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5/5/12

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SOVEREIGN DEBTS

PREPARED BY :-Makarand Takale Vipul Bali Deepak Sachan

OUTLINE

5/5/12

Objective Introduction

Analysis ---- Greece ---- Republic of Portugal Click to---- Irelandsubtitle style edit Master ---- Spain
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Macroeconomic indicators for debt crisis Recommendations

• To study the sovereign debt crisis of PIGS To analyze the macroeconomic indicators for crisis Data like Government budget. public debt & current account balance are analyzed with the help of MS-Excel OBJECTIV ES 5/5/12 • Click to edit Master subtitle style • .

INTRODUCT What is Sovereign Debt ? ION & sovereign state to It is the failure of the Govt. the adoption of Euro & lax enforcement of EU rules aimed at limiting the . high Govt. • • 5/5/12 repay its debt in full. structural rigidities. spending . In this study we have taken the case of PIGS countries and how they are under sovereign debt due to a mix of domestic and international factors Click to edit Master subtitle style Factors Responsible • • Domestically. tax evasion and corruption have all contributed to countries accumulation of debt over the past decade Internationally.

Debt as a percentage of GDP Current Account balance • .Public debt as percentage of GDP = (Govt. debt / Nominal GDP) * to edit Click 100 Master subtitle style • • MACROECONOMICS INDICATORS ANALYZED 5/5/12 Govt.

• Budget deficit GREE CE 5/5/12 • Introduction of Euro Late 2000’s financial crisis Transaction arrangements with Goldman Sachs (Creative Accounting) • Click to edit Master subtitle style • .

spending • Tax evasion • Mismanagement of funds • Adoption of Euro • Incapability to recover Click to edit Master subtitle style situation • REPUBLIC OF PORTUGAL 5/5/12 .High Govt.

IRELA ND • • • 5/5/12 Property bubble 32% of GDP as help to banks € 85 billion “bailout” agreement Click to edit Master subtitle style .

SPA IN • 5/5/12 Weak economic growth • Import of Oil • Property bubble • Late 2000 financial crisis • Inflation subtitle Click to edit Master rate style .

Govt. Budget as The budget deficit of GDP high %age is due to the 12 10 5/5/12 spending of the governments of these countries 8 Click to edit Master subtitle style 6 4 2 0 .

Current Account as A large contraction of oftrade deficit and %age inthe income account deficit GDP secondly a decrease the increased the current account deficit 12 10 5/5/12 8 Click to edit Master subtitle style 6 4 2 0 .

Public Debt as %age PIGS funded budget deficits by borrowing from of GDP international markets leaving it with a chronically high external debts. Both budget deficits and external debts level is well above those permitted by the rules governing the EU’s Economic & Monetary Union 12 10 5/5/12 8 Click to edit Master subtitle style 6 4 2 0 .

GDP in US After 2008. with the financial crisis . these countries witnessed a contraction in GDP 12 10 5/5/12 8 Click to edit Master subtitle style 6 4 2 0 . sluggish domestic billion $ demand and low international competitiveness of the goods produced.

Non-Financial and Government sectors in key aggregates Share of sectors in key aggregates 12 5/5/12 10 8 6 Click to edit Master subtitle style 4 2 0 .Share of Financial.

5/5/12 utions of expenditure components to the growth of nominal GDP in the 12 10 8 6 Click to edit Master subtitle style 4 2 0 .

5/5/12 Gross Profit share of Non Financial corporations 12 10 8 6 Click to edit Master subtitle style 4 2 0 .

5/5/12 Net acquisition of financial assets of nonfinancial corporations in the euro area 12 10 8 Click to edit Master subtitle style 6 4 2 0 .

Net acquisition of financial assets of financial corporations in the euro area 12 5/5/12 10 8 Click to edit Master subtitle style 4 6 2 0 .

Net incurrence of loans and net lending (+) / net borrowing (-) of non-financial corporations in the euro area 12 10 5/5/12 8 6 Click to edit Master subtitle style 4 2 0 .

significantly cut wages and increase savings . these industries need to increase their productivity .RECOMMENDAT Austerity accompanied with further liberalization IONS • 5/5/12 Fiscal consolidation measures to reduce Govt. spending and increase taxes Radical exit from the Eurozone • There would be devaluation followed by cessation of payments and restructuring of debts Increasing Master subtitle Goods Click to editcompetitiveness of style produced • In order to boost the competitiveness of PIGS industries and reduce their current account deficit.