Crash euro crises and welfare futures
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Crash, Euro crises and welfare futures. Outline: from 2008 to 2012. Why the crash in 2007-8? On mortgages, banks and public expenditure How the disease spreads Banks and states: the PIIGS Italy and Greece Spain, Ireland (and Portugal) States and bond markets The mess we are in.

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Crash, Euro crises and welfare futures

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Crash euro crises and welfare futures

Crash, Euro crises and welfare futures


Outline from 2008 to 2012

Outline: from 2008 to 2012

  • Why the crash in 2007-8?

    • On mortgages, banks and public expenditure

  • How the disease spreads

    • Banks and states: the PIIGS

      • Italy and Greece

      • Spain, Ireland (and Portugal)

    • States and bond markets

  • The mess we are in


T he crash in 2008

The crash in 2008

  • 1990s – 2000s: growth of derivatives markets

    • Bonus-based promotions of mortgage loans & debt

  • US / UK property bubble bursts:

    • Mortgage defaults

    • Property prices collapse / negative equity

    • Bank balances inadequate (run on banks)

    • Governments step in to forestall bank collapse

  • Private debt becomes public debt.

  • Economies contract: unemployment rises (CEE)


The problem in spain ireland

The problem in Spain (Ireland)

  • Massive expansion of (& investment in) property 1990s and 2000s. Post-crash:

    • Abandoned development projects

    • Domestic banks undermined

  • Rising unemployment hits state revenues

    • Result: massive public sector deficits

    • Result: mass youth unemployment


The problem in greece italy

The problem in Greece (Italy)

  • Heritage of extensive government borrowing

    • Small Eurozone economy slips sub EconFin radar

  • Public expenditure used to sew together coalition parties (insider privileges & public pensions)

  • Problems with taxation: lost revenue, constant borrowing to shore up deficits.

    • Greek problems affect Cyprus


The issue of the euro

The issue of the Euro

  • How to cure debt:

    • Devalue currency (impossible under Euro)

    • Raise interest rate (same + higher unemployment)

    • Renegotiate repayments (the IMF & ECB solution + ‘firewall’ of ECB guarantees)

  • The risk of default: the message of the bond markets


The markets react 2010

The markets react: 2010


Moody s s p ratings for eurozone

Moody’s + S & P ratings for Eurozone


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