Group 8

Motives for formation Stability and Growth

European Union EuroZone Single Market, Free

Movement of Goods Monetary Policy

controlled by the ECB, Fiscal policy set by the countries.

European Monetary Union

Formation of Euro : Fall in Interest Rates and increased Investor Confidence, cheap money

Increased Domestic Demand , Increased domestic debts, rise in wages and fall in productivity

Growth in Economies , but stagnation in exports for GIIPS

Growing Current account deficit, Increasing Imports, Increasing Public Private Debt

Rise of the Fall

Lax & Corrupt

Fiscal and Monetary Challenges Differing priorities of Nations

Political and Social Challenges Rising Unemployment Boosting local Economy in

GIIPS nations

Problem at Hand

Portugal Spain Greece Eurozone0%

20%

40%

60%

80%

100%

120%

140%

9% 10% 9% 7%

82%

60%

120%

85%

Fiscal Deficit and Govt Debt

Budget Deficit Government Debt

Bailout Plan for Greece (€110 Bn @ 5%)

Emergency Bailout fund of €750 Bn created (EFSF)

Creation of Stability Fund

Steps Taken and underway

To Greece• Curtail Govt. Spending• Extraordinary Taxes• VAT from 11% to 23%• Special Taxes on high

pensions• Increase in retirement

age • Budget cuts of 1.5% for

2010 and 2% for 2011

Single Monetary , Multiple Fiscal Policies difficult to work Strict adherence to the terms of Treaty Commitment by individual governments to overcome

Political and Social challenges and support Euro. Austerity measures could push countries into recession

Our Assessment

Euro

zone UK US

Greec

e

Irela

ndIta

ly

Portu

gal

Spai

n0

40

80

12089 79

94

125

77

118

8665

Debt/GDP Enhanced Role of ECB Germany and France

need to show the way

BOOST Spending!!!

http://www.euo.dk/euo_en/spsv/all/74/ http://

www.economist.com/blogs/freeexchange/2010/07/european_economies http://www.imf.org/external/np/ms/2010/060710a.htm http://www.ecb.int/press/key/date/2010/html/sp100709.en.html http://europa.eu/pol/emu/index_en.htm http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD000000000

0259877.pdf

References

Thank You !!!