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DOUBLE DIP RECESSION
Presented By
George Paul
60
Jithin KV
71
Joseph Cherian
73
Kushagra Saxena
83
Anandkumar S. Lotlikar
85
Manmeet Kaur
86
Yogesh Marakani
87
Zafar Imran
90
What is Eurozone
It is an economic and monetary union (EMU) of 16
European Union (EU) member states
They have adopted the euro as their sole trading currency.
Euro became a reality on Jan 1, 1999 , but came for the
European consumers on Jan 1 2002.
It currently consists of Austria, Belgium, Cyprus, Finland,
France, Germany, Greece, Ireland, Italy, Luxembourg,
Malta, the Netherlands, Portugal, Slovakia, Slovenia and
Spain.
Parts of EMU?
1) The euro countries give up their own
currency when they join the euro area. The
ECB sets interest rates for the euro area (16)
Greece
matter of concern.
Power of Data
GDP - $360 billion
Debt-GDP ratio 113% of GDP
Greek Economy-Significant
Problems
Government Expenditure increased by
87%, Revenues grew by only 31%
Why Greece?
Foremost, Greece did not take its EMU
membership seriously
It forged budget figures in order to be admitted
in 2001
By this it deceived the other EMU member as
well as itself
It first enjoyed the benefits of its EMU
membership by financing Govt. debt at much
lower rate than before.
Led to extended Govt. debt and was used to
preserve existing economic structure
Made the country less competitive internationally
Internationally
TIME LINE
CAUSES
Current Predicament
Private demand in debtor countries has
plunged with the end of debt financed boom
Now public sector spending is also reduced
as a part of austerity programs
So now growth and jobs now rely on exports
to other European countries
But the entire Europe is implementing
austerity policies and this can push Europe
back to recession
INDIA
Trade
(As a result of the deepening global financial crisis in 2008,
Indias export growth rate started plummeting from the high 40
per cent to 63 per cent range witnessed during April to August
2008 to 26.1 per cent in September, turning negative from
October 2008 to October 2009 with a low 4.2 per cent. this
situation has not been witnessed in the last 24 years.)
Markets
(There will be negative impact on the Indian stock market and
lead to lower reserves as well as depreciation of the Indian
rupee denting the growth prospects in the export sector. From
an investment destination perspective, if the Euro zone
becomes unattractive given debt servicing and currency
concerns, India stands to gain. )
Impact Cont..
Currency
( The fair value of tangible assets, securities, intellectual
property is linked with the euro. Cash flows of banks and
companies have been impacted. For eg. the Indian rupee
has appreciated from Rs 70 to Rs 56 vis-a-vis the euro in
just a few months. In addition to trade-based earnings,
mark-to-market losses can have important ramifications. )
Measures
1. The European Union, the IMF and the ECB set up a tripartite
committee(the TROIKA)to prepare an appropriate program.
Measures
5.ECB starts buying government debt from secondary market to
reduce bond spread and to increase the confidence of investor.
Between May 2010 to June 2011 ECB purchased 78 billion bonds out
of which 45billion from Greece government.
6. EFSF(European Financial Stability Fund)
The EFSF is intended to consist of a fund of 750 billion, which would
be made up as follows(a) 440 billion would be made available in loan guarantees from Euro
zone member states.
(b) 60 billion would consist of emergency funds made available by the
European Union itself , and
(c) 250 billion would be provided under arrangements with the IMF.
DOUBLE-DIP
RECESSION
What is Double-Dip
Recession
A double-dip recession refers to a recession
followed by a short-lived recovery, followed
by another recession
A double-dip (or even triple-dip) is a worstcase scenario. Fear that the economy will
move back into a deeper and longer
recession makes recovery even more difficult.
CAUSES OF DOUBLE-DIP
DEPRESSION
Credit Crunch.- Banks lost billions through
mortgage defaults. The financial system has never
fully recovered - bad loans and loss of confidence.
Balance Sheet Recession- Fundamental
imbalances in the banking / housing sector. Banks
are concentrating on improving their balance
sheets, and there is a greater reluctances to lend,
and banks are being more cautious.
Global factors-The factors that influence due to
global crisis such as war, calamities ,oil spills etc.
Cont..
Poor government policies-The poor
economic policy taken by the government
also cause this negative recession.
Past Recessions
US witnessed 11 recessions so far, after World
War II
1930-1939 Great Depression
Lack of high-growth new industries, high
consumer debt and bad loans given out by banks
and investors
Impacts
Negative GDP growth
Lower standard of living
Low production and higher attrition rates in
firms
Disastrous for philanthropy and charities
Deflation
Conclusion
Will it really affects India?
Euro crisis not to affect Indian IT cos:
Infosys
Euro crisis wont hit Indian IT sector NASSCOM