...Views on The World Financial Crisis: Will It Continue To Deepen? Introduction The Great Recession of the 21st Century (Wesel, 2010), which began in 2007, has affected the entire world economy; admittedly, some countries have been hit harder than others but few nations can really say that they have been entirely spared from the crisis. What is more, the devastating repercussions of the financial crisis can still be observed to this day, more than five years since it first began, as numerous countries around the globe are still struggling to get back on track. The road to recovery from the financial crisis has been more difficult than initially anticipated and, with the dawn of a new year, it is still hard to say whether things will start looking better for the world economy or not. The question on everybody’s mind is whether the world financial crisis will continue to deepen or not. Background Though still a somewhat a highly debated matter, the onset of the world financial crisis can be pinpointed to 7 August 2007, when BNP Paribas terminated withdrawals from three hedge funds, on grounds of a complete lack of liquidity (Elliot, 2012). For the two years that followed this incident, the world economy was on a continuous downward spiral. Economies around the globe started to slow down, some faster than others, stock markets began to drop, international trade declined, and credit tightened. In the United Kingdom for example, the catalyst for the economic crisis that engulfed...
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...(Stability and Growth Pact and Maastricht Treaty) ........................... 7 Faultlines ......................................................................................................................................... 7 current SCENARIO ........................................................................................................................ 8 WHY SAVE EURO? .................................................................................................................... 10 4.1 ALTERNATIVES................................................................................................................. 11 Split ............................................................................................................................... 11 Institutionalised austerity and ECB bailing out ............................................................ 13 ECB lends money to IMF and latter disburses loans with stiff conditionality’s ........... 13 Creation ofEuropean treasury/ EmpoweringEFSF ........................................................ 13 United States of Europe and issuance of Euro bonds: .................................................. 14 4.1.1 4.1.2 4.1.3 4.1.4 4.1.5 5. WAY FORWARD ........................................................................................................................ 15 TABLE OF FIGURES Figure 1: Prospects of the financial sector and sovereign spreads...
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...Enter the economy of euro zone member, Greece. Once considered as a financially stable country, Greece is now on the edge of having a financial default. With a debt total amounting to an estimated $420 billion, experts say that this debt would have been bigger that the country’s economy itself and this debt is predicted to increase as time goes by because Greece spends 12% more than it gets revenues. So what’s exactly went wrong with Greece and how did they get themselves in deep trouble? One main cause for this is the country going on an uncontrolled spending binge which relies on debt to be sustained. One prestigious project they paid for over its budget limit is the 2004 Athens Olympics. Add that up to the failure of implementing consistent economic reforms and lending with despicable returns eventually led Greece vulnerable to a debt crisis. In result of this, Fitch ratings agency cuts Greece’s credit rating from an A- to a BBB+, first time in 10 years that the country has seen its ratings below an A grade. This will prove to be a big blow to the country as it now pushes up the cost of borrowing money. It will also be viewed by their foreign investors as a financial void as they would be given lower interest payments for their investments. To try and cope up with this downfall, the government stated its plans on making some harsh cuts on their budget. As this debt crisis develops, thousands of Greek workers went on a strike to protest these austerity measures Greece...
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...FINANCIAL CRISIS IN GREECE Enter the economy of euro zone member, Greece. Once considered as a financially stable country, Greece is now on the edge of having a financial default. With a debt total amounting to an estimated $420 billion, experts say that this debt would have been bigger that the country’s economy itself and this debt is predicted to increase as time goes by because Greece spends 12% more than it gets revenues. So what’s exactly went wrong with Greece and how did they get themselves in deep trouble? One main cause for this is the country going on an uncontrolled spending binge which relies on debt to be sustained. One prestigious project they paid for over its budget limit is the 2004 Athens Olympics. Add that up to the failure of implementing consistent economic reforms and lending with despicable returns eventually led Greece vulnerable to a debt crisis. In result of this, Fitch ratings agency cuts Greece’s credit rating from an A- to a BBB+, first time in 10 years that the country has seen its ratings below an A grade. This will prove to be a big blow to the country as it now pushes up the cost of borrowing money. It will also be viewed by their foreign investors as a financial void as they would be given lower interest payments for their investments. To try and cope up with this downfall, the government stated its plans on making some harsh cuts on their budget. As this debt crisis develops, thousands of Greek workers went on a strike to protest these...
