BY HARVINDER SINGH

IBADAT SINGH SETHI

MEENAKSHI PANDITA

NARDEEP KOUR

*EUROZONE CRISIS

*EUROZONE

*INTRODUCTION

*ESTABLISHMENT

Euro Zone was formed on 1st Jan,1999

Euro was adopted as common currency by the members of Euro Zone in 2002

* ADVANTAGES OF ADOPTING COMMON

CURRENCY

• Increases competition

• cost of exchanging currency decreases

• Exchange Rate Risk reduces

• Boosts Trade

*CRITERIA FOR JOINING EURO ZONELOW INFLATION RATE GOVERNMENT FINANCEEXCHANGE RATE LOW LONG TERM INTEREST RATES

*MEMBER STATES

*17 STATES OF EUROPEAN UNION ARE IN THE EUROZONE

Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Malta, Netherlands, Luxembourg, Slovakia, Portugal, Spain and Slovenia

*NON MEMBER USAGE OF EURO

Monaco, San Marino, and Vatican City

*EXPULSION AND SECESSION

*ADMINISTRATION AND REPRESENTATION

*EUROZONE CRISIS

*CAUSES

*NO PENALTIES

*INTEREST RATES

* LACK OF ECONOMIC GROWTHS AND HIGH UNEMPLOYMENT

*EUROZONE BANKING SYSTEM

*TRADE IMBALANCES

*GLOBAL ECONOMY

*STRUCTURAL PROBLEM OF EUROZONE SYSTEM

*A MONETARY UNION WITHOUT A FISCAL UNION

*LOSS OF INTEREST

* IMPACT ON WORLD ECONOMIES

*USA

*JAPAN

*CHINA

*RUSSIA

*BRAZIL

*IMPACT ON SUB-SAHARAN AFRICA

*IMPACT ON NORTH AFRICA AND MIDDLE EAST

*IMPACT ON EMERGING MARKETS

*DROP IN TRADE FINANCE

*BANKS ARE BECOMING INCREASINGLY RELUCTANT

*TRADE FINANCE VOLUME FELL TO $26.8BN

*NEW BANKING RULES

*S&P’s RATING

COUNTRY CURRENT LONG TERM RATING PREVIOUS LONG TERM RATING

2 Notches Down    

Cyprus BB+ BBB

Italy BBB+ A

Portugal BB BBB-

Spain A AA-

1 Notch Down    

Austria AA+ AAA

France AA+ AAA

Malta A- A

Slovakia A A+

Slovenia A+ AA-

*EFFECT ON US

*US DOLLAR HAS RISEN

1 JAN. 2010 1£ = 1.43$

29 SEPT. 2012 1£= 1.2857$

*LESS EXPORT

*US EXPORTS FELL FROM 15% TO 11%.

*TRADE DEFICIT INCREASED TO $52.7 bn.

*BANKS NOT ABLE TO REPAY

*EFFECT ON JAPAN

*1 JAN. 2010 1£ = ¥133.256

29 SEPT. 2012 1£ = ¥100.2828

* JAPAN’S ECONOMY HIT BY TSUNAMI, AN EARTHQUAKE AND NUCLEAR DISASTER

*JAPAN HAS A HUGE DEBT $12.19 TRILLION

*TRADE FELL BY 207%

*INVESTORS STILL INTERESTED

*EFFECT ON RUSSIA

* RUSSIA’S ECONOMY GREW 4% IN 2010 AND 4.1% IN 2011

*HOWEVER FOREIGN INVESTMENTS REDUCED

*ECONOMY GREW BECAUSE OF HIGH OIL PRICES

$61.80 to $104 FROM 2009 TO 2011

*EFFECT ON CHINA

*1/5TH OF CHINA’s EXPORTS GO TO EUROPE

*CHINESE YUAN INCRESED BY 23% AGAINST THE EURO

*EXPORTS FELL TO 15.2%

*EFFECT ON BRAZIL

*ECONOMIC GROWTH DECLINED FROM 7.5% IN 2010 TO 2.7% IN 2011

*43% INCREASE EXPORTS TO CHINA

*17 % EXPORTS GO TO CHINA

*EFFECT ON SUB-SAHARAN AFRICA

*COUNTRIES SUCH AS ETHIOPIA, KENYA, AND GHANA WERE PROTECTED

*SOUTH AFRICA, BOTSWANA, AND SWAZI FELL FROM 3.5% IN 2010 TO 3.1% IN 2011

*LESS SHARE AS EXPORTS DECREASED FROM 40% IN 2002 TO LESS THAN 25% AT THE END OF 2010

*EFFECT ON NORTH AFRICA

AND MIDDLE EAST

*TUNISIA (80%), MOROCCO (65%), AND EGYPT (40%) EXPORTS 80%, 65%, AND 40% OF THEIR MANUFACTURED GOODS

*CRISIS SLOW ECONOMIC GROWTH AND REDUCE GLOBAL DEMAND FOR OIL

*IMPACT ON INDIA

*IMPACT OF CRISIS ON INDIA

1. Share of Indian exports as compared to the advanced economies is decreased drastically.

2. Contraction in the manufacturing sector.

3. Share of EU countries in India’s total exports

4. Indian Software Sector

5. Impact on Foreign Direct Investment (FDI)

6. Impact on Foreign Institutional Investment(FII)

7. Exchange Rate Depreciation(ERD)

Since the global uncertainties aggravated, the Indian exchange rate has depreciated (12.1%) against the Euro during the current financial year.

The depreciating rupee adds further pressure on domestic inflation and India’s import bills.

*SUGGESTIONS

* PUBLIC EXPENDITURE

*FISCAL POLICIES AND MONETARY POLICIES

*FOREIGN INVESTORS

*HOME INVESTORS

*THANK YOU