“The Euro Crisis, Genesis and Evolution of a Drama - Understanding it First

Hand”

April 5, 2012SHERATON Northbrook

www.paratuseurope.eu

Treaties of Rome (1958)Purpose: to set up the European Economic Community (EEC). European integration to include general economic cooperation.

Single European Act (1986)Purpose: to prepare for the single market.

Maastricht Treaty (1993)Purpose: to prepare for European Monetary Union and introduce elements of a political union (citizenship, common foreign and internal affairs policy).

France and the Netherlands reject in referendums in May and June 2005 the European constitution.

History of Euro

• officially adopted on 16 December 1995

• introduced to world financial markets as an accounting currency on 1 January 1999

• entered circulation on 1 January 2002

• is the official currency of the Eurozone, 17 of the 27 member states of the EU and 5 additional European countries

• used daily by some 332 million Europeans and 175 million people worldwide - including 150 million people in Africa.

• more than €890 billion in circulation

Facts about Euro

“I have very low expectations for it. I think that differences are going to accumulate among the various countries and that non-synchronous shocks are going to affect them.

Right now, Ireland is a very different state; it needs a very different monetary policy from that of Spain or Italy. On purely theoretical grounds, it’s hard to believe that it’s going to be a stable system for a long time. …”

Milton Friedman Conference at the Bank of Canada (2000)

M. Friedman on Euro

“The euro is going to be a big source of problems, not a source of help. The euro has no precedent. To the best of my knowledge, there has never been a monetary union, putting out a fiat currency, composed of independent states. There have been unions based on gold or silver, but not on money put out by politically independent entities.”

Milton Friedman Interview with New Perspectives Quarterly Magazine, 2005

M. Friedman on Euro

Euro-US Dollar exchange rate, 1999–today

Interesting Data

Budget deficit of the euro area compared to USA and UK

Interesting Data

Greece

Proportion of EUR by country

Interesting Data

Interesting Data

Interesting Data

Interesting Data

Interesting Data

Interesting Data

Interesting Data

Euro Crisis and Greece

• Internal (GR) reasons

• Structural (EU) reasons

• 3rd party (speculators, CDS – Crisis Default Swaps, etc)

EU-IMF-ECB and GR Memorandums (Mnimonio-Μνημόνιο)

• 1st May 2010 => 110 bn euros

• Update – summer 2011

• 2nd February 2012 => 130 bn euros

• Depth “Haircut”

10 Myths about Greek Crisis

• Could get cheap loans from Russia/China

• EU and IMF speculated on Greek crisis

• Dept was created by politicians70% of state budget => salaries & pensions

20% of state budget => previous loans10% of state budget => public expenditure

• Claim the dept “unfair” and “delete” it

• Returning to Drachma is more preferable

10 Myths about Greek Crisis• Depth will be eliminated if companies pay

6000 companies = 42 billion50% from public companies!30% by bankrupt companies!20% rest of companies

• Increase corporate tax, let rich pay not workers

• Increase public spending

• Dept can be eliminated utilizing natural resources

• There is a “third way” to go out of crisis

5 Stereotypes about Greece

• Greeks are lazy

• Greeks are fed in charity common meals

• Greece is in a constant turmoil

• Greece is an investors hell

• Greek tourism is collapsing

“The Euro Crisis, Genesis and Evolution of a Drama - Understanding it First

Hand”

April 5, 2012SHERATON Northbrook

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