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...Enter the economy of euro zone member, Greece. Once considered as a financially stable country, Greece is now on the edge of having a financial default. With a debt total amounting to an estimated $420 billion, experts say that this debt would have been bigger that the country’s economy itself and this debt is predicted to increase as time goes by because Greece spends 12% more than it gets revenues. So what’s exactly went wrong with Greece and how did they get themselves in deep trouble? One main cause for this is the country going on an uncontrolled spending binge which relies on debt to be sustained. One prestigious project they paid for over its budget limit is the 2004 Athens Olympics. Add that up to the failure of implementing consistent economic reforms and lending with despicable returns eventually led Greece vulnerable to a debt crisis. In result of this, Fitch ratings agency cuts Greece’s credit rating from an A- to a BBB+, first time in 10 years that the country has seen its ratings below an A grade. This will prove to be a big blow to the country as it now pushes up the cost of borrowing money. It will also be viewed by their foreign investors as a financial void as they would be given lower interest payments for their investments. To try and cope up with this downfall, the government stated its plans on making some harsh cuts on their budget. As this debt crisis develops, thousands of Greek workers went on a strike to protest these austerity measures Greece is...
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...countries. This linkage plays a very important role in the global movement of goods and services, labor, investment funds, and technology. That is, when a country defaults on paying its debt, it not only affects the country in default, but also initiates a global economic crisis. In my research paper, I will tell the tale of eurozone debt crisis, which has created a global hysteria in the current world economy. In the research that follows, I will start with a brief history of the eurozone, how did eurozone face the debt crisis, and what might be ahead for the global economy, amid the ongoing European financial crisis. Eurozone is a term designated for all the countries that share a common single monetary policy managed by the Euro-system comprising the Frankfurt based –European Central Bank (ECB) and the central banks of member states....
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...nationalism, and the future of international businesses in the case of a Eurozone collapse. Main causes of Eurocrisis The causes of the Eurozone crisis are both numerous and complex creating somewhat of the perfect storm within the member countries’ respective local economies at the start of the downturn. For the purpose of analysis, the main causes of the Eurocrisis can be divided into three main categories: sovereign debt, banking and inflation, as well as politics and labor. The following case will explore these categories in further detail. To begin with, the ratification of the Maastricht treaty, forming the European Union, brought with it two conditions that potential member countries had to meet in order to be able to adopt the Euro currency. Specifically, given the interdependent nature of the agreement, a member state was required to demonstrate economic health. This was measured annually through their maintenance of fiscal deficits under 3% of GDP, and government debt below 60% of GDP (Roscini & Schlefer, 2012, p.1). However, during the years preceding Greece’s financial woes, 6 out of the 11 members of the European Union failed to meet at least one of these standards on numerous occasions. In particular, Germany, one of Greece’s biggest critics for failing to manage the crisis correctly, “flouted the rules for four years from 2003 (and avoided punishment)” (“The causes: A very short history of the crisis,” 2011). Furthermore, Italy, Spain and...
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...Portugal’s Economic Crisis A series of economic-plummeting activities has plagued Portugal since 1999. Until 2011, the country has been covering up their genuine economic crisis. It wasn’t until they requested financial assistance from The International Monetary Fund and the European Union in April 201l, that their crisis was revealed. There are several debates on the reasons for Portugal’s bailout request. Robert M. Fishman, a professor of sociology at the University of Notre Dame, argues, “[Portugal’s third national request for a bailout] has come under unfair and arbitrary pressure from bond traders, speculators and credit rating analysts.” With this statement, he claims that Portugal’s bailout request didn’t result from a debt, but rather the threat of these market forces that have pushed out the prime minister of the country for a four-month period. With the absence of this democratic government, Fishman debates further that there was not a genuine underlying crisis in Portugal. (Fishman, Robert. The New York Times (The Opinion Pages) Portugal’s Unnecessary Bailout. April 12, 2011) The truth is that Portugal has had an underlying crisis for years but has managed to shift from the global public eye. According to David R. Cameron, professor of Political Science at Yale University, “there has been a recurring imbalance between spending and revenues.” This leads to my first solution, which is to have Portugal abandon their current fiscal policy. This would help cure the...
