Greek Crisis

In: Business and Management

Submitted By aamirmalkani
Words 1048
Pages 5
Gee Case Memo 3:
The Greek default is not a current issue, as it has been in the making

In the wake of events that followed the Global Financial Crisis, the EU was facing its toughest time since its inception, and a major catalyst to these problems was Greece. There were major speculations about a possible default on behalf of Greece, which would create a domino effect and take down a number EU members along with it and the EU could in no way let that happen. But Greece’s problems were not current. A series of events that had been occurring ever since the 1980’s eventually lead to the position Greece is in today and major bailout plan was needed, immediately.

Economic events that lead to Greece’s current state:
Beginning in the 1980’s, the situation of Greece had already started deteriorating, economically. Many of these occurring’s are what can be attributed to, as being one of the few primary reasons for the current state of Greece.

* With the trade balance increasing from -6.7% between the years 1975-79 to -7.9% in 1985-89 and finally touching -10% in 1990-94 and then averaging to -9.5% from 2001 through 2009, things had already started looking bleak for Greece. (Exhibit 4) * In addition to that, the Real GDP growth reduced from 8.5% in 1960-69 to -0.2% in 1980-84 and then averaging to a 2.45 % up till 2009, never to touch its golden ear of the 1960’s * Between the 1980’s and 1990’s the public debt as a percent of GDP almost tripled from a 28% to a whopping 89% * With the advent of the Global financial crisis, only to make matters worse, Greece’s two majorly lucrative industries, shipping and tourism were hit pretty bad which took unemployment levels to almost 20% in 2008

The Government and the people:
To a very large extent, Greece’s current state can be traced back to its own people’s doings. Right from the government to…...

Similar Documents

The Nigerian and Greek Debt Crisis

...The debt crisis of Nigeria and Greece Introduction National debt is a problem that can inflict any country including the developed countries. Almost all countries go into budget deficit one way or the other and end up borrowing money. The most direct effect of the government debt is to place a burden on future generations of taxpayers. When these debts and accumulated interest come due, future taxpayers will face a difficult choice. Inheriting such a large debt cannot help but lower the living standard of future generations. In the 1960s and 1970 some developing countries were encouraged to borrow money to service old debts and also to finance development projects in their country like infrastructure. This has been necessitated by the availability of huge oil earnings deposited by OPEC member countries and were eager to lend at very low rates. Moreover, it is misleading to view the effects of government debt in isolation. Government debt can be divided into two categories namely domestic debt and international debt. The International debt is facilitated by the formation of such institutions like the International Monetary Funds (IMF) the International Bank for Construction and Development (World Bank). Governments borrow money from the private sector and foreign governments if they can't pay for all their spending with taxes and government revenues. A government will issue bonds at bond auctions every so often and market participants will come in and bid for them. Market......

Words: 5178 - Pages: 21

Greek Crisis

...MACROECONOMICS Greek debt crisis: causes Instructor: Mou Hui Student: Galina Bogdanova JX1208903   Contents Introduction 3 Timeline of the Greek Debt Crisis 4 Causes 8 Internal 8 1. GDP growth rates 8 2. Unrestrained spending 11 3. Greek public debt 12 4. Statistical credibility 14 External Causes of the Greek Crisis 14 Influence on the evaluation of the crisis 15 Impact of the crisis on the country's macroeconomic indicators 18 Conclusion 22 References 24 Introduction International crisis 2008 has not only exacerbated the Greek economic situation, but has also intensely brought forward the economy’s deeply rooted and chronic weaknesses. The main argument of the paper is that the main cause of the Greek economic crisis is not the recent global economic instability, neither the outcome of political management practices of the latest Center Right government (2004-2009). Rather, the situation in Greece is the obvious outcome of a series of incorrect government choices and omissions during the last three decades and not a recent phenomenon at all. Greek economy fulfills the main criteria of a “weak economy”. Economic and fiscal measures undertaken by the Socialist government under the guidance of the IMF will fail to succeed unless they are followed by clear, transparent development initiatives, which is not the case until now. The purpose of this paper is to approve that the current Greek crisis is the consequence of inappropriate......

