...European debt crisis and its impact on worldwide economy Shanika Mitchell-Gregg April 30, 2012 Dr. Tzu-Man Huang BUS 5200 Strategic Finance for Executives EMBA, 2011-12 (Stockton Cohort #7) “The European Union only takes action after the facts. They only address a situation when it has already become a problem.” Zdeneil Kudrna, political economist The European debt crisis was brought on by several Eurozone countries running large budget deficits and borrowing money from central European banks. Out of 27 member states, 17 of those countries use the euro as their currency. The larger countries involved were; Italy (the worst effected), Germany, Spain, Portugal, Greece, Switzerland, Britain and Ireland. The European economic debt crisis has resulted from a combination of complex factors including; the interconnection in the global financial system, that if one nation defaults on its sovereign debt or enters into recession putting some of the external private debt at risk. Easy credit conditions, during the 2002–2008 were a period ones were encouraged of high-risk lending and borrowing practices. International trade imbalances or international interconnection of debt protection, institutions entered into contracts called credit default swaps (CDS) that result in payment should default occur on a particular debt instrument (including government issued bonds). But, since multiple CDS's can be purchased on the same security, it is unclear what exposure each country's...
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...European Debt Crisis Adelina Valencia Dr.Huang BUS 5200 April 27, 2013 European Debt Crisis On-line Mini Project The Eurozone debt crises all began when a newly elected government official took office in Greece in 2009. The prime minister announced that the deficit for Greece was 12.7% of GDP not 5% and said that the previous government had lied about this. This is what first started the European Debt Crisis. The government in Greece in May of 2010 announced that the budget deficit was much larger than what the previous government had predicted. Greece realized that they were not able to issue new debt to cover the new debt and its deficit. This is when the European debt crises all began and they requested help from the International Monetary Fund and the European Union and received a three year loan and 110 billion in euros. After two years, Greece still required assistance and the parliament approved another round of a second bailout of 130 billion euro’s. They deficit originally of 110 was actually not enough to cover their actual deficit and is why they had to ask for more help. The second year bail out required the private sector bond holders to take a reduction of the value of their bonds. The European central bank, European Union, and the International Monetary Funds stated that Greece had met the terms of the second bailout and Greece was running out of money. The Eurozone is a group of 17 members of the European Union. The European Union has over 27 members in the...
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...THE INSTITUTE OF FINANCE MANAGEMENT (IFM) THE FACULTY OF ACCOUNTING, BANKING AND FINANCE DEPARTMENT BANKING AND FINANCE BACHELOR OF BANKING AND FINANCE PROJECT REPORT COMPANY NAME: INSTORE PLC NAME: LAWRENCE PETER REG NO: BBF/11/55750 SUPERVISOR: MR. KIWIA SUBMISSION DATE: 2012 TABLE OF CONTENT ACKNOWLEDGEMENT iii EXECUTIVE SUMMARY iv LIST ABBREVIATIONS v CHAPTER ONE 1 1.0 INTRODUCTION 1 1.1 BACKGROUND OF THE COMPANY 1 1.2 POUNDSTRETCHER 2 1.3 PROFIT WARNINGS 2 CHAPTER TWO 3 2.0 CAPITAL STRUCTURE 3 2.1 CAPITAL STRUCTURE THEORIES 3 2.2 DIVIDEND POLICY 5 2.3 THEORIES OF DIVIDEND POLICY 5 2.4 DIVIDEND POLICY OF THE COMPANY 6 2.5 COMPANY VALUATION 8 3.0 THE COMPANY FINANCIAL RATIOS ANALYSIS 11 CHAPTER FOUR 20 4.0 CONCLUSION AND RECOMMENDATION 20 4.1 CONCLUSION 20 4.2 RECOMMENDATION 20 4.3 REFERENCE 21 4.4 APPENDICES 22 ACKNOWLEDGEMENT Conducting a project and thereafter writing an academic report is extremely a tough work to be accomplished alone. Thus this work could not have taken the way it is without the assistance from a number of people. I’m therefore duty found to express my sincere gratitude to all those who participated in one way or another to make this study a successful one. First of all, I would like to extend my sincerely to Almighty God that has provided life, health and capacity to perform all my works done especially when preparing this report. In connection...
