The Eurozone and the Economic Crisis (Power Point)

The Eurozone and the Economic Crisis

Polyxeni Nomikou (4100155)George Ritsos – Kokkinis (4110103)

Outline of presentation

• Introduction• The Eurozone's main strength and one major

weakness in overcoming the crisis • The opportunities of the EU to overcome the crisis• The Threat: the Price of Oil • Conclusion

What was the cause of the current Eurozone debt crisis?

The main cause was the global financial crisis in 2008.

The Strength: Euro Skepticism and Social Unrest

i) How did the crisis influence the public opinion on the role of the euro?

ii) How do Europeans find the prospect of economic reforms?

Has the euro in general cushioned the effects of the economic crisis?

EU 27

Eurozo

ne

Non-Eurozo

ne UK

Greece

Cypru

s0

5

10

15

20

25

30

35

40

45

50

Total Agree(in percentages%)

Autumn 2010 Spring 2011

EU 27

Eurozo

ne

Non-Eurozo

ne UK

Greece

Cypru

s0

10

20

30

40

50

60

70Total disagree(in percentages%)

Autumn 2010 Spring 2011

Which initiatives could most improve the performance of the European economy?

Improve education and proffesional training

Make it easier to set up a business

Reduce public debt and deficits

Invest in research and innovation

Use energy more efficiently

Strengthen regulation of financial markets

Make it easier for companies to access credit

Invest in enviromentally friendly products & services

Increase number of working hours

Increase retirement age

Invest in transport(railways etc.)

0 20 40 60 80 100 120 140 160

EU-27 Eurozone Non-Eurozone

(In percentages)

Which of the statements best reflects your household situation?

spring 2009 autumn 2009 spring 2010 autumn 2010 spring 2011

35% 35% 35% 34% 33%

29%32% 32% 32%31%28% 29% 30% 30%

1% 2% 1% 1% 2%4% 3% 3% 3%

unable to make future plans able to plan the next 6 months long-term perspective of household other

don’t know

The Weakness: The European Central Bank

December 2011: The ECB injected a great amount of liquidity into the financial system to avoid its collapse.

This had two main drawbacks.

I. Financial aid did not trickle down into society as expected.II. The ECB is funded by member states. A direct heavy toll

would pass on to nation states if a member state defaults on its sovereign debt.

He raised interest rates twice to control inflation and hampered economic growth.

He divided the ECB with his decisions and his bond purchasing policy.

Jean Claude Trichet(200

3-2011)

He took drastic measures by decreasing interest rates and reserve ratio.

He promoted the Fiscal Compact, an agreement to produce legislation that establishes disciplined macroeconomic policies.

Mario Draghi(2011-

present)

Notable ECB Presidencies

The Opportunities The main pillars of the recuperation effort

The Stability Pact:Member states agreed to work on a new fiscal pact tightening budget discipline. Member states from now on ‘should not be allowed to run fiscal budget deficits in good times, only in bad times.’

The Banking System:Necessary to prove that the banking system is healthy. The EU performed Stress Tests on European banks and discovered they needed a capital buffer of 115bn euros to be ready to face instability.

How did the EU reinforce the banking system? 1. Basel Accords

Three agreements developed by the Basel Committee on Banking Supervision including measures and reforms to strengthen the: regulationsupervision andrisk management of the banking sector.

These rules became law obliging in the EU in order to implement the Capital Requirement Directive.

2.Liquidity Coverage Ratio

The liquidity coverage ratio is an important part of the Basel Accords, as it defines the essential amount of liquid assets to be reserved by financial institutions.

The LCR aims at ensuring that banks have enough liquid assets to lend in normal times so that ‘central banks only perform as lenders of last resort’.

The Threat: the price of oil

The barrel of oil is priced in USD. That means that since the euro is weakened against the American dollar and the

price of oil rises , the European economy becomes more frail. However, social revolts and ongoing civil war in the Middle

East has made oil price fluctuate and has negatively affected the European economy.

Summary

Today we analyzed, The impact of the crisis on the public opinion concerning the

single currency and the need for economic reforms. The ECB and its efforts for economic recovery The opportunity to learn from the financial crisis The price of oil as a threat to the European recuperation

project

Thank you for your attention.

Any questions

Sources of Information

Lorca-Susino Maria .(2014). The Eurozone and The Economic Crisis: An Innovative Swot Analysis. Retrieved December 20, 2014, from http://www.addletonacademicpublishers.com