final greece crises - copy
TRANSCRIPT
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Greece Crises
PriyadarshaniSonawane
Javed Khan
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Table of Content
Introduction
Why happened
What happened
Impact on India
Impact on World
Bail out plans
Situation solved or not.
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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%.
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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
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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.
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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
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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.
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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
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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
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Unemployment:
9.4% in 2009 (from 7.7% in 2008)
11.8% in 2010
14.6% in 2011
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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.
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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.
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Impact on World
PIIGS: Greece has spread the risk toother weak and indebted Euro-areaeconomies.
Bigger impact on South East Europe
Impact on US
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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 -
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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
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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
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Thank you