Words: 7675 - Pages: 31

Greek Crisis

...current account deficits. The reliance on financing from international capital markets left Greece highly vulnerable to shifts in investor confidence. Investors became nervous in October 2009, when the newly elected Greek government revised the estimate of the government budget deficit for 2009 from 6.7% of Gross Domestic Product to 12.7% of GDP. In April 2010, Eurostat, the European Union statistical agency, estimated Greece’s deficit to be even higher, at 13.6% of GDP. Investors have become increasingly nervous about Greece’s ability to repay its increasing debt obligations, estimated at €54 billion for 2010. On April 23, 2010, the Greek government requested financial assistance from other European countries and the International Monetary Fund (IMF) to help cover its increasing debt obligations. The debt crisis has both domestic and international causes. Domestically, analysts point to high government spending, weak revenue collection, and structural stubbornness in Greece’s economy. Internationally, observers argue that Greece’s access to capital at low interest rates after adopting the euro and weak enforcement of EU rules concerning debt and deficit ceilings facilitated Greece’s ability to accumulate high levels of external debt. During the crisis, the Greek government has sold bonds in order to raise needed funds. Greece’s government has also unveiled, amidst domestic protests, austerity measures aimed at reducing the government deficit below 3% of GDP by 2012.......

Words: 299 - Pages: 2


...kategóriánként még csak 4 és 18 százalék között változott. 19 Az áfa, mint minden adó, az adóelkerülés terepe, s emelése, mint minden adóé, egyben növeli az adócsalás mértékét is. Az adócsalás mértéke azonban sokkal inkább változik országonként, mint adónemenként (ahol általában kisebb az adócsalás, ott minden adónemben kisebb.) Görögországban az adóelkerülés az átlagosnál kiterjedtebb, az áfa esetében a 90-es évek közepén a spanyol, portugál, olasz és belga értékekhez állt közel (Keen–Smith (2007): p. 19.), 2009-ben pedig a be nem fizetett adók a becslések szerint akár a költségvetési deficit 31 százalékát is elérhették. Artavanis et al. (2012): p. 4. 20 TaxExperts. Greek Tax Guide. 18 17 122 Artner Annamária ösztönzése végett ugyanakkor az osztalékokat 2011-ben 21, 2012-től pedig 25 százalékkal adóztatják meg.21 A 2012 februárjában hozott újabb munkaerő-piaci lépések az egységnyi munkaerőköltség további csökkentését szolgálják:  a 2012. januári szinthez képest márciustól a minimálbért további 22 százalékkal csökkentették (586 euróra),22 a fiatalok minimálbérét ezen felül további tíz százalékponttal (tehát összesen 32 százalékkal).  100 euróval, havi 359 euróra csökkentették a munkanélküliségi segélyt.  A befagyasztották a béremeléseket, amíg a munkanélküliség tíz százalék alá nem esik.  A kollektív szerződések hosszát és hatókörét......

Words: 5654 - Pages: 23

Greek Financial Crisis

...Greek Financial Crisis 1. Page 501 answer question 1 in the "hit or miss section." Be specific in your answers and give at least two examples. Participating in the global economy has benefits, but it also comes with perils in that economic catastrophes on the other side of the world can have real impacts at home. The European debt crisis and recession affect American exports and the stock market. There are consequences for global trade and possibly for the American Financial system as well. Exports are an important source of the American recovery so if Europe tanks, there will be fewer exports to Europe and that will hurt American manufacturing. Not only does the European debt crisis directly affect American exports it impacts other areas of the global economy which further drags on growth rate here at home. The recent slowdown in China has been attributed to the weakness in Europe. Europe being in a prolonged recession has caused the global economy to slow down. And that has an indirect effect in the United States in terms to the unemployment problems. If worldwide demand were higher, there would be more jobs created for American workers. Europe is not an insignificant part of global demand, Germany’s economy is the fourth largest in the world, followed closely by France, but collectively the economies of all 17- Euro area countries are nearly equal to that of the United States, at about 13 trillion dollars versus 15 trillion of the U.S. 2. Page 501......