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... 2012 The European Sovereign-debt Crisis Throughout history, debt has been an issue and a concern for many countries around the world. Nations borrowing money, unnecessarily spending, corruption, inability to pay back loans and a variety of other factors have contributed to the devastating and lasting effects of monetary absolution. In recent years, some of the most significant and devastating economic occurrences that have taken place were released to the general public. One that has received a great deal of attention is known as the European Sovereign- debt Crisis or the Euro zone crisis. The European Sovereign Debt crisis is an ongoing financial crisis that has made it impossible for some countries in the Europe to repay or refinance their government debt without the assistance of third parties (Wikimedia). Countries across the European Continent are struggling to find ways to cope with the crisis and the impact that it has taken on debt stricken nations. Europe’s politicians, regulators, and market players are trying different approaches to deal with the problems at hand (Bloomberg LLP). Due to the number of countries that are involved this financial crisis is not only affecting these countries but the entire world. The Euro zone crisis had a variety of origins that grew their roots over a course of many years, but the situation was not released to the general public until back in late 2009 when the concerns intensified. Fears of a Sovereign Debt Crisis arose among...
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...What is the European Debt Crisis? By Thomas Kenny, About.com Guide See More About: * economics * europe * bonds ------------------------------------------------- Ads LIC Pension 1.45 करोड़छोटा निवेश जो आपको करोड़पति बनाये = PensionPolicyBazaar.com/PureInvestment Mobile Trading On-the-GoTrade Forex, Commodities, CFDs. Low Fixed Spread, Start Now!www.4xp.com/Mobile What is Sensex?You don’t need tuitions to learn. The First Step Kit teaches enough.Sharekhan.Sharekhan-Firststep.com Bonds Ads * Bonds * Debt * European Crisis * Type of Bonds * AAA Corporate Bonds ------------------------------------------------- Ads Investment CalculatorA Free, Safe & Simplified Tool for Managing Your Money. Try It Now!www.perfios.com/managingyourmoney Looking for Major Debt?Find Major Debt on Facebook. Sign Up Free Now!www.Facebook.com The European debt crisis is the shorthand term for the region’s struggle to pay the debts it has built up in recent decades. Five of the region’s countries – Greece, Portugal, Ireland, Italy, and Spain – have, to varying degrees, failed to generate enough economic growth to make their ability to pay back bondholders the guarantee it’s intended to be. Although these five were seen as being the countries in immediate danger of a possible default, the crisis has far-reaching consequences that extend beyond their borders to the world as a whole. In fact, the head of the Bank of England referred to it as “the most serious financial...
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...Does history really repeat itself? After reading the article on “Surviving A Debt Crisis: 5 Lessons for Europe from Latin America” by Samuel George from Bertelsmann Foundation, it seems very convincing that European leaders may have an opportunities to learn from the Latin American on how to handle and survive a debt crisis. The fundamental causes of these two debt crisis are highly similar. When the global economy was in good shape, massive lending was made to countries with unstable macroeconomic histories. Investors saw the lucrative opportunities to achieve high returns in some low-credibility nations but decided to take risks since there were no signs indicating any sort of recession. However, the second oil shock in 1979 led to spike in oil prices. As a result, the US went into recession, which drove commodities prices down significantly. Latin America countries import oil and export commodities, a deteriorated international trade situation slowed down their GDP growth. They were not able to pay for their loans which associated with floating interest rates. In 21st century European, the global financial crisis trigged a series of events. The Greek government had to spend heavily through debt to subsidize shipping and tourism industries which were harmed by the business cycle. Real-estate bubble in Spain and Ireland forced their governments to bailout private banks via national debts. It is, therefore, clear that in "sunny days", countries should be cautious...
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...The contagious impact of the European sovereign debt crisis on the foreign exchange market 1. Introduction In 2010, the debt crisis caused the euro to go down 10% in a three-month period. Some largest hedge funds in America discovered this opportunity and short euro in groups to an enormous scale. Later on, the British pound is being infected. It continuously dropped for six days, which wrote the longest dropping period record. In this paper, the objective is to critically analyse how the European sovereign debt crisis affects foreign exchange markets. The theme focuses on the contagion on the markets. The contagion phenomenon exists between foreign exchange spot and derivative markets. One of the channels is the investor sentiment, which makes large scale of influences on both markets and volatility dynamics (Corredor, P., Ferrer, E., Santamaria, R., 2015). It makes sense on aspects like trading volume, effective transaction costs and so on. This paper has two main parts. The first part is to evaluate impacts on foreign exchange spot market through analysing the political channel, bank channel and financial markert channel. The second part is to investigate impacts on foreign exchange derivatives, especially on the foreign exchange swap. 2. Contagious impact on the foreign exchange market 2-1 Impacts on foreign exchange spot (impacts on euro) In this part, we explain how the debt crisis makes impacts on the foreign exchange spot market, especially, we focus...
