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The Eurozone Debt crisis

I may not be a treasury specialist, but with the routine strategic planning on the swaps, forwards, derivatives, you kind of understand the factors that drive a movement in the currency. These may also be termed as the attributes that bring about the volatility in the currencies.

Over the last couple of years, euro zone debt crisis has been a much talked about thing and probably it has brought a global change... Let's get into some features of this crisis:

1. What do these crisis spell?

- the crisis have created the problem of debt burden to majority of the countries in the europe

- rising levels of private and government debt

- increasing yields over 6% that spell the concern of poor creditworthiness

-economic and trade imbalances

2. How did the crisis get evolved in some of the countries?

Broadly the crisis resulted from a blend of different economic factors, the globalization of finance, the easy credit conditions during the last decade, the international trade imbalances, real estate crisis and many more.

Some of the countries got into the mess for their own problems like:

1. Greece- increased commitment of government to public workers

2. Ireland- the banks in ireland lent money to service the property developers and stuck into bubble

3.Portugal- As a result of government's overspending and an over bureaucratic civil structure

4. Spain- increased government spending and no accumulation for debt

5. Cyprus- bond yields over 12%, poor credibility

6. Belgium- public debt over 100% of gdp

7. France- public debt is 83% of gdp, 2.1 usd trillion

8. UK- Highest gross foreign debt and leverage

no wonder the global markets have got connected and it all works like a single basket,all countries have got affected due to this crisis, and India is amongst one

How does India connects to Europe?

India's over the last couple of years is facing hard time due to these crisis, the depreciation of currency, poor credit rating and lack of fii interest are the major issues.

The Indian reliance on europe can be tracked on the following facts:

1. India is the 8th major importer to EU with total imports of euro - 39.3 billion. EU is the largest partner to India

2.Total exports from EU to India - 40.4 billion euros

3. India's reliance is high on europe for capital goods

4.The key industries in trade are - Agriculture, fuels and mining, chemicals, machinery, textile and others

5. The services trade goes to 10.7 billion euro of exports against 8.6 billion euro of imports (eu with India)

6. Fdi inflow to India from EU in 2010- 4.7 billion euro

With such the statistics, any poor response or failure in europe does effect the india scenario

Just an insight, ankit
Sent from my BlackBerry® on the go
Apologies for typos


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