Travis Selmier and Brenda Bailey-Hughes discuss the causes and effects of financial crises in European Union countries. Selmier is Visiting Clinical Assistant Professor and Bailey-Hughes is Senior Lecturer of Business Communication, both at the Indiana University Kelley School of Business. Selmier begins by defining some terms relevant to the financial crisis: haircut, periphery countries, and sovereign debt. Selmier illustrates these terms by describing the financial crisis in Greece, which joined the EU with high sovereign debt and was able to access new funds for development. However, Greece never reformed its markets to support such high debt levels and its economy was unable to support the lifestyle of Greek citizens; for example, their generous retirement plans. Selmier next discusses the so-called "P.I.G.S." countries: Portugal, Ireland, Italy, Iceland, and Greece. He describes how financial problems in each country contributed to a greater crisis. He also discusses the worst case scenario of a buying strike on a large country like Spain, which could bankrupt European banks. Last, Selmier talks about the potential ripple effects of a European Union financial crisis on Indiana businesses, including low demand for Indiana products, reduced American competitiveness due to the euro's decline against the dollar, and the general economic shock of a crisis. *This video was recorded as a part of the Indiana University CIBER Focus Vodcast series.
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