Words: 962 - Pages: 4

The Problems and Consequences of Greek Financial Crisis

...1. In Greece the banks didn’t sink the country. The country sank the banks. Discuss this view. Which are the main differences between the Greek crisis and the crisis of Ireland and Portugal? The main cause of the Greek crisis is the ongoing disclosure of statistics that were well hidden from the eyes of the public, leaving people in ignorance about their own country and the future. When the figures started to become revealed, breaking up the shocking news about the forgery that lasted for over 30 years, it left the world in wonder – how is it possible to disclose such a thing for so long, and how is it possible that such action remains unpunished? The problems caused by the global recession were compounded by revelations that national statistics had been altered in order to cover the fact that Greece, in terms of debt levels, exceeded limits set down by the EU. The country's debt is already well over 100 percent of GDP and is still rising. According to euro zone rules, total government debt should not exceed 60 percent of GDP. The country's budget deficit in 2009 was almost 13 percent of GDP, more than four times the 3 percent limit allowed in the euro zone. But beyond the debt there is more deficit. What Greeks did when they got all this borrowed money, they gave away incredible sums to citizens, raised the wages to such an extent that it created a serious budget deficit. Inefficient Government? Corrupted mentality? Call it as you like, but it caused consequences that......

Words: 2957 - Pages: 12

Greek Credit Crisis

... Broken Promises: A Classic Greek Tragedy Presented by “Prestige International” Ana Maria, Atty, Patrick and Tom Professor Dr. Bonnie Woodson T-TH 11:10am “Within hours of taking office government officials said they would stop the planned sale of the state’s majority stake in Greece’s largest port and dominant utility. They also pledged to rehire thousands of public-sector workers and reopen the country’s state broadcaster, which has been shut down by previous government.” - Bouras & Karnitschnig (Wall Street Journal, 2015) A beautiful European country on the Mediterranean, Greece was living on borrowed time. Since gaining independence from the Ottoman Empire in 1832 Greece has spent more than half its years in default. For generations the Political system in Greece has been driven by public service jobs. Politicians regularly handed out favors in the form of government jobs to attain votes. They also made working for the state an attractive proposition with better wages than the private sector and retirement after 25 years of service. This effectively meant that if you started working after completing university you could retire before the age of 50. This is a clear example of country club style leadership. In recent years the promises made by new political leaders led some to believe that change may have been on its way and Greece could be on the road to economic recovery. As it turns out the new promises of a new government were broken, just like those of previous...

Words: 1919 - Pages: 8

Greek Financial Crisis

...Introduction The Greek debt crisis in 2009 occurred as a result of an understated financial deficit and extreme spending. The stagnation of the Greek economy and the demotion in their debt rating did not aid their financial situation. Greece was then faced with the possibility of sovereign debt default. The failure of Greece to pay their debts required bailouts from the European Union (EU) and the International Monetary Fund (IMF). While the loan bailouts have eased short term liquidity problems, Greece still remained in financial turmoil which may even deteriorate. This research paper aims to explore the history behind the Greek debt crisis, the implications it has globally and on South Africa as well as the lessons that can be learnt from the crisis. Origins of the Greek debt crisis 2.1 Historical development: 2001-2008/09 In 2001 Greece became the twelfth member to join the Euro zone and was permitted to use the Euro (€) as its currency. Greece joined the Euro zone because of the benefits associated with being part of the Euro area. These benefits were essential to the economy of Greece who had a record of unpredictable inflation (Gibson, Hall & Tavlas, 2012). In addition, after Greece changed to the Euro they had the freedom to borrow money from foreign capital markets. During 2003-2007 government records showed Greece to be growing at 4% a year which gave investors’ confidence and made Greek bonds a popular......

Words: 1993 - Pages: 8

Greek Crisis

...GREEK ECONOMIC CRISIS: CAUSES & EFFECTS Objective: To study the factors that lead to the Greek Economic Crisis and its effects on other other countries including India. A. IMPORTANCE Greece is normally known for mythology and coliseums, but for the past year, and probably well in to the future, Greece is making headlines for less mythical reasons. Greece has earned the reputation of being that family member who can't seem to get out of money trouble and, in turn, is always asking for a loan. Also, like that same family member, the chances of getting that money back isn't high. Greece is on the brink of bankruptcy and many economists believe that they are already bankrupt. Greece's debt has reached 160% of their gross domestic product. When debt reaches 100% of gross domestic product, it is cause for major concern. What's worse, they don't have the capacity to do much about it. Greece can't artificially change the buying power of their currency because they are part of the eurozone, and they can't easily raise taxes because they don't have an efficient or well-developed system of collecting taxes. If all of that isn't enough, the citizens of Greece are growing increasingly upset with their government, which is causing political turmoil as well as economic. Greece owes so much money to other countries that each citizen owes $40,000! 1. We Live in a Global World The world is no longer a collection of countries, many of which have little......

