greek debt crisis finall

8/10/2019 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-+

G!"%5 HJ& )!*+$ )K5 $A%/F?9+$ N42+$ $@O PQ*66& 66?)? @+$ !OA RK; H H5AA$'; 9*2? #%( 'O H-( U$A %>VA9W-+ )Q? 1*!*+$ X$%43+$%W Y3 R*3+$ HA Z1[!4+$

\!" H+A%+$ % W4+$ RA%4 ] ^9( ' ( _`+$'*!; 2? %[< $9/ ^!5 )3+)K5 9] @+$A 4*_< H RA%4+$H!/ *-( 1 *5AA$ Xh- 3+$=j< '; k =j < $0 @:+$

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

H +$!:5 %W/~/ ZzA# *-;X!:J+ 283:/ \>$ k66"%/ *+0 +$ !42+$ %+ 14*;

Source: $4uroe Wrestles With Solutions for Greek DebtCrisis-5 The Wall Street 6ournal,


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greek debt crisis finall

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