European Crisis and Its Impact on India

1927 Words Jun 17th, 2010 8 Pages
Living beyond our 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
…show more content…
Fitch Ratings said investors are deeply skeptical about the ability of governments to get a handle on their huge debt burdens.
``While the package of measures announced will moderate euro area governments' vulnerability to 'confidence shocks' and extreme market volatility, investor confidence will remain fragile until European governments, including the UK, are seen to be delivering on fiscal consolidation and the economic recovery is secured,''

US MARKET REACTION
US Stocks took their deepest plunge in more than a year as fears grew that Europe's debt crisis could spread around the world and undermine the U.S. economic recovery. The possibility has been brewing for weeks, but analysts said some investors are just waking up to it.
The Dow Jones industrial average fell 376 points, its biggest point drop since February 2009. All the major indexes were down well over 3 percent and are now showing losses for 2010. Interest rates fell sharply in the Treasury market as investors once again sought the safety of U.S. government debt.
The number of people applying for unemployment benefits last week rose unexpectedly and the Greek government's response to its debt crisis sparked new protests in Athens, but analysts said neither event appeared to set off Thursday's selling.
They said more insvestors seemed to be grasping the possibility that the U.S. recovery could be in jeopardy, and that many were realizing that the stock market's big rebound since March 2009
Open Document