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Introduction What is Euro Crisis?
Increase in ROI in Greece in late 2009-early 2010 causing increase in Risk Premiums Deficit-GDP ratio for 2009-12%(instead of 5%) Decrease in rating for Greek Sovereign debt to below investor grade rating in April 2010 Other countries in euro zone ± Portugal, Spain & Ireland in danger of facing same scenario as Greece Rescue: ¼750B package from which ¼440B = loan guarantees for countries facing serious problem, ¼250B from IMF, ¼60B from broadened EU balance of payment facility
Measures against Euro Crisis Nomalisation of risk premiums Joint Euro zone ± IMF rescue package German Allocation of ¼100million as of March 31.2010 Joint creation of a major state-owned bank by several small EU countries Imposition of requirements like govt should achieve budget surplus in boom periods or else sanctions must be imposed .
Greece & Spain) about their momentum of profitability speculative attacks against the euro zone Massive tendencies of populist politicians in EU demanding banks to maintain Greek Bonds inspite high volatility Creation of an EU Euro bond agency for govt debt financing thus being the only viable policy for restoring stability . govt bankruptcy not due to insolvency but due to illiquidity-rising ROIs & massive recessions as collateral damage Rise to rumours concerning the PIIGS(Portugal. Ireland.Effects of Euro Crisis One situation in case of insufficient in rescue package is that larger EU countries would have to leave the EU community to create another political & economical union Creation of an independent EU rating agency reinfocing competition & contribute to higher quality of rating process Massive devaluation. Italy.