1 / 14

Euro Zone Crisis

Euro Zone Crisis. “ Today , there are three kinds of people: the have's, the have-not's, and the have-not-paid-for-what-they-have's .“ Earl Wilson. The Past Scenario. Euro- The common currency for

nakia
Download Presentation

Euro Zone Crisis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Euro Zone Crisis “ Today, there are three kinds of people: the have's, the have-not's, and the have-not-paid-for-what-they-have's.“ Earl Wilson

  2. The Past Scenario • Euro- The common currency for • Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain • Monetary Policy the responsibility of European Central Bank (ECB) • 2009- The fear of sovereign debt crisis • Culprits- Greece, Poland, Ireland • Crisis due to widening bond yields and risk insurance on credit default swaps

  3. The Current Scenario • 2, May 2010- IMF and Eurozone countries agreed for €110bn loan • 9, May 2010- EFSF set up by 27 EU states • Followed by €85bn debt for Ireland in Nov, 2010 and €75bn for portugal in May,2011 • May, 2011- Greek problem surfaces again • Greek Public reject austerity measures

  4. The story behind it…

  5. When and how did it start National debt rises to €262 bn from €168 bn 2004 Nov 2009 Greece unveils a stability programme Dec 2009 Eurozone finance ministers approve €30bn debt Jan 2010 S&P’s downgrade of Greece to junk status Apr 2010 Greece receives a €14.5 bn loan from the EU May 2010 Parliament passes pension reform July 2010

  6. The year 2011 • Fitch third rating agency to downgrade to “JUNK” • Greece unveils a series of privatizations, part of a goal to raise €50bn by 2015 • Head of the Eurozone finance ministers backs Germany's proposal for a "soft restructuring" of Greece's debt • The EU welcomes Greek parliament's vote in favor of a severe austerity package that has sparked strikes • Greece can now receive the latest €12bn tranche of a €110 bn loan, instead of defaulting • Eurozone finance ministers approve new bailout package for Greece worth €109bn

  7. Aftermath • Ireland, Portugal, Italy, Spain and France also undergo similar situations like Greece • Government Deficit for all these countries in negative as % of GDP • Public Debt to GDP more than 100% in most of these countries • 10 year government bond yields less than 5%

  8. HOW CREDIT RATINGS WORK?

  9. CREDIT RATING- WHAT IT MEANS •  Credit worthiness •  Financial indicator • Insurance premiums worth • Employment eligibility POOR RATING MEANS: • High risk • High interest rates

  10. HOW RATING IS DONE? •  Evaluation of qualitative and quantitative information  •  Not based on mathematical formulas •  Judgment and experience •  Political risk • Economic risk • Payment default risk

  11. THE BIG THREE • S & P • MOODY’S • FITCH

  12. Impact On India… • Mixed Reactions from India • “I don’t think India will be much affected beyond the temporary market jitters and we should still grow at 8.2%” - C. Rangarajan, chairman of Indian Prime Minister Manmohan Singh’s Economic Advisory Council • US and Euro credit rating downgrade may impact India's IT, gems & jewellery exports: FIEO(the Federation of Indian Exporters )

  13. Impact On India (contd) • Rupee value-getting stronger • Exports -In 2010-11 ,India exported $25.5 billion(from $225 billion )worth of goods to the Euro region

  14. Other Impacts…. • Gold • Surge in gold prices • Tourism • 8-10 per cent dip in total inbound tourists • Foreign Investments • India remains to be attractive destination

More Related