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...governments. The United States considered Europe’s problems were of its own to deal with and that the it was not necessary for IMF to raise extra lending capacity and contended to contribute no more dollars. Another issue the author found interesting was concerning the voting power. Emerging countries thought they should have a more strong voice with the fund while an American delegate pointed out financing pledges were not supposed to alter the voting shares within IMF. The Author’s Opinion (350) The Europe has been going through a suffering time since the 2008 financial storm. Last February, the euro zone has set up a constant bailout fund European Stability Mechanism, worthy of above 500 billion euros. Based on this action, IMF may find it reasonable to lend the European an extra hand. As it has been discussed in class, long time of fiscal deficit may bring about many unfavorable consequences, finally resulting in sovereign crisis. In term of economy development, once the sovereign credit rating of a country deteriorates and meanwhile increases the difficulty for the recovery of the real economy. Businesses may find it hard to refinance and threatened by funding...
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... 5 2.0 The Economic Cost and Benefit for State Membership of the EMU 5 2.1 Benefits of EMU Membership & Mechanisms 5 2.2 Costs of EMU Membership 7 3.0 Contextual Factors: The Profusion of Dept 10 3.1 The Eurozone Crisis 10 3.3 Greece- The Forefront of the Euro Area Crisis 13 4.0 Alternate Policies and the Effective Consequences 15 4.1 Predicament 15 4.2 Abetting Dependent on Austerity 16 4.3 Creditor-Led Default 17 4.4 Debtor-led Default and Greek Haircuts 19 4.5 Greek Exit 20 5.0 Recommendation 21 Appendices: Appendix 1: Preferential liberalization References List of Illustrations Pg. Illustration 1: The cost of EMU- Diminishing Domestic Flexibility to Asymmetric Macro Shocks 7 Illustration 2: Cost and benefit of Monetary Unions 9 Illustration 3: Evolution of Nominal Unit Labor Costs in the Eurozone Pre to the US Credit Crunch 9 Illustration 4: Current Account Balances in Percentage GDP 10 Illustration 5: Core Bank Exposure to the Weaker Eurozone Member States 12 Illustration 5: Holders of Greek Government Bonds and Dept (in billion Euro) 16 Executive Summary The standing Economic and Finance minister of Germany has commissioned the policy paper for the forthcoming Council of Economic and Finance ministers meeting. The policy undertakes a consideration of whether Greece should exit the European Union on economic grounds...
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...EUROZONE CRISIS ABSTRACT Euro crisis was not fortunate. It was something that could be avoided if proper care was taken. The European sovereign debt crisis has emerged out of a situation that has made it difficult or impossible for some countries in the euro area to re-finance their government debt without the assistance of third party. It was not only the government sector that lead to this crisis but major cause of it was the private sectors taking up too much of loans. The report also states the impact of euro zone crisis on the world and the India. The Eurozone crisis is systemic in nature. It is a result of policy failures in the way European Monetary Union (EMU) was designed, constructed and implemented. In particular, the crisis is a consequence of the failure to put in place certain necessary institutional components. INTRODUCTION The global economy has experienced slow growth since the U.S. financial crisis of 2008-2009, which has exposed the unsustainable fiscal policies of countries in Europe and around the globe. Greece, which spent heartily for years and failed to undertake fiscal reforms, was one of the first to feel the pinch of weaker growth. When growth slows, so do tax revenues – making high budget deficits unsustainable. The result was that the new Prime Minister George Papandreou, in late 2009, was forced to announce that previous governments had failed to reveal the size of the nation’s deficits. In truth, Greece’s debts were so large that they actually...
