FINANCIAL CRISIS IN USA & EUROPE AND ITS RIPLLING EFFECT ON GLOBAL ECONOMY

GROUP MEMBERS NAME ROLL NOSANTOSH GUPTA 1373SAGAR MOJIDRA 1401PRIYANKA RAVINDRAN 1353ARIF KHAN 1387

ABOUT CRISIS

THE BUBBLE BURST US witnessed Financial Crisis since 2001The boom was led by rising housing prices Housing prices in USA began to drop in 2006 Rising interest rate & falling housing prices led to rise in subprime mortgage and foreclosure.Result : Housing bubble burst in Aug 2006.

IMPACT OF SUB PRIME CRISIS IN USA Initial impact in march 2008, Bear Stearns was acquired by JP Morgan chase.Sept 2008 witnessed major shakeouts in US financial Sector (LEHMAN BROTHERS declaring bankruptcy on 15th sept 2008).Washington Mutual closed by the US govt in largest failure of US bank.

FEDERAL RESERVE PROVIDED EMERGENCY LOAN TO AIG ( AMMERICAN INTERNATIONAL GROUP ) WHICH WAS REPAID BY SELLING OF AASET.MERILL LYNCH WAS ACQUIRED BY BANK OF AMERICA IN SEPT 2008 FOR $50.US FEDERAL RESERVE GRANTED APPROVAL TO INVESTMENT BANK GOLDMAN SACHS & MORGAN STANELY TO CONVERT THEMSELVES INTO COMMERCIAL BANK .

DOMINO EFFECT IN INDIA

Stock market crisis.Mortgage crisis.credit crisis.effect on jobs.

EUROZONE DEBT CRISIS

PORTUGAL FINANCIAL CRISIS

ABOUT CRISISThe FINANCIAL CRISIS BEGAN IN 2008Portuguese economy suffered deep recession & rising unemploymentGovernment possessing more tax & efforts to meet deficit reduction target.

FISCAL DEFICIT FROM 3.1 % TO 10 %PUBLIC DEBT DETORIATED FROM 68 % OF GDP TO 83 %

BAILOUTS

OTHER MEASURES

AVERAGE CUT OFF IS 20 % BASELINE CUT IN BUDGET AND RISE IN TAXATION PORTUGAL ESTIMATED BUDGET DEFICIT OF 4.5 % IN 2011.

The Facts of the PastJoined the EU in 1991Old Currency: The DharmaPopulation: 11.2 milMajor Industries: Tourism & Shipping

Reasons of Joining EUAccess to a competitive market Solidarity (Euro connection)StabilityEfficiency

Public debt: 126.8% of GDP (2009) increased to 144% of GDP (2010)Inflation: 1.2% (2009) increased to 4.5% (2010) Unemployment rate: 9.4% (2009) increased to 12% (2010)Current Account Balance: $34.43 billion (2009) to $17.1 billion (2010)

MAJOR CRISIS FACTORSMismanagement of FundsInefficient Public StructureTrade ImbalancesGovt. & Upper Class CorruptionTax Evasion (25-30 bil. Euros)

BAILOUT2010, Greek Govt Bonds become Junk, Can not privately finance.on 2 May, the Eurozone countries and theInternational Monetary Fund (IMF) presented a110 billionbailout loan for Greece.It was based around 3 key points:Implementation ofausteritymeasures.Privatization of government assets worth 50bn by the end of 2015.Structural reforms, to enhance competitiveness.Austerity-Austerity is a government method of covenants with the goal of re-stabilzing its debt deficit. Examples:Lowered SpendingIncreased Tax

Greek currently 160% of GDP, 120% by 2020 (goal)Unemployment sitting near 30%Wages last two years have fallen 12%More than 1.1m jobs lost in the private sector in the past four yearsMarket rigidities in Greece, including state monopolies, price-fixing by local producers and restricted shopping hours, keep prices of goods higher than elsewhere in the eurozone.

THE GREEK FINANCIAL CRISIS: THE PRESENT

SOLUTIONSWhat Greece implemented. Raise taxes on fuel, tobacco, and alcohol. Raise the retirement age by 2 years. Decrease government spending.

Recommendation. Sterilization.Decrease Unemployment.Fix Inflation Rates.

CONCLUSIONCRISIS WONT STOP FOR A PERIOD OF TIME TILL ALL DEBT OBLIGATION IN EUROZONE ARE NOT CLEARED. THIS SITUATION IS BECAUSE EURO COUNTRY ARE DEPENDANT ON EACHOTHER. COUNTRY NOT ABLE TO REPAY DEBT THEY BORROWED FROM THERFORE THER IS A DEBT CRISIS.POLICY REACTION ARE MADE TO COME OUT OF DEBT CRISIS.

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