Eurozone Crisis and its impact on India

1. THE
EUROZONE
CRISIS
Arpan Bhowmick – 13DM068
Rohan Bhowmick – 13DM074

2. TOPICS TO BE DISCUSSED
 Eurozone
 Eurozone crisis
 How the crisis started
 Current situation
 Who’s fault
 Impact on India

3. 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, Ge
rmany, Greece, Ireland, Italy, Luxembourg, Malta, the
Netherlands, Portugal, Slovakia, Slovenia and Spain.

4. 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)

5. 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

6.  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

7. 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

11. 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

12. 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

13. THANK YOU