European Debt Crisis

Eurozone Debt Crisis CAUSES, TIMELINE, EXTENT OF THE CRISIS, HOW IT IS BEING ADDRESSED AND HOW IT’LL AFFECT US

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How the crisis unfolded? 

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Euro was born when European Union became a single economic zone. EU comprised of strong (Germany, France) as well as weak (Greece, Portugal) economies. Euro being the single currency in the union, there was no fear of local inflation, so banks lent indiscriminately. World economy was was in good shape, so so direct correlation between economic economic and repayment strength was was not evident.







What did the PIIGS do? 

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Ireland underwent a massive real estate bubble, and its banks sustained giant losses. The Irish government wound up rescuing its banks, and now the country is burdened under a huge debt load. Spain also experienced a huge housing bubble. The country didn't indulge in excessive borrowing, rather, it ended up with high deficits because it couldn't collect enough tax revenue r evenue to cover its expenses. Greece not only borrowed beyond its means, but exacerbated the problem with lots of overspending, little economic







And now… 

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Given the huge size of the PIIGS P IIGS debt, investors are reluctant to buy bonds from European countries, since many are in huge debts and others may have to assume responsibility for the black sheep. We could be looking at depression for Europe and recession for rest of the world. Uncertainty prevails as







Timeline of the crisis 

1999-2008  

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Euro is introduced, more countries join in. In Dec ‘08 EU leaders agree on a 200bn-euro 200bn-euro stimulus plan to help boost European growth following the global financial crisis.

2009 

Slovakia joins EU, Estonia, Denmark and others make preparations to join.







Timeline of the crisis (contd…) (contd…) 

2010 

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Severe irregularities are found in Greece’s accounting procedures. Talks start over austerity measures, sparking riots and protests Euro continues to fall against Dollar and Pound. In May, EU members and IMF agree on a 110 bn Euro bail-out package for Greece. Ireland, Portugal, Spain, Italy come under review. In November, the EU and IMF agree to a bailout package to










2011 

In February, eurozone finance ministers set up a permanent bailout fund, called the European Stability








2012 

S&P downgrades France and eight other euro zone countries, blaming the failure of o f euro zone leaders to t o deal with the debt







Extent of the Crisis: Debt as a % of GDP







Extent of the Crisis: Unemployment Rate







Extent of the Crisis: Projected GDP









Whose fault is it?







What ‘s being done done to avoid the crisis?







How does it affect us?







European Debt Crisis

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