EURO DEBT CRISIS

Group 3
Lecturer: Duy Pham
 WORK FLOW

The establishment of European Union & Euro Area

01 Hieu Nguyen

Euro Debt Crisis

02 Thuy Duong

Reasons for Euro Debt Crisis

03 Quynh Duong

Solutions - Recommendations
04 Kiprass – An Luu
1.1 What is Euro
Debt Crisis
Manh Hieu
In the late of 2009, when Greek’s Prime Minister at that
time George Papandreou announced that the
government could not reveal the national’s deficit by
the fact that debt of Greek was so huge that the entire
economic could not be equal to the debt level and Greek’s
government could not hide it any longer
 26.65%
The interest of Greek government’s bond July, 2011
PIIGS(C)
1.2 European Union
& Euro zone
Manh Hieu
 EU and Euro zone

EU
- Established in 1993 with Maastricht
Treaty
- 28 Member States
- 1 European Central Bank
- 2 most powerful currencies: £ n €
 EU and Euro zone

Euro Zone:
▫ 1 common currency €
▫ 12 countries.
▫ Monetary policy of EU:
▫ 1. Monetary policies of Member States follow ECB and
national central bank of each member
▫ 2. The economic policies are still the based-on
governments of members; however, they should coordinate
to attain the common objectives
▫ 3. European Semester is held annually for ensuring
coordination of Members States in governing economic
policies
SWOT Analysis of Euro zone – puzzle game!

. ECB
. Skeptical attitude to €
. Belief of resident on EU to
recover economy
. Reinforcement to fiscal and
monetary policies of ECB
. Indulgent bank system
. Price of oil
 WORK FLOW

The establishment of European Union & Euro Area

01 Hieu Nguyen

Euro Debt Crisis

02 Thuy Duong

Reasons for Euro Debt Crisis

03 Quynh Duong

Solutions - Recommendations
04 Kiprass – An Luu
2 Euro Debt
Crisis
Thuy Duong
 The context of Euro Debt Crisis

▪ After 2007, the public debt of EU member

countries tended to increase significantly,
most of the public debt of EU countries
exceeded the threshold level
▪ The global financial crisis in 2008 has
created a strong impact on most of the
economies of European Union member
states.
Public Debt and Budget Deficit in EU 2009
Debt crisis in Europe with
starting point in Greece
 The Greeks rushed to
withdraw money

A complex idea can be

conveyed with just a
single still image,
namely making it
possible to absorb
large amounts of data
quickly.
 UNDERLYING
CAUSES

▪ Inefficient use of ▪ Low domestic savings

capital and high lead to external
public expenditure borrowing for public
expenditure

▪ Lack of transparency ▪ Budget revenues

and confidence from decreased
investors
For the EU, aside from
Greece, Ireland and
Portugal are among the
concerns that need to
be cautious.
CONSEQUENCES

▪ Losses of trillions of dollars in financial income from EU member

states
▪ The euro is constantly losing value
▪ The European Commission (EC) predicts euro-zone GDP will fall
0.4% this year.
▪ The unemployment rate in the region also reached a record high in
March with 12.1%
▪ Public euro-zone debt is 8.600 billion euros or equivalent to 90% of
GDP
▪ Countries like France, Spain, Ireland and Greece had to tighten
their belts to reduce their budget deficits
 WORK FLOW

The establishment of European Union & Euro Area

01 Hieu Nguyen

Euro Debt Crisis

02 Thuy Duong

Reasons for Euro Debt Crisis

03 Quynh Duong
Solutions - Recommendations
04 Kiprass – An Luu
3 Reasons for
Euro Debt
Crisis
Quynh Duong
 Greece’s deficit

Many REASONS:

- Fiscal policies
- Errors in
agreements
OF EUROPEAN - Common currency
DEBT CRISIS -…
#1 DIFFERENCES BETWEEN FISCAL
POLICIES AMONG COUNTRIES
 Establishment of EU –
A picture is worth a
Euro €
thousand words

