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Greece Crisis



Presented By :-

Members Roll No. TopicMayur Chordia 15 Introduction

Dilip Pandey 66 Greece Overview

Naseem Khan 40 Contribution to world

Mayur Patel 72 Present Crisis

Nitin Parmar 74 Impact on India

Ronak Modi 57 Role of Germany

Abhishek Pathare 71 BailoutAnup verma 76 Solutions to Crisis

Sandeep Dube 21 Current News



Trade Blocs

A trade bloc can be defined as a µpreferential tradeagreement¶ (PTA) between a subset of countries,designed to significantly reduce or remove tradebarriers within member countries.

OR

A trade bloc is a type of intergovernmental agreement,of ten part of a regional intergovernmental

organization, where regional barriers to trade (tariffsand non-tariff barriers) are reduced or eliminatedamong the participating states.



Continued..

Regional Trade Agreement/Integration Agreement

Natural Trade Bloc

RegionalismOld Regionalism & New Regionalism

³The first waves of PTAs appeared in the 1930s leading to

a fragmentation of the world into trade blocs´



Emergence of Trade Blocs



Few Trade Blocs in world

(1) In Europe, the European Union (EU)

(2) In United States, the North AmericanFree Trade Agreement (NAFTA)

(3) In Latin America, the Common Market of theSouth (MERCOSUR)

(4) In Asia, the Association of Southeast Nations(ASEAN)



Eurozone

The Eurozone-officially the euro area, is an economic and monetary union (EMU) of 16 European Union (EU) member states which have adopted theeuro currency as their sole legal tender.

OR

A geographic and economic region that consists of all

the European Union countries that have f ully incorporated the euro as their national currency.



It currently consists of Austria, Belgium, Cyprus,

Finland, France, Germany, Greece, Ireland, Italy,

Luxembourg, Malta, the Netherlands, Portugal,

Slovakia, Slovenia and Spain.

Eight (not including Sweden) other states are

obliged to join the zone once they f ulfill the strict entry criteria.

Continued«



Emergence of Eurozone



European Central Bank

The European Central Bank (ECB) is the institution of the European Union (EU) tasked with administrating the monetary policy of the 16 EU member statestaking part in the Eurozone.

It is thus one of the world's most important centralbanks.

The bank was established by the Treaty of

Amsterdam in 1998, and is headquartered in Frankf urt, Germany.

The current President of the ECB is Jean-ClaudeTrichet.



WHERE IS GREECE?

Geographic Location

´ Greece is located at the southeast end of

Europe .

´ Greece is referred to as a southernEuropean country, because geographically

part of this region.

´ It·s capital city is Athens

´ It is famous for its beautiful beaches and

sea.

´ Greece is 5005.13 Km from New Delhi .



GREECE MAP



LITER ACY R ATE OF GREECE

In Greece, people were considered literate when

they graduate the 6 years of primary school.

In some other countries literate means someone

that can read and write.

The literacy rate in Greece is 97.5%.



LITER ACY R ATE OF GREECE

In Greece education is free and compulsory for all

children between the ages of 6 and 14.

The remaining years of secondary school are

optional and also free.

Greece steadily increases its literacy rate

specifically for youths aged 15-24 years old is

higher at 98.94%.



GDP GROWTH L T IVE EAR



CONT«..

GDP - r l gr t r t

- . ( st.)

. ( st.)

r ( st.)

r ( st.)

r ( st.)



GREECE ECONOMY FIVE YEAR

BACK According to the data given by the International

Monetary Fund for the year 2008:-

The service sector contributes 75.8% of theIndustry 20.8%, Agriculture 3.4% of total GDP.

The economy of Greece is the twenty-seventhlargest economy in the world by GDP.

The thirty-third largest by purchasing power



CONT«..

Greece is the twenty-fourth most globalizedcountry in the world and is classified as a high

income economy.

The Greek economy grew by nearly 4.0% per

year between 2003 and 2007

Rising debt levels (115% of GDP in 2009) lead

to rising borrowing costs, resulting in a severe

economic crisis.



CONT«..

Budget deficit criterion of no more than 3% of

GDP from 2001 to 2008.

But the 2009 budget deficit stood at 13.6%

of GDP.



MARITIME INDUSTRY

´ The Greek maritime fleet is the largest in the world, at approximately 18% of the worlds maritime fleet.

´ Today, shipping is one of the country's most important industries. It accounts for 4.5% of GDP, employs about 160,000 people (4% of the workforce), and represents1/3 of the country's trade deficit.

