The ppt covers the causes & impacts of greece bankruptcy & the reforms that were made later.

1. The Great Greek Crisis

2. Greek budget deficit

3. Budget Deficit

4. Introduction of Greece Economy
Introduction of Greece Economy
Population: 11.2 million (UN, 2009)
Capital: Athens
Major Language: Greek
Major Religion: Christianity
Monetary unit: 1 euro = 100 cents
GNI per capita: US $28,650 (World bank,2008)
Inflation rate: 1.10% (Sept 2013)
Unemployment rate: 40% (2013)

5. Introduction of Greece Economy
• 27th largest GDP in the world
 agriculture: 3.4%
 industry: 20.8%
 services: 75.8%
• 22nd highest human development
• Greece main business is Tourism, Mining,
Petroleum, Chemicals, Food Processing,
Textile, Metal Products and Tobacco
Processing.

6. MARITIME INDUSTRY
The shipping industry is a key element of
Greek economic activity dating back to ancient
times.
Piraeus is the largest marine –
based shipping centre of Greece
and also the commercial hub of
Greek shipping, with most of
Greece's ship-owners basing
their commercial operations
there.

7. TOURISM INDUSTRY

8. Economic Overview
Greece has a capitalist economy with the public sector accounting for about 40%
of GDP and with per capita GDP about two-thirds that of the leading euro-zone
economies.
The Greek economy grew by nearly 4.0% per year between 2003 and 2007.
The economy went into recession in 2009 as a result of the world financial
crisis, tightening credit conditions, and Athens' failure to address a growing
budget deficit.
The economy contracted by 2% in 2009, and 4.8% in 2010.

9. Why is Greece in Trouble?
• Greece’s reported budget deficits averaged 5% per
year, compared to a Eurozone average of 2%, and
current account deficits averaged 9% per year,
compared to a Eurozone average of 1%.
• Between 2001 and 2008, Greece’s government
borrowed heavily from abroad to fund substantial
government budget and current account deficits.
• Greece funded these twin deficits by borrowing in
international capital markets, leaving it with a
chronically high external debt (179% of GDP in
2012).

10. •The Greek economy became embroiled in a huge debt crisis in
the aftermath of the global financial crisis from 2007 onwards.
• As a direct consequence of the Global Financial Crisis:
•Most of Greece’s main trading partners went into a deep
recession – cutting exports
•There was a 2% fall in world output (unusual) but worse,
a 12% fall in global trade
•Greece suffered badly because her economy was heavily
dependent on tourism and construction, two sectors badly hit
by the sharp fall in demand and production.
Why is Greece in Trouble?

11. • Greece’s current economic problems have been caused by a
mix of domestic and international factors.
• Greece is facing sovereign debt crisis since it accumulated
high levels of debt during the decade before the financial
crisis when the market was highly liquid.
• Reasons
– High Government Spending and Weak Government
Revenues
– Structural Policies and Declining International
Competitiveness
– Increased Access to Capital at Low Interest Rates
Why is Greece in Trouble?

14. Hosting the 2004 Olympics
 Many factors were behind
the crippling debt crisis,
the 2004 Summer
Olympics in Athens has
drawn particular attention.
 The 2004 Athens Olympics
cost nearly $15 billion
 The tab for security alone
was more than $1.2 billion.
Initial proposed budget of $1.6 billion

16. The Big Bailout..
• It was saved when other European countries and the
International Monetary Fund stepped in with two massive
bailouts. In exchange, Athens has had to make harsh
spending cuts and tax increases to rein in the runaway
deficits. Its economy has been put under strict supervision
from the IMF, European Commission and European Central
Bank, known collectively as the "troika."
• First bailout package of $147 billion in May 2010 prevented
bankruptcy.
• Second deal of $174 billion in October 2011 forgives about
50% of Greece overall debt.
• Greece’s public debt stood at 305.3 billion euros, or 160.5
percent of GDP, in the first quarter of this year.

17. IMPACT!!

18.  On 27 April 2010, the Greek debt rating was
decreased to BB+ by Standard & Poor
 Standard & Poor's estimates that in the event of
default investors would fail to get 30–50% of their
money back

19.  Stock market and Euro currency
declined
 The euro declined by 1.6 % to
$1.3175
 The dollar jumped 1% on a
trade-weighted basis on haven
flows
 The yield of the Greek two-year
bond reached 15.3%

20. Industrial Production
dropping by 11%.
Mining fell by 6.4%
manufacturing decreased
by 11.3%
electricity production
dropped 12.2%

21. Impact on private individuals
• The most obvious way would be through tax
bills, as Europe agrees to ride to the rescue
and help Greece deal with its mounting public
and foreign debts.
• Any assistance to Greece will come at a cost
that will ultimately have to be borne by
taxpayers in the nations that contribute.

22. Greek banking sector is also in trouble
• Banks stocks were the
worst affected
because of crises
• Decline in bank stock
prices by 47% since
November 2009
• Greek bank deposits
have fallen to 8.4
billion Euros

23. Greek banking sector is also in trouble

24. Exposure of banks to Greece bonds
Name of Banks Holdings
BNP Paribas €5 billion
Dexia €3.5 billion
Generali (Italy) €3 billion
Commerzbank (Germany) €2.9

25. The industrial production is low
In 2011- unemployment rate gone to 15.9%

26.  The crisis has reduced
confidence in other
European economies
 Financing needs for the euro
zone in 2010 come to a total
of €1.6 trillion
 Ireland, with a government
deficit in 2010 of 32.4% of GDP,
Spain with 9.2%, and Portugal at
9.1% are most at risk.

