Final Greece Crises - Copy

8/3/2019 Final Greece Crises - Copy

1/18

Greece Crises

PriyadarshaniSonawane

Javed Khan


2/18

Table of Content

Introduction

Why happened

What happened

Impact on India

Impact on World

Bail out plans

Situation solved or not.


3/18

Introduction

Economy GDP (2010 forecast):236 billion

(about $315 billion).

Per capita GDP (2009 estimated):$30,035.

Growth rate (2010 forecast): -4.00%.

Inflation rate (2010 forecast): 4.6%. Unemployment rate (annual average,

2010 forecast): 11.8%.


4/18

Agriculture (5.4% of GDP)

Manufacturing (21.3% of GDP)

Services (73.3% of GDP)

Trade: Exports(2009 estimated)--$21.37 billion

Romania. Imports(2009 estimated)--$64.27 billion


5/18

Why Happened

Greece adopted the euro () as itscurrency in January 2002

Budget deficit was likely to be 12.7%

of GDP (3 times more than estimatedfigure)

Financial crises, governmentsuncontrollable spending

Its GDP growth rate shrunk by 2.5%in 2009 due to falling tax revenuesand consumer spending.


6/18

BOOM

The boom years were 1999-2001 and 2005-07; the bust years were 2002-04 and 2008-

09.One observes a number of remarkablepatterns.

First, private debt increases much more thanpublic debt throughout the whole period

Second, during boom years private debtin r l rl


7/18


8/18

BUST

First, as the economy is driven into arecession, government revenues declineand social spending increases.

Second as part of the private debt isimplicitly guaranteed by the government(bank debt in particular) the government isforced to issue its own debt to rescueprivate institutions.


9/18

What Happened

On 27 April 2010, the Greek debtrating was decreased to BB+ (a 'junk'status) by Standard & Poor

The yield of the Greek two-year bondreached 15.3% in the secondary

market


10/18

Between 2001-2008, Greece reported budgetdeficits averaged 5% per

year, compared to Eurozone average of 2%.

Also, its current account deficits averaged to9% per year compared to Eurozone averageof 1%

Greece funded these twin deficits byborrowing in international capital

markets, leaving it with chronically high


11/18

Unemployment:

9.4% in 2009 (from 7.7% in 2008)

11.8% in 2010

14.6% in 2011


12/18

Impact on India

Greek imports from India includecotton, synthetic fibres, fabrics,vehicles, iron, steel and fruit.

while Greek exports to India includefibres, fertilizers, organic chemicals,pharmaceutical products, leather

goods, metal processing machinery,etc.


13/18

Only 0.05% of India's exports go toGreece and Indian banks havevirtually no direct exposure to Greece.

There will be some additional capitalflows coming in in search of a safehaven and a small drop in exports

Euro which was quoting at around

Rs.67 before crisis is way below atRs.55.92 currently.


14/18

Impact on World

PIIGS: Greece has spread the risk toother weak and indebted Euro-areaeconomies.

Bigger impact on South East Europe

Impact on US


15/18

Bail Out Plans

Austerity packages Euro zone leaders and the IMF agree to

provide financial safety net.

April-euro zone finance ministers approve 30 billion

May 2-The aid package amounts to 110

billion over three years. May 10-the rescue loans, with 5.5 billion

being provided immediately.
http://www.reuters.com/subjects/euro-zonehttp://www.reuters.com/subjects/euro-zone


16/18

Global policymakers install emergency

financial safety net worth about $1 trillion to bolster financial

markets and prevent

Greek crisis from destroying the euro440 billion guarantees from euro zone

states (Germany:123 billion)

60 billion European debt instrument250 billion from IMF


17/18

Situation solved or not

Greek debt markets have reactedfavourably since the second bailoutpackage was announced.

Indeed, our analysis suggests that itwould not be credible to consider theGreek debt crisis

solved just yet


18/18

Thank you

Documents

Final Greece Crises - Copy