has the euro crisis ended

8/11/2019 Has the Euro Crisis Ended

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Has the Euro crisis ended

Do numbe

differently


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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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ANY

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Thank you for your attention

has the euro crisis ended

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