Department of Business and Industrial Management, Surat

Presentation on “Greece, its international creditors and euro”From Economic & Political Weekly 14th Feb.

2015 issue no.7 vol. 50

Greece, its international creditors and euro

Stay in euro

Reverse austerity

Stay in power

• 25th January 2015 SYRIZA won greek election (coalition of Radical left and Anel party)

• Alexis Tsipras – Prime Minister• Yanis Varoufakis (economist)– Finance

Minister

Origins of Greece’s Problems

• “Maastricht treaty” (treaty that established the euro zone) in 1992

• Greece entered in Jan 2001• From 2001-2007 avg. GDP of Greece : 4.3%

Euro zone avg. GDP : 3.1%

USUK

GERMANYFRANCE

GREECE

• Monetary expansion in the advanced capitalist countries (US, UK, Germany, France) of the centre.• private capital started to flow from the centre to the periphery which includes Greece

Good GDP Easy Credit

private consumption and

government spending

Trouble

Non productive spending

Athens Olympics in

2004

Militaryspending

Global Financial Crisis in June 2007

private capital flow surge reversed

• Beginning until 2009 the Greek governments had been masking their sovereign debt and budget deficit through “creative” accounting and off balance sheet transactions as well as complex currency and credit derivatives.

• Papandreou government which was elected in October 2009 stopped this and released the true numbers.

• Greece has been in depression since 2009• GDP down about 25%• Youth unemployment is above 50%• Public debt to GDP ratio 175%

Bailed out Leave the euro zone

Hyper inflation

Bank failures

Savings devalued

austerity

troika

IMF

ECBEC

• EC : European commission (executive body of European union)

• ECB : the European Central Bank• IMF : international monetary

fund • Euro group : conference of FM

of 19 member state (euro zone) for discussion of matter related to EURO

Euro Group

European financial stability

Facility (EFSF)

European Stability Mechanism (ESM)

• EFSF : It’s a private company established in 2010, a special purpose vehicle created as a temporary crisis resolution mechanism.

• ESM : Permanent rescue mechanism with same mission established in 2012.

• Unlike GFL ,EFSF & ESM funds its operations by issuing money market as well as medium & long term debt.

Macroeconomic Adjustment Programmes : Bailed outs package of 2010

Greek Loan facility (GFL)

from may 2010 to June

2013

IMF€ 30 Billion

Euro group

€ 77.3

Billion

Bailed out package of march 2012

MAP

€164.5 Billion from 2012 to

end 2014

IMF€19.8 Billion

Euro group

€144.7

Billion

• MAPs were imposed & overseen by troika which consists of – Fiscal reforms to generate “Savings” (austerity)– Structural reforms to “enhance competitiveness &

growth”– Financial reforms to “enhance financial stability”

Here European Central Bank (ECB) does not provide financial assistance in bailed out but it only provides technical expertise

Beneficiaries of Bailed outs

1. Greece’s Private Lenders2. German & French banks

• Here Varoufakis appears right when he claimed that “it was the banks that got bailed out, not Greece & that Greece got deformed, not reformed ”

Main objectives of SYRIZA government

1. Write off 50% of sovereign debts2. Reverse austerity3. Reverse structural reforms4. Remain euro zone members

• since then PM and FM are working on it

But still the question remains!

Stay in euro

Reverse austerity

Stay in power