Words: 7912 - Pages: 32

Greek Crisis

...Greek economic problems Bc. Nikola Novosádová Field of study:  European Business and Finance Course: Understanding Global and European Business Environment 1. year, 1. semester 2014 CONTENT General information about Greece 3 Greek economic problems 4 Greek government-debt crisis 4 Overpriced government contracts 4 Government budget deficit 5 Tax restriction and tax evasion 5 Trouble of main Greek sectors - tourism and transport 5 Problem with repayment of debts 6 Measures 6 Rescue packages by EU and IMF 6 Privatization of state assets 6 Current economic situation 7 Debt 7 High unemployment 7 Conclusion 8 General information about Greece The capital: Athens Official languague: modern Greek Official name: The Hellenic Republic, Elliniki Dimokratia Religion: Greek Orthodox Church Area: 131 960 km2 Number of inhabitants: 10 815 000 Currency: euro (from 2002) Member of EU from 1981 (7) Unemployment rate (2014): 25.9% (2) Greek flag: Greek economic problems Greek economic problems are caused among other reasons by influences of impacts of the Great Depression (Global economic crisis). But there was also other different reason. This causes, described in following paragraphs, didn’t came to this coutry from outside, from the world but rised inside Greece. Greek government-debt crisis  It is also known as the Greek Depression. Government-debt crisis is definitely the main cause of current and previous Greek...

Words: 1370 - Pages: 6

The Greek Crisis

...its financial crisis. At the end of 2009, the problems for Greece started emerging when the newly-elected government realised that the country was heavily in debt. In the meantime, both Greek banks and the government were graded by rating agencies as dramatically low, as the country's debt had peaked (Tseronis 2014). Furthermore, in 2010, reports concerning accounting irregularities for the statistics which the Greek government delivered to Brussels caused the media to put Greece on the spot and raised concerns about the sustainability of the Greek debt and the country's credibility (Tseronis 2014). Thus, Greece became the first EU member to activate a bailout package from the newly set up European Financial Stability Facility (EFSF) and representatives of the European Commission (EC), the European Central Bank (ECB), and the International Monetary Fund (IMF), commonly referred to as the ‘troika’, in May 2010 (Gemenis & Nezi 2015; Tseronis 2014). Afterwards, Greece required a second bailout programme in February 2012 and an agreement that led to a third bailout after marathon negotiations, on 13th July 2015. The aim of this essay is not only to describe and analyse how Greece reached a third bailout but also to investigate if this programme could be the end of the Greek and euro crisis. It is divided into three main sectors: the first one is about the previous bailout programmes as well as the reasons for their failure. The second one analyses the present crisis, the new......

Words: 3251 - Pages: 14

Report - Greek Sovereign Debt Crisis

... Greek Sovereign Debt Crisis CONTENTS 1. INTRODUCTION................................................................................................................... 2 2. THE CRISIS ........................................................................................................................... 2 3. THE WAY TO THE CRISIS...................................................................................................... 3 4. HOW DOES THE CRISIS AFFECT THE GLOBAL FINANCIAL SYSTEM? .................................... 4 5. WHAT IF GREECE LEFT THE EURO ZONE? ........................................................................... 5 6. IF GREECE HAS RECEIVED BILLIONS IN BAILOUTS, WHY IS THERE STILL A CRISIS? ............. 6 7. CONCLUSION....................................................................................................................... 7 8. BIBLIOGRAPHY .................................................................................................................... 8 1|Page Greek Sovereign Debt Crisis 1. Introduction The economy of Greece is the 45th largest in the world with a nominal gross domestic product (GDP) of $238 billion per annum. It is also the 51st largest in the world by purchasing power parity at $286 billion per annum. As of 2013, Greece is the thirteenth-largest economy in the 28-member European Union. Greece is classified as an advanced, high-income economy,......