´ According to the BTS, the Greek-owned maritime fleet istoday the largest in the world, with 3,079 vesselsaccounting for 18% of the world's fleet capacity (making it the largest of any other country).



TOURISMSECTOR

´ Greece attracts more than 16 million tourists eachyear, thus contributing 15% to the nation's GrossDomestic Product. In 2008, the country welcomedover 16.5 million tourists. The number of jobsdirectly or indirectly related to the tourism sectorwere 659,719 and represented 16.5% of thecountry's total employment.

´ t has been criticised many times for lagging

behind other Western European nations in

terms of tourism infrastructures and amenities



CONTINUED..

´ According to a survey conducted in China in 2005,Greece was voted as the Chinese people's numberone choice as a tourist destination.

´ [4] In November 2006, Austria, like China,announced that Greece was the favourite touristdestination for its citizens.

´ In line with these observations, Greece's former

Minister of Tourism Aris Spiliotopoulos announcedthe opening of a GNTO office in Shanghai until2010.



EXPORTS



MAJOR EXPORT

PARTNERS



MAJOR IMPORT PARTNERS



TECHNOLOGY UPGR ADATION



GREECE BAL ANCE OF TR ADE

Year 2007 2008 2009 2010

Trade Deficit 41499.2 44048.8 30760.4 5542.6



GREECE INFL ATION R ATE

YearAPRIL

2007

APRIL

2008

APRIL

2009

APRIL

2010

Inflation Rate 2.5 4.4 1 4.8



GREECE STOCK MARKET INDEX

YearMAY

2007

MAY

2008

MAY

2009

MAY

2010

INDEX 4836 4196 2192 1630



GREECE GOVERNMENT BOND

YearMAY

2007

MAY

2008

MAY

2009

MAY

2010

Rate of increase 4.50 4.75 5.24 12.45



GREECE UNEMPLOYMENT R ATE



FEARS OF CRISIS

In early 2010 fears of a sovereign debt crisisdeveloped concerning some countries in Europe.

Greece, Ireland ,the United Kingdom, Spain andPortugal .



GREECE CRISIS

Public debt .

Greece has 13% of fiscal deficit and 113% of

public debt as percentage of GDP.

Greek government debt was estimated at ½216

billion in January 2010.



There are a few reasons for this.

1. Income inequality has been growing in Greece.

2. Declining unit labour costs, aimed at increasing export competitiveness, Greece, among other

European countries like Spain, Portugal andIreland, lost out to Germany.

3. There are two portions of government debt ²

principal and interest payments.

4. Last but the most important, this would not havebeen such a big problem had Greece not been a part of the EMU.



CONTINUED«

If they had an independent currency .

But as soon as a country becomes a part of a

unified currency under a common CentralBank, its independent monetary policy practically disappears, particularly for therelatively poorer and less powerf ul countries.



Other reasons

The global financial crisis that began in 2008 had aparticularly large effect on Greece.

Two of the country's largest industries are tourismand shipping, and both were badly affected by thedownturn with revenues f alling 15% in 2009.

To keep within the monetary union guidelines, thegovernment of Greece has been found to haveconsistently deliberately misreported, in other wordsf alsified, the country's official economic statistics.[



Continued««««.

In the beginning of 2010, it was discovered that Greece had paid Goldman Sachs and other bankshundreds of millions of dollars in fees since 2001 forarranging transactions that hid the actual level of

borrowing.

The purpose of these deals made by severalsubsequent Greek governments was to enable them

to spend beyond their means, while hiding theactual deficit from the EU overseers.



Role Of Germany

Germany Holds The Key: -

With Greece threatened with a def ault, European

Union leaders have been debating potential rescue dealsfor the Greek economy.

Most EU leaders as well as the governments of most

EU member states, supports bailout package for Greeceto help it survive this debt crisis.



However, Germany has proven to be highly reluctant to f und such a bailout, as a ma jority of German voters oppose such a move and as thecenter German government f aces a key state election

in Germany¶ s largest state in the near f uture.

If Germany blocks an EU bailout for Greece, therebe little choice for the Greek government but to turn

to the IMF, a move that will likely be greeted withhostility in many EU member states, but one that isacceptable to Germany.

Continued..



What German Chancellor Mrs. Angela Merkelsays about Bailout

The German chancellor was said for taking a hard lineagainst an European bail-out of Greece.

That was before George Papandreou, the Greek primeminister, bowed to the inevitable on April 23rd and asked for the ¼30 billion ($40 billion) loan pledged by Greece¶s euro-zone partners,

Of, which Germany¶s share is about ¼8 billion. A further slice, of perhaps ¼15 billion, may come from the IMF.



