International Finance: Greek Financial Crisis

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The Greek Financial Crisis has become a major issue in Greece and in Europe. This slideshow will discuss you with the background, effects, reasons, and future outloo k

Transcript of International Finance: Greek Financial Crisis

  • The Greek Financial Crisis:
  • The Greek Financial Crisis: The Past The Facts of the Past: Joined the EU in 1991 Old Currency: The Dharma Population: 11.2 mil Major Industries: Tourism & Shipping Reasons of Joining EU Access to a competitive market Solidarity (Euro connection) Stability Efficiency
  • The Greek Financial Crisis: http://www.youtube.com/watch?v=7inY3k8y4d0
  • The Greek Financial Crisis: The Past Initial Success in Euro Switch Increase wages, Early retirement, High pensions, Low interest rates, Foreign investment Maastricht Treaty Obligations: Debt Limit Max. 60% GDP (113% in 2009) Annual Deficit Max. 3% GDP (14% in 2009) Reveals 300 bil. debt. Highest in modern history (2009)
  • The Greek Financial Crisis: The Past
  • The Greek Financial Crisis: The Past Major Crisis Factors: Mismanagement of Funds Inefficient Public Structure Trade Imbalances Govt. & Upper Class Corruption Tax Evasion (25-30 bil. Euros)
  • The Greek Financial Crisis: The Present 2010; Greek Govt Bonds become Junk, Can not privately finance on 2 May, the Eurozone countries and the International Monetary Fund (IMF) presented a 110 billion bailout loan for Greece. It was based around 3 key points: 1. 2. 3. Implementation of austerity measures. Privatization of government assets worth 50bn by the end of 2015 Structural reforms, to enhance competitiveness. What is Austerity? Austerity is a government method of covenants with the goal of re-stabilzing its debt deficit. Examples: Lowered Spending Increased Tax
  • The Greek Financial Crisis: The Present Results of 2010 bail out Record increase in unemployment Abolishment of the trust between the Greek people and the Govt. Greek economic conditions worsened 2011-2012; Bail Out #2 Further implementation of Austerity conditions All holders of Greek govt bonds had to agree to incur a 53% loss (extremely unpopular) 130 billion Troika (EU, ECB, IMF) monitor all loans to Greece Greece to resume using the private capital markets for debt refinance and as a source to partly cover its future financial needs 2013; Speculation of a 3rd Bailout Rumored that Greece still needs 50 billion from 2015-2020
  • The Greek Financial Crisis: The Present Fun Facts Rumors of hypocrisy, national self interest conspiring of EU nations trying to take advantage of Greece Huge protests from Greek people who feel they are being cheated by lenders and are at war with them. Greece has lost 40% of its disposable income since crisis began Greek stock market has dropped 85% in less than 4 years
  • The Greek Financial Crisis: The Present Greek currently 160% of GDP, 120% by 2020 (goal) Unemployment sitting near 30% Wages last two years have fallen 12% More than 1.1m jobs lost in the private sector in the past four years Market rigidities in Greece, including state monopolies, price-fixing by local producers and restricted shopping hours, keep prices of goods higher than elsewhere in the eurozone.
  • The Greek Financial Crisis: The Future What would happen if Greece left the Eurozone? Greece would have the ability to print currency Could cause other countries to follow Greece out of the Eurozone Greeces absence would cause a decrease in value in the Euro Would face minimal austerity measures
  • The Greek Financial Crisis: The Future If Greece stays in the Eurozone and accepts additional bailouts Greek bank would continue to take losses and continue to take on more debt Austerity measures could be unproductive because of high unemployment rates Private sector will continue to struggle
  • The Greek Financial Crisis: The Future
  • The Greek Financial Crisis: The Future What needs to be done? Tax structure reform (Lagarde List) Business regulatory reform Less regulation to encourage competition Continue to make efforts to increase tourism Restore faith in the government
  • Questions Do you believe Greece should leave the Euro zone or stay within it? What do you believe Greece should do to rebuild their economy and to restore faith in the government? Will they make a full recovery?