Words: 2375 - Pages: 10

Greek Crisis

...Hệ lụy đầu tiên Hy Lạp phải đối mặt là mất khả năng tiếp cận thị trường tài chính quốc tế hoặc những điều kiện ưu đãi đi kèm các khoản vay sẽ mất đi, chi phí lãi vay sẽ ở mức rất cao hoặc thậm chí không huy động được nguồn vốn. Điều này dẫn đến , chính phủ Hy Lạp không có khả năng thanh toán các khoản nợ đến hạn . Để có thể khắc phục thâm hụt ngân sách và đáp ứng các điều kiện của EU để được nhận các gói cứu trợ , chính phủ Hy Lạp đã thực hiện các biện pháp thắt lưng buộc bụng . Các biện pháp này gây ra hàng loạt tác động tiêu cực đến đời sống của nhân dân Hy Lạp: tỷ lệ thất nghiệp tăng cao 21,7 % (số liệu cập nhập ngày 7-5-2012 ) nghiêm trọng hơn tỷ lệ thất nghiệp trong giới trẻ ( 18-25 ) lên tới 50 % ; phúc lợi xã hội bị hạ thấp : tạm dừng cấp dưỡng cho người già , giảm 10 % lương hưu , tăng độ tuổi về hưu từ 61 lên 65 , chất lượng dịch vụ y tế giảm xuống …. Chính việc áp dụng những chính sách này đã làm dấy lên làn sóng phản đối mạnh mẽ từ phía người dân. Ngày 5/5/2010, mọi hoạt động đã hoàn toàn tê liệt vì đình công. Tình hình xã hội trở nên hỗn loạn. Mặt khác, điều này còn ảnh hưởng tới sức mua của các hộ gia đình vì gánh nặng lại càng đè nặng hơn lên vai người dân, điều này khiến cho Hy Lạp càng lâm vào tình thế hiểm nghèo: sức mua giảm, tỷ lệ thất nghiệp tăng… Cuộc khủng hoảng nợ này còn làm mất niềm tin của các nhà đầu tư. Bằng chứng là Standart&Poor đã giảm điểm tín nhiệm của Hy Lạp xuống 3 nấc, xuống còn BB-. Các nhà đầu tư cũng lo......

Words: 500 - Pages: 2

Hot Spots: Beyond the "Greek Crisis"

...This forum focuses on the debt crisis in Greece (the 2010 EU/IMF “bailout” and subsequent austerity measures), as well as the various challenges that have been posed to the violence of neoliberal “adjustment.” The brief articles presented here have been solicited from observer-participants in the debates and protests, but also in the intimacies and banalities, defining everyday life in crisis Greece. The outlines of the crisis are widely known. Indeed, Greek society and its travails have never before been so visible to the global media eye. The aim of this forum is not so much to fill in this familiar outline of crisis with ethnographic detail as to trouble its parameters. The first section Debt, Responsibility and “Reform” treats debt not as a statistical fact, but anthropologically as a complex discourse on morality, responsibility, obligation and reciprocity. Against the breathless synchronicity of “breaking news” and (endless) speculation on the denouement of the crisis, these pieces insist on historicizing and globalizing. Piercing the blatant Orientalist tropes dominating international and often domestic reporting, they plumb the social, political and economic forces that have led to the current impasse, but also the political efficacy of “crisis” itself in legitimating the agenda of “structural reform.” The second section Precarity and Protest centers on the escalating violence of the crisis and the emergent politics of protest. The December 2008 revolt, which......

Words: 596 - Pages: 3

The Greek Currency Crisis

...been over-borrowing at such staggering levels that even the EU was shocked. With a down world economy, they were no longer able to borrow at such cheap rates and could not pay off their debts (Hoffman, CBS News). Throughout the rest of this paper, I will examine exactly what led Greece into this mess and what policies that the Greek government should put in place in order to try and resolve this issue with the least amount of damage possible. First things first, let’s look at how Greece got into so much trouble. During the good times, the Greek government decided to borrow billions upon billions of dollars to help the country grow. This would have been fine if they were receiving enough tax revenue in order to cover these debts but, of course, they were not. Now they’re stuck with this huge debt burden that equals around 133% of their total GDP (an estimated €300 billion or $413.6 billion) and that number only continues to grow as the economy shrinks even further (Hoffman, CBS News). These numbers have led Greece to the lowest credit rating in the entire Euro zone and has made borrowing for them extremely expensive. Now the fear is that the Greek government will declare bankruptcy and default on all their debt unless drastic steps are taken. And as usual in situations like this, these steps are not going to be very popular with the citizens of the country. So what has Greece already done to try and stem off a catastrophic event? They have essentially turned to......

Words: 2224 - Pages: 9