THE EUROZONE

CRISISArpan Bhowmick – 13DM068Rohan Bhowmick – 13DM074

TOPICS TO BE DISCUSSED

Eurozone

Eurozone crisis

How the crisis started

Current situation

Who’s fault

Impact on India

EUROZONE

Economic and monetary union (EMU) of 17 European

Union (EU) member states

Adopted ‘Euro’ as their sole trading currency

Consists of Austria, Belgium, Cyprus, Estonia, Finland,

France, Germany, Greece, Ireland, Italy, Luxembourg,

Malta, the Netherlands, Portugal, Slovakia, Slovenia

and Spain.

EUROZONE CRISIS

An ongoing crisis that has been affecting the countries

of the Eurozone since late 2009.

It is a combined Government debt crisis, a banking

crisis and a growth and competitiveness crisis.

Started in October, 2009 in Greece

Weaker economies: Portugal, Italy, Ireland, Greece,

Spain (PIIGS)

HOW THE CRISIS STARTED

EU comprised of strong economies (Germany,

France) & weak economies (Greece, Portugal)

Weaker economies of EU (PIIGS) overspent

using borrowed money

Unable to pay back their debt

Spain - ended up with high deficits because it

couldn't collect enough tax revenue to cover its

expenses

Greece:

- borrowed beyond its means

- lots of overspending

- little economic production to make up the difference

- creative bookkeeping to prevent euro zone authorities

from realizing the true extent of the situation

Italy and Portugal - huge debt to GDP ratios, high

unemployment and weakened economy

CURRENT SITUATION

Investors reluctant to buy bonds from European

countries, since many are in huge debts

EU may break up

Certain countries may pull out of EU

Unemployment in Spain is at 25%

Hampered international trade

WHOSE FAULT??

Countries borrowed too much, taking

advantage of the low interest rates available to

all euro member nations

Euro as a single currency cant meet the needs

of 17 different economies

IMPACT ON INDIA

Capital flows into the economy and exports

FII investment pattern marked with high volatility

Merchandise exports to the region declined by 1%

Decline in tourist visits from Europe

Weak Euro => Strong USD => Weak INR

IT/Outsourcing companies facing losses

THANK YOU