Presentation_Euro Crisis.pptx

8/2/2019 Presentation_Euro Crisis.pptx

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Financial stability in Euro zone

Presented by:

Mohamed Kashif Raza

Neha V jain

Neha Khandelwal

Priyesh Shah

Ronak shah


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Gross Domestic Product

(US $ Billion)

3,309.67

304.87

2,560.00

228.54

203.89

2,051.41

1,407.41

GDP US$ Billion

Source: World Bank Data

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

4,000.00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Germany

GreeceFrance

Portugal

Ireland

Italy

Spain


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European Crisis

1993: European Union was formed

1999: Introduced Euro

11 Countries started using Euro

Beneficiated PIIGS

Interest Rate < Inflation Rate

Countries started accumulating debt

Source: europa.eu


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Bond Yield (%)

0

5

10

15

20

25

30

35

40

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Germany

France

Portugal

Ireland

Italy

Spain

Greece

Source: World Bank Data


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Source: tradingeconomics.com



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E.U rescue packages

Greece: 110 Billion 80 Billion (Euro zone Loans)+ 30 Billion (IMF)

Ireland: 85 Billion 22.5 Billion (EFSM) + 17.7 Billion (EFSF) + 4.8 Billion ( Bi-

lateral Aid)+ 22.5 Billion (IMF Loan)+ 17.5 ( Irelands Cash

Reserves)

Portugal: 80 Billion from Euro and IMF


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Countries

Greece

Less Productivity,

Pension for Arduous jobs.

Spain

Biggest housing bubble,

Spains real estate debt is around 35%-40% of its GDP

Brought $ 80 billion of Greece, Portugal and Irish bondsand lend around $450 to European governments andEuropean banks with no co-lateral.


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Countries

Italy

GDP is $US2.05 trillion in 2010 almost 7 times GDP ofGreece.

Italy is one of the world's largest markets for governmentbonds.

Italy's cost of borrowing continues to soar, it will have toraise around 650 billion ($869 billion) for the next three

years.

American banks have little ''direct'' exposure to Italy

Source: Analysts Capital Economics


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Money Owned ByGerman Banks

28.8 Billion Greece

28.7 Portugal

114.7 Billion Ireland 146.8 Billion Spain


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Suggestion by Franco- German

Automatic penalties

Harmonization of the fiscal system and the

taxation base

Adjustment of the pension systems

Suggestion to establish minimum rates of

investment


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ROLE OF EFSF

EFSF

EFSFS top credit rating affirmed:

AAA-S&P; Aaa-Moodys EFSF places 3 billion bond in support of

Ireland.

EFSF launches short term funding programme


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ROLE OF ECB

June 2009: ECB launches first covered bondsprogramme.

March 2010: Welcomes Greek governmentsconsolidation measures

March 2010: Offers support to Greece.

May 2010: Introduces securities marketsprogramme


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ROLE OF ECB

US dollar/euro swaps re-activated.

June 2010: ESFS established

June 2010: Ends covered bonds programme.


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ROLE OF ECB

JULY 2010: Banks stress test results published

ECB announces stricter rules on bank collateral

Nov 2010: Ireland seeks financial support

Dec 2010: European systemic risk board set up.

Dec 2010: Introduces loan by loan informationrequirements.


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ROLE OF ECB

JUNE 2011: Approves aid to Portugal.

AUG 2011: Statement by ECB President.

OCT 2011: announces 2nd covered bondpurchase programme.

Nov 2011: Lowers interest rates by 25 bps.


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European Central Bank

ECB Total Assets: 1939 Billion

77.5 Billion Purchased a sovereign bondsfrom indebted Euro countries.

60.7 Billion Purchase of company bonds as aresult of financial crisis.


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Expected Aids

European council to give 200 billion to IMF to

bailout European countries.

European Stability mechanism by July 2012,

permanent 500 billion

EFSF- 440 billion

ECB capping to purchase weekly bonds at 20

billion


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Greece budget- 2012

Cut deficit to 5.4%of GDP. Projected 9%of GDP

Taxes: Charging up to 5% on personal income

Also controversial property has to pay up to 5% or else

face electricity cut. Elimination of 30,000 public sector jobs- will bring

savings of200 million

950 million- coming from the launch of a unified

payment system for civil servants. Spending on health and welfare would fall by 9 per

cent.

5.8 per cent overall reduction in wages and pensions


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Italys austerity package

30 billion euro package of austerity.

Aims to raise more than 10 billion Euros from

New property tax, new tax on luxury items like

yachts, raise value added tax, crack down ontax evasion and bring forward measures to

increase the pension age.


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Documents

Presentation_Euro Crisis.pptx