What is financial crisis?

 The term financial crisis is applied broadly to a variety of

situations in which some financial institutions or assets
suddenly lose a large part of their value.
 The basis terms you hear while financial crisis:
1. Sub-prime mortgages
2. Collateralized debt obligations
3. Frozen credit markets
4. Credit default swaps

 Who is affected? – “everyone”

 The Eurozone Financial Crisis

The risk of the Sovereign Crisis was first developed in early 2010.
The main fear was that the Government of some European
Members like Portugal, Italy, Ireland, Greece, Spain (often referred
to as PIIGS) and Belgium were not in a position to pay of their
debts. Usually in such a situation the IMF (International Monetary
Fund) comes to the rescue of that country.

Following can be considered as two most important reasons for

sovereign debt crisis
Government relying on financing through Short term bonds
Currency mismatch if a country is not able to issue bonds in their
own currency.
 The Eurozone Financial Crisis

As was feared in early 2010, Greece did make a default in

repaying its debt obligations.
On 2nd May 2010, the Euro Zone Countries and IMF agreed to
€ 110 billion loan to Greece. By the time the Greece bailout
was finalized talks of Ireland bailout had started.
On 28th Nov 2010 EU and IMF together agreed on a € 90
billion loan for Ireland.
What lies ahead on this crisis is hard to predict. With
speculations of Spain being the next for bailout, which is
quite likely, the situation in Euro Zone is not going to get any
better in near future.
History Of European Union
 What is European Union?

 € as currency introduced in 1999

 Share in global economy

 € in tough competition with $

Historically, financial crises have been followed by
a wave of governments defaulting on their debt
obligations.
Greece’s current economic problems have been
caused by a mix of domestic and international
factors.
*High government spending
*Declining international competitiveness
*Access to capital at low interest rates
*Issue with EU Rules enforcement