Transcript PPT1

THE DEBT CRISIS AND
ITS IMPLICATIONS
Dai Bingran
Centre for European Studies
Fudan University
I. What is Debt Crisis ?
1. Debt is a very common
phenomenon in our daily
economic life, and happens
at all levels.
Debt management may
be the heart and art of
management.
• 2. A common way of debt
settlement is to borrow new
debt to clear old debt—
hence the question of credit.
•
It becomes a crisis only
when the debt is no longer
manageable.
• 3. The current debt crisis
refers to that happens in a
number of Euro Zone
countries, where the public
debts are much too higher
than allowed, and seem to
be out of control:
country
Budget deficit (as % of GDP)
2007
2008
2009
2010
Greece
6.5
9.8
15.8
10.6
Portugal
3.1
3.6
10.1
Ireland
+0.1
7.3
Span
+1.9
Italy
Euro Zone
Public debt (as % of GDP)
2007
2008
2009
2010
107.4
113.0
129.3 144.9
9.8
68.3
71.6
83.0
93.3
14.2
31.3
24.9
44.3
65.2
94.9
4.5
11.2
9.3
36.2
40.1
53.8
61.0
1.6
2.7
5.4
4.6
103.1
105.8
0.7
2.1
6.4
6.2
66.3
70.1
115.5 118.4
79.8
85.4
II. Why This Crisis
• 1. High government
spending, especially in
social welfare, and weak
real economy—the
vulnerable links in the
Euro chain.
• 2. Public finance further
weakened by the financial
crisis and economic
recession.
• 3. Strong international
speculation—the result
of the abuse of Dollar
supremacy
• 4. Reluctance and
hesitance of reactions in
the Euro zone, as shown by
the several European
Council meetings
III. Nature of the Crisis
• 1. It is not merely a
question of money: Euro
Zone is not short of money,
and internationally the
problem is rather there is
too much money.
• II. It is a crisis not just of
the PIGS countries, but
rather of the whole Euro
Zone and the EU—Euro is a
shared enterprise and a
common destiny.
IV. The Way out
• 1. To rebuild the market
confidence by showing
the Euro Zone muscles,
and by enlisting
international assistance.
• 2. To mend the Euro (EMU)
mechanisms:
• --reestablishing the fiscal
control;
• --monitoring financial
market movements;
• --strengthening ECB’s roles
• 3. To adjust the economic
structure and reform the
social welfare models and
policies.
V. Implications
• 1. The crisis is not over yet,
and it entails the retard of
economic recovery and all
its social and political
impacts.
Economic Forecast (2010-13)
EU (27)
2010
2011
GDP growth
2.0
1.6
Consumption
1.0
Investment
Employment
2012
Euro Zone (12)
2013
2010
2011
2012
2013
0.6
1.5
1.9
1.5
0.5
1.3
0.4
0.4
1.1
0.9
0.5
0.4
1.0
-0.3
1.9
0.8
3.0
-0.5
2.0
0.5
2.9
-0.6
0.4
0.1
0.4
-0.5
0.3
0.0
0.3
Unemployment
rate
9.7
9.7
9.8
9.6
10.1
10.0
10.1
10.0
Inflation
2.1
3.0
2.0
1.8
1.6
2.6
1.7
1.6
Budget deficit
(as % of GDP)
6.6
4.7
3.9
3.2
6.2
4.1
3.4
3.0
Public debt
(as % of GDP)
80.3
82.5
84.9
84.9
85.6
88.0
90.4
90.9
• 2. The crisis might not
necessarily be bad, if it
pushes for reforms in the
Euro Zone and in the EU.
• 3. It might be of interest to
see the subtle by-effects
the crisis is likely to bring,
say, to the relations among
the member states and
among the EU institutions.
• It might also bring with it
some international
implications.