deficits down from 5. The lower house of parliament has voted for 25 billion Euros of cuts to reduce the country’s deficit. • Italy.7% by 2012.3% of GDP to 2. . The govt.Situation of other countries • Spain is experiencing the highest unemployment rate of 20%.

. • Government’s overall target of $200 billion for the fiscal could be at stake.Effect on India • India’s exports to Europe could witness a slump close to 10%. • About 22-28 percent of revenues of India’s top tech majors come from Europe whose revenues will definitely be affected. • Export driven sectors such as textiles and software are likely to bear the brunt.

FUTURE PREDICTED • Either the euro zone should go for integrating their economic policies. . British and American) lose hundreds of billions. French. countries devalue and the banks (German. and the Greeks and other profligate . OR • It collapses.

.PROBLEMS • It combines efficient and indiscipline economies. • Political problems. • Too high debts.

SOLUTIONS Countries affected must: Grind down Wages Raise Productivity Slash Spending Raise taxes Transparent Banking system Endure such Austerity Drives for many years .

which further spread to Euro zone and caused Euro zone crisis.CONCLUSION • The US crisis led to Global financial crisis. . as these countries were most affected. • Hence the Big Brothers should help the countries in problem to come out from the crisis.

Thank you very much for your attention!!! We are looking forward to receive your questions………… .

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