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...Date: The European sovereign debt crisis Introduction At the beginning of 2010, its emerged that the sovereign debt crisis would drastically spread through the entire European Union since Portugal, Greece, Spain, Italy and Ireland, which are jointly known as the PIIGS were in facing the significant increase in their deficit as well as public debt. The events about the crisis were closely tied to Greece since there were doubts about its ability to offset the huge sovereign debt it owed as well as government deficits. This crisis of confidence in Greece resulted in the significant downgrade of the Greek bonds into a junk status as well as the Greek bond yield spreads notably rose (Brutti and Sauré, 2016). The financial unrest gradually spread to the entire European Union zone and the European stocks tumbled, and the euro currency reached 2-year lows. Nonetheless, Greece was not the only stressed economy in The Euro Zone, in fact, it turned out to be a tip of the iceberg since other nations in the European Union were trailing on the Same road. Spain, Italy, Portugal and Ireland had accumulated huge budget deficits as well as increased public debt to the Gross Domestic product ratios. Portugal had an economic boom that was being sustained by the significantly lower borrowing rates. Nevertheless, it was hit by expeditious wage inflation which adversely affected the local companies’ competition with other foreign firms (CAI and LI, 2012). The sovereign debt crisis in European region has...
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...Topic: PIIGS (European debt crisis) 吳宇綸D0131292 劉昱顯D0131156 王謙 周雋彥D0125599 Contents 1. Introduction 2. Overview of the European sovereign debt problem 3. Relief measures of the European sovereign debt crisis 4. European debt crisis 5. Conclusion 6. References I. Introduction The PIIGS is a group that composed of five countries that have some commonality in location and economic environments. In this case, PIIGS includes Portugal, Italy, Ireland, Greece and Spain. The countries which be mentioned are all part of European Union members and have been noted for having weak economics and bad situation of financial problems. In 2008, economic crisis came to all over the world, during the worldwide economic crisis, Portugal, Italy, Ireland, Greece and Spain began to come out the grave and serious concern in the European Union refer to the enormous amount of sovereign debt that they were carrying. The problem with the PIIGS is that speculators dropped, compounding their debt issues and the situation might be much more worse. Many European Union members were also unwilling to rescue these struggling nations although when it became very clear that assistance would be needed. The sovereign debt crisis sparked a number of conversations about reforming financial policy in the European Union to prevent similar problems in the future. The members of PIIGS felt displeasure at the negative allusions and some have...
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...in responding to the debt crisis. It was in the end of 2009, when the EU debt crisis began and appeared as a major threat in 2010. The following reasons can be summarized which participated in the debt crisis. Violation of EU Rules- The beginning of the story of the debt crisis is related to the earlier stages of the time, when many European nations wanted to form a monetary union which lead to the inception of “Euro” as many participants violated the conditions needed under the Maastricht treaty. Countries like Greece and Cyprus didn’t had real data about the financial and economic conditions and EU ignored it. EU also accepted heavy debts by many countries at the time of crisis. Banking Sector Problem- The banking sector was collapsed when it got involved in the global financial chain which dragged down in 2007 financial crisis. The Banks were in a weak position because of the financial instruments of high risk will collapse in the debt crisis scenario and as the money they had was used for financing Government budget deficit rather than doing its important role of providing the money to Businesses and households which could have given them return for their ending amount. Rating Agencies- Tensions in bond market and increasing bond yields, difficulty in raising money by the government due to low trust of the creditors had after rating agencies continued downgrading the troubled euro nations because of the risk arising from the debt crisis. Political Conflict ...
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...EUROPEAN DEBT CRISIS – ORIGIN, CONSEQUENCES AND POTENTIAL SOLUTIONS F RA N TI Š E K N E M E T H Abstract What is the European debt crisis? As the head of the Bank of England referred to it in October 2011, it is “the most serious financial crisis at least since the 1930s, if not ever.”1 In fact, the European debt crisis is the shorthand term for the region’s struggle to pay the debts it has built up in recent decades. Five of the region’s countries – Greece, Portugal, Ireland, Italy, and Spain – have, to varying degrees, failed to generate enough economic growth to make their ability to pay back bondholders the guarantee it’s intended to be. Although these five were seen as being the countries in immediate danger of a possible default, the crisis has far-reaching consequences that extend beyond their borders to the world as a whole. Introduction The global economy has experienced slow growth since the U.S. financial crisis of 2008-2009, which has exposed the unsustainable fiscal policies of countries in Europe and around the globe. Greece, which spent heartily for years and failed to undertake fiscal reforms, was one of the first to feel the pinch of weaker growth. When growth slows, so do tax revenues – making high budget deficits unsustainable. Greece's economy has struggled since the country joined the euro in 2001. In 2004, it admitted its budget deficit was higher than allowed under rules of entry. By 2008 the government had narrowly passed a belt-tightening budget...
