greece loan crisis new presentation

8/3/2019 Greece Loan Crisis New Presentation

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LECT:EN FIRDAUS FITRI ZAINAL ABIDIN

PREPARED BY RINA AND COu

YUSREENA,NURUL AINI, HASMAH, S.FAIZAL,AZLI, ROSLI, BAHARIN, MUHAMMAD FAIRUZ

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To find out what are the Greece debt crisis allabout and the effect for the country and europecause by the event

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Greece is a developed country,with a highstandard of living

Human development index,ranked 25th in theworld in 2007

Main industries are tourism and shipping

Adopted euro as its currency in 1999

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Foremost, Greece did at take its EUmembership serious

It forged budget figures in orders to be

admitted in 2001 As an EU member it continued to do so year

after year

By this it deceived the other EU members as

well as itself and created uncertainty on thetrue economic situation of the country

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It first enjoyed the benefits of its EUmembership by financing govt debt at much

lower interest rates than before The rapidly extended govt debit was used to

preserve existing economics structures whichmade the country less competitive

internationally

As it seems, greek politicians did notunderstand that EU membership means

significantly more systems competition makinga policy adjustment necessary in order tobenefit in the medium to long run

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Greece borrowed heavily in internationalcapital markets to fund govt budget andcurrent accounts deficits

Accumulated high levels of debt during thedecade before the crisis,when capital marketswere highly liquid

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As the crisis has unfolded,and capital marketshave become more illiquid,Greece may nolonger be able to roll over its maturing debt

obligations

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Greek govt revised the estimate of the govtbudget deficit for 2009 from 6.7% of GDP to12.7% of GDP

In april 2010 eurostate the EU statisticalagency, estimated Greece deficit to be evenhigher at 13.6% of GDP

Greece credit rating is possible within amonth.these actions fostered fear amongpotential investors in greek bonds,make it verydifficult for them to borrow to fund its debt

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Govt expenditures increased by 87% revenuesgrow by only 31%

Rising unemployment

Insufficient bureaucracy

Tax evasion

Corruption

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SOUTHEASTERN EUROPE

Greece foreign policy focus on the region andgrowing trade volumes between the countries like

serbia,albania,macedonia,romania,bulgaria, andturkey cannot remain indifferent to the magnitudeof the crisis next door

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-As greek 10yrs bond fall and yields continue toremain above 6% sovereign debt issuance and therisk premium investors demand to hold securities

emitted by romania,serbia,bulgaria, and turkeyhave been adversely affected

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Greek govt had falsified statistics andattempted to obscure debt levels throughcomplex financial instruments also contributed

to a drop investors confidence Before the crisis,greek 10yrs bond yields were

10 to 40 basis points in january 2010,which wasat the time a record high

High bond spreads indicate declining investorconfidence in the greek economy

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DOMESTICALLY

High govt spending

Structural rigidities

Tax evasion and corruption

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The adoption of the euro

Lax enforcement of EU rules aimed at limitingthe accumulation of debt

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Over the past 6yrs however while the centralgovt expenditures increased by 8.7% revenuesgrew by only 31%,21 leading to budget deficits

In 2009,greek govt expenditures accounted for50%of GDP

Over-staffing and poor productivity in sectors

An aging population,could place additional

burdens on public spending

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The euro has proven to be a major problem forgreece as it cant devalue its currency in order tolessen its debt burden and to boost exports,and

it has exposed the weakness of the greekeconomy in relation to other eurozonemembers most notably germany

A 20% devaluation of the euro is a big deal buteveryone has to realise that the benefits of thedevaluation are going to be spread quiteunevenly

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In mid april 2010 the details of the proposedfinancial assistance package for this year werereleased a 3year loan worth 30billion (40billion)at

5% interest rates,above what other southerneuropean countries borrow at but below the ratecurrently charged

It is expected that an IMF standby arrangement,the

IMF

s standard loan for helping countries addressbalance of payment difficulty valued at 15billionfor this years would precede any assistanceprovided to Greece by the eurozone members

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The policy solutions to two of the majoreconomic issues facing the greek govt

Cutting large govt budget deficits(which

requires contactionary fiscal policies toaddress)

Stimulating the economy during cyclicaleconomic downturn

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Average value-

added tax from 19%to21% Civil servant hiring freeze in 2010

5:1 retirement/recruitment ratio for new publicsectors hires from 2011

10% cut in civil service salary allowances

A freeze on state pensions

Raising the average retirement age

Reducing the number of municipalities from1034 to 370

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The creaditability of eurozone is seriouslydamaged and moral hazard problems created

Which is the next nation to ask for the financial

assistance (PIIGS) PORTUGAL,ITALY,IRELAND,(GREECE),SPAIN

Whether the financial rescue program willstabilize Greece and the eurozone

Will Greece require more financial aid?

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EU should separate the countries in europe intotwo or three ties based on their economicstabilation to avoid another country get the

same fate as Greece in future

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THANK YOU for the time given to us..

any questions

please?

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greece loan crisis new presentation

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