1. European Debt Crisis
Arturo Peguero
Pei-ling Liu
Nilar Thein

2. European Debt Crisis
Euro as Common Currency
Adopted in 1999
Economies on the Brink of Financial Collapse:
Greece
Portugal
Ireland
Italy
Spain
Eurozone is an economic and monetary union of 18 countries

3. European Debt Crisis Discontinued Individual Monetary Policies:
Now under control of the European Central Bank (ECB)
Different Fiscal Policies

4. Monetary Policy:
Controls Money Supply
Interest Rates
Fiscal Policy:
Taxes
Government Spending

5. European Debt Crisis After Euro Adoption:
Small Economies (E.G. Greece) could borrow more and at lower rates
Led to new fiscal policies
Huge spending deficits
Generous public sector salaries
Welfare
Retirement benefits
Paid debts by borrowing more
Cheap credit fueled housing bubbles, etc.

6. European Debt Crisis Global Financial Crisis of 2008
Started with the housing bubble burst in the U.S.
Credit shortage spread worldwide (Euro Governments couldn’t borrow more)
Crisis severely affected Euro Countries with large fiscal deficits

7. European Debt Crisis Emergency Loans IMF & Germany step up
Demanded Implementation of Austerity Measures
Increase taxes
Reduce Salaries & Pensions

8. European Debt Crisis Mainly Small Economies Affected
Dragged down the rest of Euro zone
Economic Interdependency