Significant AI Trends for the Financial Industry in 2024 and How to Utilize Them
The history of EU and its current situation.
1. The history of EU and its current
situation:
- How Greece economic instability is threatening the entire
stability of EU.
Presented By,
Rajashree Swain
Asia Pacific Institute of Management
New Delhi
2. Introduction to EU ( An abstract to EU)
Current EU economy ( An overlook to the economy of
countries under EU)
The History of EU Economy ( 1945- Today)
Greece Economy (Current, 2010-15 Govt. debt crises,
disadvantages towards EU)
Recommendation
Conclusion ( Allan GreenSpan)
AGENDA:
3. Prof. Shiladitya Dasgupta for his instructions.
http://www.bbc.com/news/world-europe-33225461
http://themarketmogul.com/europe-existential-crisis/
https://europa.eu/european-union/index_en
https://europa.eu/european-union/about-
eu/history_en
https://en.wikipedia.org/wiki/Greek_government-
debt_crisis
Special Thanks to..
4. Introduction to EU:
1. The European Union (EU) is a
political and economic union of
28 member states that are
located primarily in Europe.
2. It has an area of 4,475,757 km2
(1,728,099 sq. mi), and an
estimated population of over 510
million.
3. The EU has developed an
internal single market through a
standardized system of laws that
apply in all member states.
5. Cont…
4. EU policies aim to ensure the free
movement of people, goods, services,
and capital within the internal market,
enact legislation in justice and home
affairs, and maintain common policies
on trade, agriculture, fisheries, and
regional development.
5. Within the Schengen Area, passport
controls have been abolished.
6. A monetary union was established in
1999 and came into full force in 2002,
and is composed of 19 EU member
states which use the euro currency.
6. GDP (PPP) 2016 Estimate
Total $ 19973 Trillion
Per Capita $39212
GDP (Nominal) 2016 Estimate
Total $16,518 Trillion
Per Capita $32,384
7. Current EU Economy:
The European Union has established a single market across the
territory of all its members representing 510 million citizens. In 2014,
the EU had a combined GDP of 18.640 trillion international dollars, a
20% share of global gross domestic product by purchasing power
parity (PPP). As a political entity the European Union is represented
in the World Trade Organization (WTO). EU member states own the
estimated largest net wealth in the world, equal to 30% of the $223
trillion global wealth.
19 member states have joined a monetary union known as the
eurozone, which uses the Euro as a single currency
8. Of the top 500 largest corporations in the world measured by revenue in
2010, 161 have their headquarters in the EU.. n 2016, unemployment in the
EU stood at 8.9%.while inflation was at 2.2%, and the current account
balance at −0.9% of GDP. The average annual net wage in the European
Union was around $20,000 in 2015, which was about half of that in the
United States.
There is a significant variance for GDP (PPP) per capita within
individual EU states. The difference between the richest and poorest
regions (276 NUTS-2 regions of the Nomenclature of Territorial Units for
Statistics) ranged, in 2014, from 30% of the EU28 average to 539%, or
from €8,200 to €148,000 (about US$9,000 to US$162,000)
9. The five largest economies in the world according to the IMF by
Nominal GDP in 2015:
10. The History of European Union:
1945 - 1959
A peaceful Europe – the
beginnings of cooperation.
1960 - 1969
A period of economic growth.
1970 - 1979
A growing Community – the first enlargement.
1980 - 1989
The changing face of Europe - the fall of the Berlin Wall.
13. Many countries joined the Euro without respecting all the
rules and flawing their numbers.
For example, Greece entered the Eurozone with a budget deficit of
3.38% of GDP, exceeding the 3% limit. Moreover, the Euro was
launched without fiscal policy, which makes the Euro adopt a policy
of Laissez Faire.
The lack of fiscal policy gives less control over the currency and the
overall economy, especially during recessions. This lack of control
helps countries to hide their true numbers using intricate derivatives.
EU Crisis:
14. This is the case of Greece that used Goldman Sachs’ derivatives
swaps; buying other currencies and selling euro to disguise their
numbers.
Further, one may think that the low cost of borrowing that countries
of the Eurozone benefited from was a great advantage of the
currency.
But as Spain entered the Eurozone, it became eligible to borrow at
very low interest rates, which considerably raised its debt, and it is
also the case for other European countries that sunk in debt and are
now in crisis.
