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Has the Euro crisis ended
Do numbe
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Agenda
Introduction and causes Evolution of the crisis
Policy reactions
Economic reforms and recovery proposals
Proposed long term solutions Controversies
Political impact
Is it over?
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What is Euro zone Crisis..???
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Evolution of Eurozone Crisis
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Greece
Reason for Crisis - Large Structural Deficits
S&P slashed debt rating to BB+
In April 2010, borrowed from the EU and IMF
In May 2010, Greek government took some austerity measures whiriots
In April 2014, returned to international capital markets
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Portugal
Reason for Crisis Large spending in state-managed public works aand wages in the period between 1974 and 2010
In 2011, Portugal requested IMF-EU bailout package
By April 2014, returned to capital markets selling 10 year governmeat a rate of 3.59 percent
In May 2014, Portugal left the EU bailout mechanism
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Spain
Reason for Crisis - Debt was largely avoided by the ballooning tax refrom the housing bubble. When the bubble burst, Spain spent largeof money on bank bailouts.
In 2011, Spanish government passed a law to approve an amendmepublic debt can not exceed 60% of GDP.
In 2012, Bankia, NCG Banco and Catalunya Bank received a bailout.
In 2014, as foreign investor confidence in the country has been restformally exited the EU/IMF bailout mechanism.
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European Central Bank (ECB)
What is ECB?
One of the largest currency areas in the world
One of the world's most important central banks and is the seven institutions of the European Union(EU) listed
the Treaty on European Union
ECB offered Long-term Four-year loans
http://en.wikipedia.org/wiki/Institutions_of_the_European_Unionhttp://en.wikipedia.org/wiki/Treaty_on_European_Unionhttp://en.wikipedia.org/wiki/Treaty_on_European_Unionhttp://en.wikipedia.org/wiki/Treaty_on_European_Unionhttp://en.wikipedia.org/wiki/Institutions_of_the_European_Union -
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European Stability Mechanism(ESM)
What is ESM?
27 September 2012
Maximum lending capacity of 500 billion
Bailout loans to Ireland, Portugal and Greece.
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Economic Reforms aRecovery Proposals
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European sovereign debt crisis
Globalization of Finance
International trade imbalances
Real Estate bubbles
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Reform Policies
Fiscal Stimulus
Direct loans to banks and banking regulation
Less austerity, more investment
Mobilization of credit
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Proposed Long TermSolutions
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European Fiscal Union Increased European integration giving a central body increased control over th
member states
Raising of Taxes, Budget cuts could be easily monitored and exercised
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Bank Recovery and ResolutionAuthority
Legislature to give member states power to impose loss due to baon bondholders
Replace management before the bank fails
To keep aside 1% of their deposits as Special funds to Finance Resbanking crisis
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Euro Bonds
Get investors through Euro bonds
Give all 17 nations powers to facilitate and issue Euro Bonds
Link them with European Monetary Fund making them untradeab
Giving fixed liquidity to the euro nations
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Drastic Debt Write-Off
Impose Wealth tax in the range of 11-30% for most of the countriethe Sick ones.
Impose a lower rate of 3-5% of Wealth tax over a period of 30 yea
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NGEL MERKEL
Born in July 1954, Germany.
Trained as a physicist, entered politics after the 1989 fall of the Berlin Wall.
Became Germany's first female chancellor, following the 2005 national elections.
She has been the beneficiary of a favourable economic and political environment.
nuclear power, the shape of the social-market economy and Berlin's role in
global security.
Style of government is reactive rather than proactive.
She is a chancellor without an agenda.
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FINGERS POINTED AT GERMAN
Too Austere
Too insistent on fiscal consolidation even in
recession
To prone to burden on adjustment on deficit
countries
Dominated by lawyers not economistsMERKEL W
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Political Impact of Euro crisis
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Portugal Resignation of Government.
Early elections in June 2011.
Italy Right wing of cabinet lost majority. Change of president.
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Ireland
Collapse of the 30th
Dail. Change of Taoiseach.
Greece 40 years of bipartisanship Government
ended.
New coalition Government formed.
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An analysis According to EUROSTAT the total growth rate of the euro union was 0.3% in the
BORROWING COST:
Current account deficit:
o Spain running a surplus of 1.1% of GDP
o Greece deficit was 15% in 2008 but came down to 0% in 2013.
Country July, 2012 August, 2013
Italy 6.5% 4.2%
Spain 7.5% 4.5%
Ireland 6% 3.9%
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In 2014(second qtr. result acc. to NY times)
GDP fell in Germany, the biggest, and Italy, the third largest, by 0.2%the second largest economy, stagnated.
Inflation fell to just 0.4% in July, well below the European Central Btarget of almost 2%.
By contrast with the troubled euro area, Britain, which retains its o
currency, is faring much better than before, as its recovery continuflourish, pushing down unemployment much faster than expected.
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Public debt as % of GDP:
Euro crisis in a
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Euro crisis in a shell
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QUESTIONS !
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