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1 BACKGROUND

Mauritius was formerly a colonial country under the reins of Great Britain and is currently esteemed among the Sub Saharan African countries. Mauritius locates itself on 23rd position out of 183 economic as the most idyllic site in world where it is easy to do business, in the Doing Business 2012 Survey. In addition, Mauritius was entitled as the jewel of Africa at the Mauritius Board of investment conference (officially titled Mauritius, Your business passport to Africa) in London. With its characteristics of the easiest place of doing business, Mauritius, is definitely on the schema of various UKS largest companies. (Mauritius now, 2012). Mauritius has been crowned twice in 2009 and 2010 as the top leading African county in the World Banks doing survey. The Mauritian economy is not insusceptible to the recent financial crisis but it has shown great resilience to external shocks. The financial sector being the fourth pillar of the Mauritian economy has a lengthy tradition of conventional banking with a high profile as a safe and sound financial environment for local and foreign investors, by beings economically, politically and socially stable. The financial sector in Mauritius is dominated by banks. The BOM was established in September 1967 as the Central bank of Mauritius, under the Bank of Mauritius Act 1966, now revised and interchanged as the Bank of Mauritius Act 2004. It was modeled on the bank of England as Mauritius did not have any model of its own. The BOM as the central bank has the role to carry out supervision and regulate the banking business in Mauritius. BOM acting as prudent the regulator and supervisor is the reason why banks in Mauritius remained buoyant during the uncertain economic activity. Recently, a shift in consumer behaviour has been observed: the Mauritian consumer is evolving from a semi-collectivistic consumerism to an individualistic one, whereby one family now may own more than one car, for instance. This is partly due to new financial offers and products available to consumers such as credit cards and loans. In the event that CBs fail to act proactively or on time, over-indebtedness which occurs due to inability to repay a loan may affect the whole financial system as we have witnessed with the real-estate bubble during 2007. In Mauritius, debts are said to be manageable. According to the BOM Annual Report 20092010, Central Government debt increased from 50.0% at the end of June 2009 to 50.8% at the end of June 2010 while the public sector debt remained unchanged at 59.1%, both as a

percentage of GDP at market prices. Externally, Mauritius is not classified in the list of countries exposed to debt rollover risk, that is, which have difficulties finding financing on the markets, and has not till now turned to the Bretton Woods for debt restructuring. The concern for the euro zone debt crisis arises because Europe is our first exporting market as well as our main tourism market meaning that progressive slow growth in that region would affect our revenue. The disparity between the Euro and Dollar affects the whole of the importexport business and our trade deficit because Mauritius is highly dependable on the European market which constitutes: 95% of sugar revenue, 65% from ICT-BPO sector and 60% generated from European tourism. Therefore, it is essential to mention that the recent global crisis (2007-2011) has sent contagious waves to Europe, causing the peripheral members of the European Union (EU), also referred to as the PIIGS, to face a severe debt crisis. The case of the euro zone is quite special, several European countries joined in 1999 to form the EU with the prime objective of a common currency. As a result, it assigns the role of price stability of the Euro as the key objective to the ESCB, which comprises of the European Central Bank and national central banks. According to Celine Allard4, The euro area is not a single nation, and its treaty prohibits member states from sharing each others liabilities, but this does not prevent the whole Europe to be affected by the downfall of the periphery.

This European turmoil can be attributed to the peripheral countries which misrepresented their economic information by using creative accounting in order to be accepted in the Economic Union. The rating agencies have acted unethically by submitting a rating that does not project the real state of Greeces economy and have produced serious and irreversible consequences but have not yet been sanctioned by law.