Impact of Euro-Debt Crisis on Global Economy

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A report On Impact of Euro-debt crisis on global economy Submitted to Mr. Raad Mozib Lalon Lecturer Department of Banking & Insurance Faculty of Business Studies University of Dhaka Submitted by Khondaker Ashraf Hafiz Roll-255, Batch-16th Department of Banking Faculty of Business Studies University of Dhaka Date of Submission: 25/12/2012 Letter of Transmittal October 14, 2012 Raad Mozib Lalon Lecturer Department of Banking & Insurance University of Dhaka Subject: Submission of a report on
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    A reportOn Impact of Euro-debt crisis on global economy Submitted toMr. Raad Mozib LalonLecturer Department of Banking & InsuranceFaculty of Business StudiesUniversity of DhakaSubmitted byKhondaker Ashraf HafizRoll-255, Batch-16 th  Department of BankingFaculty of Business StudiesUniversity of Dhaka Date of Submission: 25/12/2012    Letter of Transmittal   October 14, 2012Raad Mozib LalonLecturer Department of Banking & InsuranceUniversity of Dhaka Subject: Submission of a report on ―The Global Effect of European Debt Crisis‖   Sir,I am delighted to submit the following report on the topic   “ Impact of Euro-debt crisis onglobal economy ”   as a partial requirement of the course “Financial Markets & Institutions”.   The report contains a study on European debt crisis, how it occurred, reasons behind this crisisand the global effect of the crisis. It was a great pleasure for me to do the assigned job. Thisreport has definitely given me an exceptional experience that will be of use in future.Thank you, sir, for your heartiest Guidance and co-operation.Yours sincerely-------------------------Khondaker Ashraf HafizID: 16-255B.B.A 16 th BatchDepartment of Banking & InsuranceUniversity of Dhaka    Contents Introduction: What is European debt crisis? ................................................................................................. 1 How did the crisis started? ............................................................................................................................ 1 Who is responsible for the crisis? ................................................................................................................. 2 Impact of euro-debt crisis on global economy .............................................................................................. 3 Increase in bond yield ................................................................................................................................... 4 Reduced business for other countries ............................................................................................................ 5 It may start a global recession. ...................................................................................................................... 5 World financial system may crash ................................................................................................................ 6 Rising unemployment ................................................................................................................................... 6 Financial contagion created by Euro-debt crisis ........................................................................................... 6 Impact on emerging market economies (BRIC) countries ............................................................................ 7 The Effect on the United States .................................................................................................................... 8 The negative impacts of the Eurozone crisis on Bangladesh ...................................................................... 10 Causes behind Euro-debt crisis ................................................................................................................... 13Impact on Bangladesh Garment sector ...................................................................................................... 17 Recommendations ....................................................................................................................................... 19    Executive Summery European debt crisis refers to a period of time in which multiple European countries facedeconomic distress. Five European countries  –  Greece, Portugal, Ireland, Italy, and Spain have been the main victims of Euro-debt crisis. The crisis started in 2008, with the collapse of Iceland's banking system, following the U.S. financial crisis of 2008-2009. The debt crisis led toa crisis of confidence for European businesses and economies. The Euro debt crisis impacted theglobal economy in many ways. The first impact was raise in bond yields. Because, wheninvestors see higher risk associated with investing in a country’s bonds, they require a higher  return as a compensation for that risk. Europe is a big market for other industrialized, emergingand developing countries. In difficult economic situation like this, the European consumers will be less likely to spend money on imported goods. So, there is a possibility of less business for other countries also. As the financial sector of one country is interrelated with others, thecollapse of Eurozone may also initiate the fall of other countries. As a result of this crisis, theunemployment rate in the affected European countries along with their exporter countries have been rising to very high levels. Bangladesh is also affected by this phenomenon as Europeanunion countries are the largest buyers of Bangladeshi exports. Bangladeshi Garment sector islikely to be hurt badly if this situation continues.
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