evolution of euro.pptevolution of euro & euro crisis
TRANSCRIPT
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Evolution of EURO &
Euro Crisis
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Table of Contents
Introduction
Objectives
Member Countries
Criteria for Joining the euro
Euro Crisis
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Introduction
History of EURO
Established by the provisions in the 1992 Maastricht Treaty. In order toparticipate in the currency, member states are meant to meet strict
criteria .
The name euro was officially adopted on 16 Dec1995
Introduced to world financial markets as an
accounting currency on 1 Jan 1999.
The official currency of 16 of the 27 member states
of the European Union (EU).
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Introduction
Managed and administered by the Frankfurt based
European Central Bank (ECB)
Common designs on both sides
Freely used in any nation which has adopted
the euro
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OBJECTIVES OF THE EUIts principal goal is to promote and expand cooperation amongmember states in economics, trade, social issue, foreign policy,security, defense, and judicial matter.
EU has sought out to meet its objective in three ways:
By defining a common commercial policy.
By reducing economic differences between its richer and poorermembers.
By stabilizing the currencies of its members.
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Member Countries
1951 Founding Members Belgium
France
Germany
Italy
Luxembourg
The Netherlands
1973
Denmark
Ireland
The United Kingdom
1981
Greece
1986
Portugal
Spain
1990
East Germany
1995 Austria
Finland
Sweden
2004
Cyprus
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Malta
Poland
Slovakia Turkey
Croatia
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Criteria for Joining the euro,
Economic & Monetary Union Inflation: Not to exceed 1.5% points of the
average of the best three performing countries
Interest Rates: Not to exceed 2% points of theaverage of the best three performing countries
Fiscal Deficit/GDP ratio: Not to exceed 3%
Public Debt/GDP ratio: Not to exceed 60%.
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Criteria of EU
Criteria I Applicant countries must have stable institutions
that guarantee democracy, the rule of law, human
rights, and protection of minorities (the politicalcriteria)
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Criteria of EU (Cont.)
Criteria II
Applicant countries must have a functioningmarket economy, and the capacity to cope
with competitive pressures (the economiccriteria)
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Criteria of EU(Cont.)
Criteria III
Applicant countries must have the ability totake on the obligations of membership (to
apply effectively EU rules and policies)
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Euro Crisis
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Introduction to Euro Zone
crisis It is the biggest challenge Europe has faced since 1990.
Due to global financial crisis that began in 2007-08 the euro zone enteredits first official recession in third quarter of 2008.
The national debt of Greece was put at 300 billion ($413.6 billion), whichis bigger than the country's economy.
On 11 Oct 2008, a summit was held in Paris by the Euro group heads of
state and Govt. , to define a joint action plan for euro zone and centralbanks of Europe to stabilize the economy.
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Beginning of Crisis
Started in Oct 2009 in Greece
Its immediate causes lie with the US crisis of 2007-09.
The result in Euro Zone was Sovereign debt crisis.
PIIGS: Portugal, Italy, Ireland, Greece, Spain.
Greece allowed deficits from Central bank and government bondsto pile up. Greece debt came to light in 2009.
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What Happened and Why?
Greece: Sharp Budget Deficit
Large government and External Debts in PIIGS.
Greece credit rating downgraded.
Interest rates surged on government bonds.
Need for external aid from EU and IMF
The high debts and rising rate of interests was a matter of concern.
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Reasons for rise in External Debts
High household indebtness.
Large current account deficit:
Excessive growth in domestic demand.
Increase in wage rates.
Lower exchange rate risk.
Weakening export competitiveness. Reasons for rise in Internal Debts:
Rising Unemployment: Lower tax returns,
higher budget deficits.
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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.
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Situation of other countries
Spain is experiencing the highest
unemployment rate of 20%.
Italy- has already taken austerity measures.
The lower house of parliament has voted for
25 billion Euros of cuts to reduce the
countrys deficit. The govt. aims to reduce
budget deficits down from 5.3% of GDP to2.7% by 2012.
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Effect on India
Indias exports to Europe could witness aslump close to 10%.
Export driven sectors such as textiles and
software are likely to bear the brunt. About 22-28 percent of revenues of Indias
top tech majors come from Europe whose
revenues will definitely be affected. Governments overall target of $200 billion
for the fiscal could be at stake.
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FUTURE PREDICTED
Either the euro zone should go forintegrating their economic policies.
OR
It collapses, and the Greeks and otherprofligate countries devalue and thebanks (German, French, British and
American) lose hundreds of billions.
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