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...1 EGC Montauban Business School Bachelor degree THESIS THE FINANCIAL CRISIS AND ITS CONSEQUENCES ON THE GERMAN FINANCIAL SYSTEM Thesis presented by Florian DAVID Promotion Mulliez florian.david@egc-montauban.fr The 10th August 2009 2 Figures....................................................................................................................... 3 Introduction............................................................................................................... 4 1. The roots of the crisis ....................................................................................... 6 1.1 Macroeconomic situation.............................................................................. 7 1.2 The behaviour of the involved actors............................................................ 8 1.2.1 The approach of the borrowers ............................................................. 8 1.2.2 Banks and financial institutions ............................................................. 9 1.2.2.1 A new way to grant credits ............................................................. 9 1.2.2.2 A new way to earn money............................................................ 10 1.2.2.3 The emergence of new risks ........................................................ 10 1.2.3 Rating agencies .................................................................................. 11 1.2.4 Internal Audit .............................................
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...this year that are promoting a larger economic, political and social unity inside the EU. A united Europe is a project that has taken a long time to create and that had overcome many difficulties. All the indefinitions in the EU in the past have created many problems in the present, but now they work as a pressure mechanism to conclude the project and correct those indefinitions. If this goal of a united Europe is reached, the consequences will be tremendous because the EU will become the largest economy of the world, and it will have enough power to change the world in different ways. The development of the essay will follow a chronological perspective. First are going to be analyzed the problems in Europe before the EU and show the developments as a clue to develop new theories of what can happen in the future. This future is going to be a consequence of the events happening this year and it will be the second point of analysis. The third one will be the theory of the future creation of a real European Union after this year events. Finally, the consequences and importance in the future of the EU created due to the events of this year. Past In a diachronic perspective, the European Union was something difficult to think as a reality when the project was being born, but the overcome of all the problems can be seen as a signal of how problems will be overcome. There was a large list of situations that had to be removed in the 1950´s when the project started. To get to the present...
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...measures…………………………………………………………………………9 5. Conclusion……………………………………………………………………………………………………….11 6. References……………………………………………............................................................13 1 1. Introduction In the last years the severe debt crisis of Greece has posed a large challenge to the member states of the Eurozone. It is threatening the stability of the European Monetary Union (EMU). After having piled up over 300 Billion Euros of debt, in 2010 the market mistrust in Greece dramatically increased, especially as the newly elected government revealed the incorrectness of the financial statistics of previous years. Finally, on the 23rd of April 2010, Greece was threatened by national bankruptcy and requested help of the other Eurozone members and the International Monetary Fund. Although Greece is one of the smaller economies of the Eurozone, its daring default has great effects on the whole community. Now then, what happen if Greece “Grexit”? The Pros are that a return to the old currency like the Drachma would have the effect of depreciate in value, it would become more competitively in price, what would boost up the Greek exports. The Greek government would also get back the power over its fiscal policy. On the other hand there are many reasons why Greece should not decide to leave the Eurozone. One is that Greece would lose its purchasing power. Today, Greece imports nearly 40 percent of its food, most of its medicine and almost all of its oil and natural gas, a situation...
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...Tata Motor’s -Company Background Tata Motors was established in 1945 and is formerly known as Tata Engineering and Locomotive Company. It is India's largest automobile company, and a fortune 500 company. Tata Motors acquired Jaguar and Land Rover, a premium car brand in UK, in 2013. The company always worked in line the Tata Values to contribute to Indian society. Tata Nano - Origin Ratan Tata’s thought about a people’s car was a social concern. He wanted to give a car to middle class of the society. Accordingly Ratan Tata, former Chairman, Tata Motor’s, shared his vision of making Rs. 1 lakh car at the Geneva Motor Show, in 2003. A team was then constituted to build a car with a target price of Rs. 1 lakh. Subsequently, the car was launched with a tag line “A promise is a promise”. Executive Summary TATA Nano is the cheapest car in the world. It is manufactured by TATA Motor Limited, the largest automobile company in India. Its chairman, Mr. Ratan Tata envisions that Tata Nano to become a “People’s car” which is affordable by almost everybody. Tata Nano is scheduled to first be launched in India on 1st April 2009 and expected to be in Indian market by July 2009. From the first moment that Tata Nano project was published, a huge buzz has been created all over India. It has already received 3000 bookings. What makes Tata Nano so cheap? Basically, by making things smaller, lighter, do away with superficial parts and change the materials wherever possible without compromising...
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