Group No: 02Group Name: Lionel Robbins.Members:Muhammad Akbar Roll No: 56 Wasiq Ullah Roll No: 57Dawood Roll No: 52 Fazle Wahid Roll No: 39Summia Sayed Roll No:

Euro Zone Crisis

CONTENTS • What is Euro Zone?

• What is Euro Zone Crisis?

• Impact on world Economies?

• Present condition?

• Solution.

• Conclusion.

EUROPEAN UNION

• It is formed in 1958.

• Unique economic and political partnership between 27 European countries.

• It I s a single market to apply laws to all member nations.

• Since then, the union has grown in both power and size.

Euro Zone • It is also called “Euro Area’’.• It is an economic and monetary union (EMU) of 17 European

Union (EU) member states.• They have adopted the euro as their sole trading currency. • It currently consists of: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.

Benefits to the European Countries

• Free flow of goods and services• Tax-free trade area• Free flow of people• No custom, no need for ID card.• All citizens from any of the 27 countries enjoys same rights and

benefits.

Convergence Criteria:

If a country wants to join the Euro zone, it must fulfill certain conditions:

• Inflation Rate : <1.5% • Government Deficit/GDP : <3%• Government Debt/GDP : <60%• Interest Rates : < 2%

Euro Zone crisis

EURO ZONE CRISIS

HOW THE CRISIS STARTED

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.

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.

COUNTRIES MOST EFFECTED BY EUROZONE CRISIS?

• Greece:

• It is a country that is worst effected.

• Budget deficit: In 2009 was 12.7% more then four times the maximum allowed by EU rules and in 2010

it was 13.6% of GDP.

• Debt: was 300bn Euros the biggest in the modern history and it is 113% of GDP nearly double of

Eurozone limit.

• Bail-0ut Package: European Union and IMF agree a 110 billion euros to rescue Greece.

Graph of Greece GDP deficit and Debt

CONTINUE…Ireland:•The EU and IMF agree to a bailout package to the Irish Republic of 85bn Euros.

•The Irish Republic soon passes the toughest budget in the country's history.

•Portugal:•Portugal admits it cannot deal with its finances itself, leading to a 78bn-euro bailout.

IMPACT ON WORLD ECONOMIES

IMPACT ON USA

,

US dollar has risen. 1 JAN. 2010 1£ = 1.43$ 29 SEPT. 2012 1£= 1.2857$.

LESS EXPORT: US export fell from 15% TO 11%.

Trade deficit increased TO $52.7 bn.

Banks not able to repay.

IMPACT ON JAPAN• 1 JAN. 2010 1£ = ¥133.256 29 SEPT. 2012 1£ = ¥100.2828.

• Japan economy hit by an Earthquake and Nuclear Disaster.

• Japan has a huge debt $12.19 trillion.

• Trade fell by 207%.

EFFECT ON RUSSIA

• Russian economy grew 4% in 2010 and 4.1% IN 2011.

• However foreign investment reduced.

• Economy grew because of high oil prices:

• $61.80 to $104 FROM 2009 TO 2011.

IMPECT ON CHINA

• 1/5TH of China’s export go to Europe.

• Chines Yuan increased by 23% against the euro.

• Export fell to 15.2%.

EFFECT ON BRAZIL

• Economic growth declined from 7.5% in 2010 to 2.7% in 2011.

• 43% increase export to China.

• 17 % Export go to China.

PRESENT SITUATION OF EURO ZONE

GREEK DEBT CRISIS

• In the first quarter of 2010, the

national debt of Greece was put at

€300 billion ($413.6 billion), which is

bigger than the country's economy.

• Greece has the worst combination of

high debt level, large budget deficit

and large external debt.

Continues…

•GDP - $360 billion.

•Debt-GDP ratio – 113% of GDP.

•Budget Deficit – 12.9% of GDP.

•Current Account Deficit- 11.0% of GDP.

•Net Foreign Debt – 70% of GDP.

•Total Outstanding Public Debt- 290

billion euro.

Countries Affected By Greek Crisis

• South-eastern Europe.

• Neighboring Serbia, Albania,

Macedonia, Romania, Bulgaria and

Turkey.

Resolutions

• European governments and the International Monetary Fund

(IMF) have stunned global stock markets with a 750bn-euro.

• France agrees to pitch in with 17 billion euro.

SOLUTIONSCountries affected must:•Grind down Wages.•Raise Productivity.•Slash Spending.•Raise taxes.•Transparent Banking system.

CONCLUSION

• The US crisis led to Global financial crisis, which further spread to Euro zone and caused Euro zone crisis, as these countries were most affected.

• So strong economies should help the countries in problem to come out from the crisis.