Investors believed more

in currency power

Low rates

Borrow a lot of money

GERMANY
PIIGS
FRANCE
A picture is worth a
thousand words
No bailout Clause:
“No member state should be liable for the
fiscal decisions of another. Any new bailout
plan, then, requires a new treaty and a new
round of ratifications”
(Greeley, B. 2011).
#2 THE LOSS OF SANCTIONS FOR
VIOLATING EU’s CRITERIA
 #3 DISADVANTAGES OF THE
COMMON CURRENCY – EURO (€)
 CONTROL THE CURRECY: CONTROL THE CURRECY:

- Print more money - Print more money

- Change interest rates - Change interest rates
 WORK FLOW

The establishment of European Union & Euro Area

01 Hieu Nguyen

Euro Debt Crisis

02 Thuy Duong

Reasons for Euro Debt Crisis

03 Quynh Duong

Solutions - Recommendations
04 Kiprass – An Luu
4.1 Austerity
Measures
Kipras
 Economic Consequences

- Unemployment Rate
- GDP Growth
- Investment Rate
 Social Consequences

- Homelessness
- Mental Health
- Pesion cuts
4.2 The financial
interconnection
in Euro zone
An Luu
Bailout Breakdown of
Greece in 2015
Debt-to-GDP ratio of
countries in debt crisis
4.3 Fiscal Union or
Break-up
An Luu
Unemployment rate of
countries in debt crisis from
2007 to 2017
Unemployment rate of
Greece, Spain and Italy in
comparison to EU from 2007
to 2016
Debt-to-GDP ratio of
countries in debt crisis since
2007
Change government debt/GDP ratio
(%) and Austerity (% GDP) during
2009-2012
EU’s FISCAL UNION
4.4 EURO ZONE ON
THE STAGE OF
RECOVERY.
An Luu
The GDP growth (%) of
countries in debt crisis and
Euro area in 2014
The GDP growth (%) of
countries in debt crisis from
2014 to 2016.
Debt-to-GDP ratio of Greece,
Italy, Portugal and EU from
2013 to 2016.
Prospect of Euro zone in
2018.

▪ The Eurozone’s ▪ Another ▪ The healthy

economy is healthy growth outlook
placed in good expansion in with economy
shape, the best real GDP, of thriving is
since the global 2.1%. This what can be
financial crisis follows guaranteed
a decade ago estimated despite Brexit
and this growth of 2.4% or Spain’s
progress will in 2017 constitutional
be maintained. crisis.
 LESSONS FROM RESEARCH

- Don’t borrow when you

cannot pay back.
- Austerity measures could
be counter-productive.
- Choose friends to play
with, if not, you have to
pay a high price.
THANKS!

Q&A section.

We love to receive your feedbacks and

recommendations.
 References

▪ Thomas, K (2017, Feb 21) What is the European debt crisis. Retrieved from https://www.thebalance.com/what-is-the-
european-debt-crisis-416918
▪ Matthews, D (2011, Sep 28). Everything you need to know about the European debt crisis in one post. Retrieved from
https://www.washingtonpost.com/blogs/ezra-klein/post/everything-you-need-to-know-about-the-european-
debt-crisis-in-one-post/2011/08/05/gIQAg69QwI_ blog.html?utm_ term=.2eb75ac87ef3
▪ Parrott, W (2015, Aug 18). The European debt crisis. Retrieved from
http://www.accaglobal.com/vn/en/student/exam-support-resources/professional-exams-study-
resources/p4/technical-articles/the-european-debt-crisis.html
▪ Greeley, B. (2011, Sep 26). Europe's debt crisis has become a german identity crisis. Business Week, , 1. Retrieved from
https://search.proquest.com/docview/894329651?accountid=63189
▪ Wikipedia (2018, Jan 10). Euro convergence criteria. Retrieved from
https://en.wikipedia.org/wiki/Euro_ convergence_ criteria
▪ Figure 1: Debt as percentage of GDP in EU, 2011. Retrieved from
https://www.csmonitor.com/World/Europe/2011/1202/The-eurozone-crisis-explained-in-5-simple-graphs/Deficit-
spending-as-a-percentage-of-GDP
▪ Figure 2: Deficit spending as percentage of GDP in EU, 2011. Retrieved from
▪ https://www.csmonitor.com/World/Europe/2011/1202/The-eurozone-crisis-explained-in-5-simple-graphs/Deficit-
spending-as-a-percentage-of-GDP