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...contained to the big banks and investment firms based mostly in New York City. By the time bailouts were implemented by the United States government, the effects of the financial crisis were exported to Europe. States similar, but not limited to Portugal, Ireland, Italy, Greece, and Spain (PIIGS) have each been in the media spotlight in recent years as attempts to rescue their respective financial markets are implemented. Unfortunately, many efforts made by Eurozone member states and other international actors have failed in alleviating the financial stresses of the region. Considering this, then, is there really a permanent solution that can not only relieve financial markets but also prevent the crises from spreading? To date, the European Unions’ collective response up to this point has been insufficient in order to curb the further slide into Europe’s second recession. I contend, then, that Europe and the Euro would greatly benefit from following many if not all of Germany’s internal budgetary constraints in order to fix the overall problem of debt and spending. One of original intentions of the euro when it was established in 1992 was to limit the amount of budget deficit a sovereign member state could have. Furthermore, the euro was designed to prevent a “bailout” should a state be unable to meet its debt obligations. Consequently, the euro indirectly served as a scare tactic for member states to “pay their bills” or face a default. However, as the credit boom of 2003 – 2007...
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...of the Euro Zone and the introduction of the Euro 2 3.0 Key Causes of the European Financial and Economic Crises 3 4.0 The Start and Progression of the European Debt Crisis 5 5.1 Greece 6 5.2 Portugal 6 5.3 Italy 7 5.4 Spain 7 5.5 Ireland 8 5.6 Iceland 9 5.0 Measures Taken (so far) to Combat the Debt Crisis (European Level) 10 6.7 European Financial Stability Facility (EFSF). 10 6.8 European Financial Stabilization Mechanism (EFSM). 10 6.9 ECB interventions. 10 6.10 Brussels Agreement. 11 6.0 Implications of the European Debt Crisis: For the European Union 12 7.0 Implications of the European Debt Crisis: For the Global Economy 13 8.0 Implications of the European Debt Crisis: For Global Politics 14 9.0 Implications of the European Debt Crisis: For Pakistan 15 10.0 Implications of the European Debt Crisis: For the Welfare State 16 11.0 Solutions for the European Debt Crisis 16 12.11 Eurobonds. 16 12.12 Restructuring of Eurozone. 18 1.0 Overview: With a nominal GDP of $16,242 Billion in 2010 (20% of global GDP), the European monetary union is not only the world’s largest economic block, but also the foremost integrated economic and political association of nations in history. The economic crisis the Euro Zone currently faces is unique in all of its aspects. While, like all...
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...means = European crisis In early 2010 economic activities of the PIGS (a group of 4 nations in Europe namely Portugal, Italy, Greece and Spain) have come under increased scrutiny from the international investment community, with the threat of “Sovereign default” lurking around the corner. Sovereign default refers to a situation when government of particular country is unable to repay its debts. This situation of default payments by governments lead to European crisis. With onslaught of the recession and subsequent introduction of various financial stimulus packages, the government expenditure like public job creation, pensions, social benefits etc ..on various countries took on gargantuan proportions to support these packages. To support these packages government was forced to borrow heavily consequently generating high fiscal deficicts.Most countries had manageable fiscal deficit, the government of PIGS nations mopped up a huge debt bill. The state of affairs in Greece which was epicenter of the sovereign default malaise is shamboic as country was known to live beyond its means. Debt Skelton of PIGS [pic] Role over risk in EURO ZONE It is one element played a role in the crisis is “roll-over risk”. Countries involved are exposed to a fiscal crisis (the “bad equilibrium”) to the extent that they are forced to rely on the market to roll-over their debt. Thus, much depends on the amount of public debt coming...
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...Executive Summary Introduction Eurozone debt crisis, which is also known as European Sovereign debt crisis is an on-going financial crisis that the countries within the Eurozone such as Ireland, Italy, Portugal, Greece and Spain varying a certain degree that faces struggles to repay or refinance their government debt without the assistance of third parties. This has caused much worries faced by the European Unions and hence to the above crisis, thus causing a great impact beyond the borders to the world as a whole. We will look into various roles undertaken by the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) in helping to solve the euro zone Debt Crisis. European Central Bank (ECB) The ECB is one of the seven institutions of the European Union which was listed in the Treaty on European Union where it administers the monetary policy of the 17 EU members’ states where euro zone is consider one of the largest currency areas in the world. Founded in 1998, the central bank is one of the most important in the world with more than 500 billion euros in its reserves. Currently, the bank is based in Frankfurt, Germany and led by Jean-Claude Trichet. The primary function of ECB is basically to implement monetary policy for Euro zone, responsible for the care of foreign reserves of the European System of Central Banks, and to promote and conduct smooth operating of the financial markets and foreign exchange functions. In addition...
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