27. Impact On Euro Zone
• High interest rates on bonds
• High unemployment
• Foreign trade badly affected
• Exchange rate of Euro was adversely affected
• Downgrading of rating of euro zone nations
• Low confidence of global investors
• The financial crisis caused slow down in euro zone
and global economy

29. Europe
Greece
Other
USA
Asia
Greece Government Bond
ownership by region
Asia3%

30. Impact on US
 U.S. exports to the EU could be impacted if the crisis slows growth in
the EU and causes the euro to depreciate against the dollar.
 As the crisis continues, increased perceptions of risk are impacting
U.S financial markets.
 CDT DOW dropped more than 992 points.
 The panic in Greece caused one of the most turbulent days ever on
Wall Street. In a matter of minutes, stocks plunged 900 points.
 The Dow managed to recover but still ended in negative territory,
The Dow closed down 347 points.

31.  Greek imports from India include cotton, synthetic fibres, fabrics, vehicles,
iron, steel and fruit.
 Greek exports to India include fibres, fertilizers, organic chemicals,
pharmaceutical products, leather goods, metal processing machinery, etc.
 Only 0.05% of India's exports go to Greece and Indian banks have virtually no
direct exposure to Greece.
 There will be some additional capital flows coming in in search of a safe
haven
and a small drop in exports.
 Euro which was quoting at around Rs.67 before crisis is way below at
Rs.55.92
currently.

32. What level of debt is sustainable – 60-85% of GDP

33. •Pension reforms including raising the official state retirement age
•Privatization of state assets both to raise revenue and to increase
competition
•Cuts in the national minimum wage
•Measures to reduce entry barriers to certain occupations
•Cutting taxes on employing workers to boost employment
•Making the Greek judicial system more efficient
•Stronger measures to tackle tax evasion by individuals and
businesses
REFORMS

35. Tourism is Greece's number one industry, accounting for 15% of GDP. Greece
should be one of the world's foremost destinations for cruise ships. But highly
restrictive laws have long discouraged foreign tour operators
In 2010, under orders from the
troika, the Greek government
enacted a new law that promised
reform, but failed to deliver in
practice.
It required cruise lines to sign a
three-year contract guaranteeing
visits to Greek ports. Not a single
cruise line entered the market
under that law.
The new government has pledged to
enact a measure that removes both
the tax and the contract
requirement for non-EU carriers.
The Cruise Industry

36. The shockingly high cost of road transport is socking both Greek exports and
domestic production. To operate a trucking fleet, companies need a license for each
truck, and no new ones have been granted since the 1970s.
As a result, trucks are in short supply, so manufacturers need to pay inflated
prices to move merchandise within Greece, or to foreign markets.
In 2010, the parliament passed a law enabling the government to issue new
licenses at minimal cost. But the reform was delayed for three years -- leading to
questions over whether it would really happen. In 2012, the parliament
eliminated the transition period, and fully opened the trucking market as of
January
The Truck Industry

37. Pharmaceuticals
The government guaranteed pharmacies a 35% markup on all drugs. So a
patented, $200 a month heart medicine got $70 tacked onto the retail price.
The incentive to over-prescribe was immense.
It explains why Greece has the highest level of pharmaceutical consumption
per capita in the EU.
Under a new law, pharmacies are limited to imposing a margin of 15% on
inexpensive drugs, and far less on expensive therapies. On average, the
markups should fall from the old 35% to well under 15% on average, a
major victory for consumers.

38. In Greece, areas outside of cities do not have zoning laws. That doesn't mean you
can build freely on islands or in rural areas. On the contrary, development is
severely restricted. Only a single law allows for master plan development, and it
requires that the villas and homes be constructed around a major hotel.
The law also prevents the developer from selling homes or villas; only rentals are
allowed.
A new law provides two
improvements. First, it reduces
the requirement of two
environmental impact statements
to just one, virtually cutting the
approval time in half, from two
years to a bit over twelve months.
Second, it now allows developers
to sell many of the apartments
and homes in their resorts,
instead of merely renting them
out. That change alone could
make Greece a prime destination
for retirees.
Resort Development

39. In 2012, the government and the unions negotiated a new "minimum wage"
annually, mandating that the lowest-paid employees get a raise of, say, 5%.
Then, a second round of negotiations would occur for each industry, with the
5% national agreement as a minimum raise. So the department store employees
might get an extra 2%.
That caused Greek goods to become more overpriced, year after year, than
competing products from Germany, which held wages in check.
The unemployment in Greece stands at 21%. Wages are still so high that many
employers pay workers cash, off the books, to avoid social security taxes.
New law passed has a 22% decrease in the minimum wage for most workers,
& a 32% drop from employees under the age of 24.
The labor market
Greek youth unemployment rose above 60 percent this February!

40. Macroeconomic Options

41. Conclusion
• Euro Zone crisis has been the combined result of
US financial crisis and excessive debts with slow
GDP growth rates.
• This crisis has badly affected the financial market,
capital market and global economy.
• ECB, IMF, International creditors and stronger
nations are considering various options to resolve
the crisis.
• The situation is grim and there is no immediate
solution to the problem and it has long term
affects on global economy.