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European crisis is a global crisis!

“When Argentina and Chile underwent crisis, it was termed as Latin American crisis. When Thailand and its neighbouring countries underwent the same, it was termed as Asian crisis. But when countries like Spain, Portugal and Greece undergo crisis, it is called as global financial crisis. The Europeans have the knack of calling their own crisis as a global one,” said Dr R Vaidyanathan, Professor of Finance and Control, IIM-Bengaluru.

Addressing a Hindustan Chamber of Commerce’s Economic Lecture series, Vaidyanathan stated that European countries are terming their conflicts as a global one for the past 50 years. Huge amount of debts procured by all these countries were cited as the major reason for the meltdown. Overall debt percentage to GDP in Spain, France and Italy is over 300 per cent, while  Britain’s is approximately 500 per cent. Crisis occurs when borrowing goes beyond a point. In all these countries, people are not worried about savings, but about consumption. Household debt percentage in all these countries is in the range of 80-100 per cent. In contrast, Brazil, India and Russia have the lowest household debt percentage of 0-20 per cent.

Vaidyanathan said: “50 per cent of youngsters in Spain are jobless, mainly due to lack of skillset, followed by Greece with 48 per cent, Portugal and Italy with 30 per cent and Britain with 22.3 per cent.”

On India, Vaidyanathan said that growth of Indian GDP is majorly driven by unorganised businesses. The presence of so many unorganised businesses will probably be integrated through the launch of MUDRA Bank announced in the recent budget.

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