Continued«

Now, Mrs. Anegla Merkel, Reported politicians¶ estimates of the

whole bill have soared to ¼120 billion and f ar beyond, with a correspondingly greater contribution from Germany.

Many Germans feel they are being forced to choose between two basic principles of their economic stability and integration

within Europe.

They also says that German taxpayers would not have to pay for other members¶ mistakes.

It should not be forgotten that one of the first countries to

break the original eurozone rules on government borrowing wasGermany itself. In f airness though, Germany got itself back in line² without having to get financial help from other members.



The German Factor in Greece¶s Crisis (Part II)

Af ter heated debate, the German government recently approveda rescue package for Greece.

Former Irish Prime Minister John Bruton argues that suchassistance should not be portrayed as charity ² but as a loan that

is being extended in the rational self -interest of both the lenderand the borrower.

Germany leaders today approved the country¶ s share of the

rescue package for debt ± laden Greece af ter a big debate in which the finance minister told them they had no alternative tothe unpopular measure.

The lower house of parliament authorize granting as much as22.4bn Euros in credit over three years.



Continued«

Mr. John Bruton, believed that it was both f air and reasonablefor Germany and others to insist on a long-term and detailedausterity program from Greece before releasing f unds.

It is true that these measures will depress the Greek economy in the short term, but that had to happen sooner or later anyway,and the sooner it is done, the sooner Greece will get back on a sustainable path.

France, Italy, Spain and Portugal also approved their share of a the bailout to keep Greece from imminent def ault as the 16 leaders from countries using the Euro.



What is Bailout

A bailout is an act of giving capital to an entity (a company, a country, or an

individual) in danger of f ailing in an attempt to save it from bankruptcy,insolvency, or total liquidation and ruin;

or to allow a f ailing entity to f ailgracef ully without spreading contagion.



Bailout: -

International Monetary Fund(IMF) approves the bailout package for theGreece crisis of 250bn Euro.

Eurozone countries approves the bailout

package for the Greece crisis of 440bn Euro



What triggered THE RISE?

The Euro 750bn received from Eurozone & IMF packaged , which rise a rally in stock marketsworld wide, forced traders to cover their short

positions, thereby covering their losses.



Impact OnIndia



Solution to Crisis



THE WAY FORWARD- PAUL KRUGMAN

´ Greece comes out of the European Monetary

Union.

´ Greece stays in it but bailing it out in that case

becomes implausible due to various political

forces at work.



FURTHER IT CAN COME OUT OF THECRISES BY STAYING WITH THE EMU

´ Greek workers could redeem themselves through suffering,accepting large wage cuts that make Greece competitiveenough to add jobs again.

´

The European Central Bank could engage in much moreexpansionary policy, among other things buying lots of government debt, and accepting, indeed welcoming ³ theresulting inflation; this would make adjustment in Greeceand other troubled euro-zone nations much easier.

´ Greece could become to Athens what Washington is toSacramento ³ that is, fiscally stronger Europeangovernments could offer their weaker neighbors enough aidto make the crisis bearable.



LIMITATIONS- INVOLVEMENT OF EMU

´ Based on an unsubstantiated belief that a

higher money stock automatically leads to

inflation since "more money chases the same

goods".

´ Greece has idle capacity and unemployment,

European Central Bank's money would chase

an increased amount of goods instead of the

same goods, thereby, avoiding inflation.



LIMITATIONS OF BERLIN, EMU AND IMF, ARE COMING TOGETHER

´ Berlin and EMU, along with the IMF, are coming to the

rescue of Greece by announcing the bailout package, it is

coming with strings attached.

´ It might force the Greek government to decrease its deficit

in its immediate future and balance its budget in the long

run.

´ Budget deficit can be decreased through increasing tax

rates or by decreasing government expenditure or both.



WAYS TO WAIVE OFF CRISES

´ Without accepting the IMF's deflationary and

extremely painful path to recovery. The answer lies in

what IMF does not want Greece to do

i.e. increase tax rates. The Greek government coulddecide to increase the direct tax rates while

maintaining its expenditure on job-creating activities.

This would have a dual effect. It would increase the

growth rate and at the same time decrease the debtburden of the government by increasing the tax

revenues for the same expenditure.



CONTINUED«

´ Instead of joining the rat race for exportcompetitievness which leads to declining wage

share, they should concentrate on domestic

sources of growth. One of the primary sourcesis the wage growth which Increases the

domestic consumption.

´ Above path, however, would require Greece to

gradually break away from the EMU and have

strict capital controls.



Current News



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