Cont….
15. Greece applied to join the European Community in
1975. It was not greeted with open arms.
Greece’s entry was a way to ensure democracy and
stability in southern Europe at the height of the cold
war.
Greece was the model, Spain and Portugal followed,
joining in 1986. But Greece was also a warning: levels
of corruption were worse than the European average,
the state was poor at collecting taxes.
Entry of Greece:
16. Economy of Greece :
The economy of Greece is the 46th largest in the world with a nominal gross
domestic product (GDP) of $194.851 billion per annum.[4] It is also the 54th
largest in the world by purchasing power parity, at $288.245 billion per annum.
Greece was accepted into the Economic and Monetary Union of the European Union
by the European Council on 19 June 2000, based on a number of criteria (inflation
rate, budget deficit, public debt, long-term interest rates, exchange rate) using 1999
as the reference year. After an audit commissioned by the incoming New Democracy
government in 2004, Eurostat revealed that the statistics for the budget deficit had
been under-reported.
19. 2010–2015 government debt crisis:
According to Der Spiegel, credits given to European governments were
disguised as "swaps" and consequently did not get registered as debt because
Eurostat at the time ignored statistics involving financial derivatives.
These conditions had enabled Greek as well as many other European
governments to spend beyond their means, while meeting the deficit targets of
the European Union and the monetary union guidelines. In May 2010, the
Greek government deficit was again revised and estimated to be 13.6% which
was the second highest in the world relative to GDP with Iceland in first place at
15.7% and Great Britain third with 12.6%. Public debt was forecast, according
to some estimates, to hit 120% of GDP during 2010.[
20. As a consequence, there was a crisis in international confidence in Greece's ability to
repay its sovereign debt, as reflected by the rise of the country's borrowing rates
(although their slow rise – the 10-year government bond yield only exceeded 7% in
April 2010 – coinciding with a large number of negative articles, has led to arguments
about the role of international news media in the evolution of the crisis).
In order to avert a default (as high borrowing rates effectively prohibited access to the
markets), in May 2010 the other Eurozone countries, and the IMF, agreed to a "rescue
package" which involved giving Greece an immediate €45 billion in bail-out loans, with
more funds to follow, totaling €110 billion.In order to secure the funding, Greece was
required to adopt harsh austerity measures to bring its deficit under control
21. According to Fortune, once the Greek break out of the
euro, the central bank would pursue and expansionary
monetary policy by lowering interest rates and printing
money which would cause inflation to soar.
Nomura’s Jens Nordvig, one of Wall Street’s top
currency strategists, predicts the implied annual inflation
to be around 8.6% and based on this inflation figure, the
drachma is expected to plunge by around 43%. So if
drachmas begin at one drachma per Euro then it is
predicted that the conversion rate would depreciate to
two to one.
How Greece economic instability
is threatening the entire stability
of EU.
22. A currency’s valuation will be painful but it will eventually give a
boost to the Greek economy making its exports cheaper. It is
predicted the one off 30% devaluation of the drachma would push
the economy by 20%. So as long as Greek banks do not fail, the
drachma could be a better than expected means to an end.
On the other hand, if the drachma is to become Greek’s currency
again, the European creditors would lose hundreds of billions. An
amount of 240 billion euros to the government along with 89 billion
euros as loans from the ECB to Greek banks might be defaulted in
case of a Grexit. Borrowing costs should rise for Italy, Portugal,
and Spain as a contagion effect but the fact is the ECB is buying
their bonds as part of the quantitative easing which might put a
ceiling on their rising yields.
Moreover, the euro would depreciate as a result of uncertainty over
the Grexit boosting their exports.
Cont…
24. GREECE
1
2
3
Grexit after attempted
Eurozone negotiations
will integrate.
Greek banks collapse
leading either to
Eurozone rescue deal or
to Grexit.
Greek mandate
persuades Eurozone
leaders to agree to
revise deal.
DEAL
EXIT
25. “The Euro can only be saved via a real political union. I don’t believe that a
common economic and currency area can function in the long term if it is
made up of 17 countries with 17 different social systems. The Eurozone needs a
complete political union, comprising either all member states or a core Europe.
That is the only way the Eurozone isn’t going to break up”.
---Allan Greenspan, ex-Chairman of the Federal Reserve
Conclusion
