What the crisis is

The European debt crisis is the shorthand term for Europes struggle to pay the debts it has built up in recent decades..

The European sovereign debt crisis is an on-going financial crisis that has made it difficult or impossible for some countries in the euro area to refinance their government debt without the assistance of third parties.

MAJOR AREAS OF INCEPTION

GREECE IRELAND
ITALY

PORTUGAL

SPAIN

 Root of Origin from usa financial crisis[2008-09] Banks In Greece 2009

Giving debts
Less capital

 The government expenditure like public job creation, pensions, social benefits etc. ..on various countries took on job creation, pensions, social benefits etc . To support these packages government was forced to borrow heavily consequently generating high fiscal deficits. Direct and indirect impact on the rest of the world

Us crisis

Greece crisis

A crisis in an economy impacts other economies via three channels:

Trade Channel Financial Channel

Confidence channeL

 affect countrys trading partners too Falling household and business demand in the slump-hit economy hits the exports/imports of its trading partners.

 Foreign Direct Investment Foreign Institutional Investment External Commercial Borrowings

NRI deposits

Confidence declines in business and households seeing the global uncertainty

Decline in confidence can disrupt the economic conditions

decline in overall Indian GDPgrowth

decline in business investments

VS
In the face of European economic crisis, large institutional investors have moved out of the Euro and into the Dollar. The conclusion is that not all countries have lost value against the Dollar, and those that have lost value have lost it in varying degrees. Dollar has gained in value against a lot of major currencies

 Eurozone Debt Sustainability

Domestic Reform Financial Reform

 Eurozone Debt Sustainability-Need to change the debt trend with cheaper loans, a restructuring of existing debt and an investment programme to generate growth Domestic Reform- Structural reforms (public sector, competitiveness, ) in countries such as Greece Financial Reform - Making sure financial institutions can cover their losses private sector involvement in losses

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