Greek Debt Crisis Finall
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Transcript of Greek Debt Crisis Finall
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The Greek Debt CrisisA brief Summary
By: Amal Mohy & ShaimaaSuleiman
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What Went Wrong in Greece?
Spending BudgetDefcitCorruptio
nMassive
DebtTax
EvasionLow
IncomeBorrowin
g
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A Sen!ing Sree Greece lived beyond its means.After joining the eurozone,
public spending soared.
Public sector wages increasedto 50 between !"""#$00%.
Greece also went on a big debtincluding paying for high#
pro&le projects such as the$00' Athens (lympics, whichwent well over its budget.
After years of overspending
coupled with mass ta) evasionand a low income, Greece*spublic de&cit spiralled out ofcontrol.
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"oans & "ies
+o tacle this large budgetde&cit, the government hadto borrow more.
-eportedly, the Greegovernment withheldinformation about debt levelswhile forging reports and
statistics about the country*seconomic performance.
owever, when the global
&nancial downturn hit theworld, Greece*s hiddenborrowings came to light/the country was ill#prepared
to cope
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Massi#e Debt
$Greece%s Total !ebt reache!'()bn in *(+(,- .BBC
1ebt levels reached
the point where thecountry was nolonger able to repayits loans, and was
forced to as forhelp from its2uropean partnersand the 34 in theform of massiveloans.
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/el 0s Aroun! The Corner
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T1o Bailout 2ackagesAn! A Write.o3
4#erything /as A2rice!
3n 4ay $0!0, the 26 and 34,over fears of a Gree debtdefault and a spiral of the crisis,provided !!0bn 2uros of bailoutloans to Greece to help thegovernment pay its creditors.
3n ebruary $0!$, a second,!70bn#euro bailout was agreedupon.
+he vast majority of Greece8s
private#sector creditors agreedto write o9 about three#:uartersof the debts owed to them by
Athens. +hey also agreed toreplace e)isting loans with newloans at a lower rate of interest.
3n return for all this
help, the 26 and 34insisted that Greeceembar on a majorausterity driveinvolving;
1rastic spending cuts. +a) rises.
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2olitical 0nstability
Greece*s &nancial troubles andthe resulting austeritymeasures generated waves ofriots and protests.
George Papandreou :uit in$0!! and was succeeded by
amarasand the ?ew 1emocracy wonthat elections.
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/anging 0n The Balance Antonis >amaras insisted
Greece did not need afurther bailout but wanteda two#year @breathingspace@ to meet the toughbudget targets attached tothe bailout from the 26and 34.
4eanwhile, the parliamenthas passed a tough budgetfor $0!7 involving ".'bneuros of spending cuts.
Accordingly, Greece hasbeen granted the e)tratime, but major problemsremain and the &nancialmarets are still nervous.
3f Greece8s economycontinues to contract
sharply, the country maynot be able to cut itsoverspending as much asplanned, and mayultimately be unable to
repay its debts, meaning itwill need further help. 3fthe rest of 2urope is nolonger willing to provide it,then Greece may be forcedto leave the euro.
What Coul! GoWrong?
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The Domino 43ect
3f Greece falls, it won*t bealone this time. >pain, 3taly,and Portugal will follow suit.
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such a thing, and wouldput the 2B, which hasaccepted a lot of Greebonds as collateral for its
lending, in a tight spot.+he 34 on +uesday alsoe)pressed concernC its topo9icial in Athens, Bob+raa, said 2uropeanauthorities had to be
cautious about any ind ofdebt restructuring.
@+here is no such thing asbeing a little bitpregnant,@ said 4r. +raa.@(nce you unleash arestructuring scenario,this is not very helpful.D
!"# #$%& '( )!*+$ ,-./ )01234+5 66789:; $98;< )!=*66&
%> $!? '"@+$ '**5AA$ (F-+
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Z'"%+$ 1-=*O l#(0
1_ 4O *+ Y< $9/ %*3+$ 9"q
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1epending on how the e)changewas structured, it would lielycause at least some write#downsfor 2uropean bans. Germanbans were holding about E$$.%billion of Gree government debtas of 1ec. 7!, the most recentdata available, according to data
from the Ban for 3nternational>ettlements, while their renchcounterparts were sitting onnearly E!5 billion. F+he &guresare adjusted to account forcertain hedges the bans have.
/ H J+$ 1 W"9h+$ H +0 9 4+5A)< '*2 J" ' "%+$ #2/ 1 -=*O 5k>< H-( 93/ %> 1-=*+$ l#(0)!"%+$ 1*W+ *./ ' ( 9 "%W/N-/ 0 1*5AA$ !42+$ k2> ';
^ %W/ 1[ 1 *+$ !42+$yy1*;!=:+$ )!"%+$ ' ; zA# *-;{%[< |3:5 N66+A G166*!*+$N45 '66( X%66] H66J+$ X*266+$
H 1*+A%+$ X"!3J+$}~G923"#1[ 1*39+$ J"9 N-/ 4*5
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Source: $4uroe Wrestles With Solutions for Greek DebtCrisis-5 The Wall Street 6ournal,
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