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GREECE CRISIS

GROUP MEMBERS:ANKUSH BATRA


NISHANT GROVER
TANIYA MONDAL
VIRIK SHAH
SARFRAZ SHAIKH

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AGENDA
Introduction
Financial

crisis of 2007-2008

Greek-government

debt crisis

Causes

for Greece debt crisis

Impact

of Greece crisis

Measures
Current

taken

status

HOW DID GREECE CRISIS START?

Country profi le

Population: 11 Million

GDP per capita (EUR): 16,028

Prime Minister : Alexis Tsipras

Ruling party: Syriza

Government type: Democratic

Founding member of UN

10th to join EU

Member of NATO, OECD,OIF, OSCE and the WTO

one of the world's largest shipping powers, middle powers and


top tourist destinations

ENTRY IN EU
Formed

in 1958

Six

countries- Belgium, France, Italy, Luxembourg,


Netherlands, West Germany

Objective-

remove regional disparity, improve economy


and inflate trading

Greece

joined in 1981

ENTRY IN EUROPEAN
ECONOMY AND MONETARY
UNION
Greece entered in EMU in 2001

Switched Dratchma and adopted Euro Currency.

Single market through a standardized system of laws which


would apply in all states.

Financial crisis of 2007-2008

Worst financial crisis since the Great Depression

Threat of total collapse of large institutions

Bailout of banks by national government

Downturns in stock market around the world

Housing market also suffered resulting in evictions, foreclosures and


prolonged unemployment

GREECE DEBT CRISIS

Facing Sovereign Debt Crisis

Accumulated high levels of debt before the financial crisis when the market was
highly liquid

Later crisis deepened and there was a liquidity crunch in the market

Due to this, Greece is unable to roll over its maturing obligations

Several Eurozone member countries have high unsustainable levels of public debt

With largest public debt and one of the largest budget deficits in Eurozone,
Greece is at the centre of the crisis.

Fraud revealed

In 2004, Eurostat revealed that Greece understated the budgetary statistics

Eurostat used ESA95 methodology


COUNTRY

INFLATION RATE

ANNUAL
GOVERNMENT DEFICIT
TO GDP

LONG TERM INTEREST


RATE

REFERENCE VALUE

Max. 1%

Max. 3%

Max. 6%

GREECE

2.5

3.4

6.4

REASONS OF INTERNAL
GREECE CRISIS

Democratic government, socialist population

Welfare schemes

Hiring of more Government jobs

Increase in government employee salary

Evasion of tax

High taxes which led to high tax evasion

Losing 30 billion Euros per year

36.6% of the gross government revenue

REASONS (CONTD.)

Government spending focused on government expenditure

Greek government expenditure approximately 104 billion Euros which is equal to


49% of their GDP (at that time)

Large spending on interest payment

20% of the government revenues diverted into long term investment expenditure

Fraudulent Government and Fiscal Indiscipline

Accumulated debts

Secretly borrowing from private and foreign investors to hide deficits

Because of government borrowing supply for the private sector decreased

2004 OLYMPICS

The 2004 Summer Olympics in Athens has drawn particular


attention

It cost nearly $11 billion

Tab for security alone was more than $1.2 billion

Athens was questioned on $15 billion expense by the Greece


Government

After Olympics, stadiums are vacant and not in use

Debt and budget defi cit

RATING DECLINE

On 27th April 2010, rating by Standard & Poors was


decreased to BB+

Standard & Poors estimate that in the event of default


investors would fail to get 30-50% of their money back

IMPACT OF GREECE CRISIS

IMPACT OF CRISIS

Industrial production dropped

Mining saw a decline

Manufacturing decreased by 11.3%

Electricity production dropped by 12.2%

Bank stocks were affected worst

Decline in bank stock prices by 47%

Unemployment increased

65000 retail stores were closed

Reduction of confidence in other European countries

Trade between India and Greece hit

MEASURES TAKEN

MEASURES (CONTD.)

1 s t round of crisis response


(Feb 2010)

BAILOUT CONTRIBUTION (EURO 110 BILLION)

IMF Euro 30 billion

Eurozone creditors 80 billion

ECB purchased Euro 45 billion bonds from Greece Government

AUSTERITY MEASURES

Freeze in salaries of government employees

10% cut in bonuses and overtime work

8% cut in public sector allowances

2 n d round of crisis response


(july 2011)

BAILOUT CONTRIBUTION (EURO 109 BILLION)

EFSF (European Financial Stability Facility Euro 109 billion

ECB liquidity support for Greek banks Euro 98 billion

REVISED AUSTERITY MEASURES

Increase in VAT 10%

Return of special tax on high pensions

Average retirement age increased from 61 to 65 years

3 r d round of crisis response


(FEB 2012)

BAILOUT CONTRIBUTION (EURO 130 BILLION)

Greek parliament approves a new package-Euro 130 billion

AUSTERITY MEASURES

Further cut in salaries by 8%

10% rise in luxury taxes and taxes on alcohol, cigarettes and fuel

Pension instalments abolished

MEASURES (CONTD.)

CURRENT STATUS

Debt repayment

CURRENT AFFAIRS

Missed IMF repayment of Euro 1.6 billion on 30th June 2015

All banks closed from last few weeks and restrictions on ATM for
only Euro 60 per day

PM Alexis Tsipras announced the referendum bailout with


austerity or not

61% voted NO to austerity