Euro Zone Crisis :

Euro Zone Crisis DIV A: Apurva (2803110) -Jyotsna (2802122) Margie (2802125) -Mrunali(2801128) Neetu(2803130)

Slide 2:
CONTENTS What is Euro Zone? What is Euro Zone Crisis? Countries affected and impact on them(PIIGS). Effect on Greece.
Present condition. Solution. Conclusion.

Euro Zone :
Euro Zone It is an economic and monetary union (EMU) of 16 European Union (EU) member states They have adopted the euro
as their sole trading currency. Euro became a reality on Jan 1, 1998 , but came for the European consumers on Jan 1 2002. It
currently consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the
Netherlands, Portugal, Slovakia, Slovenia and Spain.

Introduction to Euro Zone crisis :

Introduction to Euro Zone crisis It is the biggest challenge Europe has faced since 1990. Due to global financial crisis that began
in 2007-08 the euro zone entered its first official recession in third quarter of 2008. The official figures were released in 2009 Jan.
On 11 Oct 2008, a summit was held in Paris by the Euro group heads of state and govt, to define a joint action plan for euro zone
and central banks of Europe to stabilize the economy.

Beginning of Crisis :
Beginning of Crisis Started in – Oct 2009 in Greece Its immediate causes lie with the US crisis of 2007-09. The result in Euro
Zone was Sovereign debt crisis. PIIGS: Portugal, Italy, Ireland, Greece, Spain.

What Happened and Why? :

What Happened and Why? Greece: Sharp Budget Deficit Large government and External Debts in PIIGS. Greece credit rating
downgraded. Interest rates surged on government bonds. Need for external aid from EU and IMF The high debts and rising rate
of interests was a matter of concern.

Slide 7:
Reasons for rise in External Debts High household indebtness. Large current account deficit: Excessive growth in domestic
demand. Increase in wage rates. Lower exchange rate risk. Weakening export competitiveness. Reasons for rise in Internal Debts:
Rising Unemployment: Lower tax returns, higher budget deficits.

PRESENT SITUATION :
PRESENT SITUATION

GREEK DEBT CRISIS :

GREEK DEBT CRISIS In the first quarter of 2010, the national debt of Greece was put at €300 billion ($413.6 billion), which is
bigger than the country's economy. Greece has the worst combination of high debt level, large budget deficit and large external
debt

Slide 11:
GDP - $360 billion Debt-GDP ratio – 113% of GDP Budget Deficit – 12.9% of GDP Current Account Deficit- 11.0% of GDP
Net Foreign Debt – 70% of GDP Total Outstanding Public Debt- 290 billion euro

Countries Affected By Greek Crisis :

Countries Affected By Greek Crisis South-eastern Europe Neighboring Serbia, Albania, Macedonia, Romania, Bulgaria and
Turkey

IMPACT :
IMPACT Contagion Effect Greek crisis has made investors nervous about lending money to governments through buying
government bonds. Reduced wealth: Take-home pay is likely to fall as it is eroded by rising taxes. Impact on private individuals

Resolutions :
Resolutions European governments and the International Monetary Fund (IMF) have stunned global stock markets with a 750bn-
euro. France agrees to pitch in with 17 billion euro.

Situation of other countries :

Situation of other countries Spain is experiencing the highest unemployment rate of 20%. Italy- has already taken austerity
measures. The lower house of parliament has voted for 25 billion Euros of cuts to reduce the country’s deficit. The govt. aims to
reduce budget deficits down from 5.3% of GDP to 2.7% by 2012.
Effect on India :
Effect on India India’s exports to Europe could witness a slump close to 10%. Export driven sectors such as textiles and
softwares are likely to bear the brunt. About 22-28 percent of revenues of India’s top tech majors come from Europe whose
revenues will definitely be affected. Government’s overall target of $200 billion for the fiscal could be at stake.

FUTURE PREDICTED :
FUTURE PREDICTED Either the euro zone should go for integrating their economic policies. OR It collapses, and the Greeks
and other profligate countries devalue and the banks (German, French, British and American) lose hundreds of billions. ,

PROBLEMS :
PROBLEMS It combines efficient and indiscipline economies. Too high debts. Political problems.

SOLUTIONS :
SOLUTIONS Countries affected must: Grind down Wages Raise Productivity Slash Spending Raise taxes Transparent Banking
system Endure such Austerity Drives for many years

CONCLUSION :
CONCLUSION 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.