PRESENTATION

ON
EURO ZONE CRISIS PRESENTED BY: -
ANCHAL MATHUR
ANUP KUMAR DUBEY
GITANJALI JOSHI
MANISHA CHOURASIA
RONAK DOSHI
PRAMIL KUMAR GUPTA
BACK GROUND AND REASONS
 Interest rate risk
 Government default
 Monetization of debt
 Contagion Effect
 Renegotiation of Debt
 Roll over risk/Bad equilibrium
 Depreciation of Euro
 Restructuring of debts
 Lack of federal treasury and budget
 Attack by speculators on Greece
STATE OF VARIOUS COUNTRIES AND FUTURE OUTLOOK

I. Luxembourg
I. Belgium II. Malta

II. Cyprus III. Netherlands

III. Finland IV. Portugal

IV. France V. Slovakia

V. Germany VI. Slovenia

VI. Greece Spain

VII. 8.4
GDP trillion euro (Contributes
VII. Ireland
Worlds 14.6% GDP)
Interest rate 1%
VIII. Italy Inflation rate .3%
Unemployement 10%
Trade balance 22.3 bn Surplus
ROLE OF RATING AGENCY
 On 27 April 2010, the Greek debt rating was decreased to the first
levels of junk status by Standard & Poor's amidst fears of default
by the Greek government.
 agencies have been accused of giving overly generous ratings due
to conflicts of interest.
 Raters downgrade securities in reaction to plummeting
government-bond values, which in turn causes further bond
market declines.
 European leaders are planning to set up a European ratings agency
in order that the private U.S.-based ratings agencies have less
influence on developments in European financial markets in the
future
ROLE OF IMF
 The IMF’s initial crisis response for EU members has been fast
and efficient, later developments reflected country specific issues. 
 The IMF also played a key role in the European Bank
Coordination Initiative, together with the EU, the EBRD and
others.
 he IMF has paid close attention to the social dimension of the
programs. 
 Issue bailout packages
BAILOUT PACKAGES
 € 110 Bn for Greece
 € 85 Bn for Ireland
 € 62 Bn for Portugal
 emergency loans for Hungary , Ukraine ,
Iceland , Belarus , and Latvia worth more than
$39 billion
 IMF given $200 Bn to various economies and
$283 Bn in SDR
RECOVERY
Should also strengthen economic policy coordination
 Currently, the major policy frameworks in Europe—

macroeconomic, financial, and structural—are relatively

independent of one another.
 One of the lessons of the crisis in Europe is that a single

currency without enough economic policy coordination may

lead to huge imbalances
Reigniting growth and tackling unemployment
 European countries must work together to sustain the economic

recovery
RECOVERY
 Banks would have to be nationalized and public
control extended over utilities transport energy
and telecommunication
 Improve productivity
 Shift in the balance of political power in favor of
labor
 Issuing pan euro zone sovereign bonds
 SPV – European financial stability facility
CREATION OF FULL FUND MAY 2010 BY EU

€ 750 BN Fund

€ 60 Bn from
€ 440 Bn from emergency € 250 Bn Euro
Eurozone states European from IMF
commission funds
ANALYSIS
 Countries should avoid too much debt leverage.
 An investor should not rely too much on credit
rating agencies.
 Long term stability in a country requires a
common fiscal policy rather than controls on
portfolio investment.
IMPACT ON INDIA
 "I don’t really see an impact of what is happening
in Greece here. I think the impact of what's
happening in Greece and the PIGS countries is
really with regard to the euro. If the euro were to be
impacted, then we need to think what could happen
here. At this point in time, other euro zone
members are all inclined to come together to work
out a package. I am sure that will make this blow
away.“
- KV Kamath, (Non-Executive Chairman, ICICI Bank, told CNBC-
TV18)
 http://www.imf.org/external/pubs/ft/survey/so/20
09/int011409a.htm