A detailed presentation on Greece crisis. how it all started. What measures are taken to help Greece.

1. GREECE – FINANCIAL CRISIS
Presented by –
Gaurav Sah

3.  Countries borrow money from capital markets,
international financial institutions, and
governments to pay for infrastructure such as
roads, public services, and health clinics or even
to purchase weapons
 Also like individuals, countries must pay back the
principal and interest on the loans they take
 If the financial conditions are beyond the
government's control, it makes loan repayment
impossible; Moreover, countries cannot file for
bankruptcy, there is no such procedure, no
arbitrator
 At the international level, the creditors, not a
court, decide whether and under what conditions
should a country pay its debt

6.  Greece joined the European Union in 1981 and as of
2013 it is the thirteenth-largest economy in the 28-
member European Union
 Greece is a developed country with an economy based
on the service sector 81%, industry 16%
 Main Sectors with greater contribution to GDP
 a) Shipping
 b) Tourism
 Currency: Euro since 1 January 2001 (formerly Greek
drachma, GRD). Converted at 340.75 drachmae per euro
 The Greek Merchant Navy is the largest in the world,
with Greek-owned vessels accounting for 15% of
global deadweight tonnage as of 2013.
 Greece is classified as an advanced, high-
income economy, and was a founding member of
the Organisation for Economic Co-operation and
Development (OECD).

7. Spending
>
Revenues
High
National
Debt
Interest
rates
increased
Austerity
Slow
Economy
Greece tried to
cover it by
manipulating
data to comply
with ECB norms
Larger
than
thought
Debt
Due to
lack of
trust
Increased
unemployment
reimbursemen
t
Controlled
spending
and
increased
taxes

9.  Before the Euro currency acceptance
Drachma was devalued and helped in
borrowing
 Greece was able to continue its high level of
borrowing because of the lower interest
rates that government bonds in Euros could
command
 Problem was caused after 2008 great
recession, the main contributors to GDP –
Shipping and Tourism were affected badly,
revenues fell nearly 15% in 2009

10.  Increased social security expenses
 High cost of Production
 Incompetent pricing in global
market

11.  The CAD was an average 9.1% between 2000-2011
 Trade deficit is balanced by capital surplus
 Incase of Greece it was funded by foreign financial
surplus which stopped during crisis
 Countries facing such a sudden reversal in capital flows
typically devalue their currencies to resume the inflow
of capital; however, Greece was unable to do this, and
so has instead suffered significant income (GDP)
reduction, another form of devaluation
TAX EVASION
• Tax income of the government has always been below
the expected level
•Due to widespread corruption
•Greece is the most corrupt country in European Union

13.  Bailout package
 Rescue package
 European Stability Mechanism
 European Central Bank
 Austerity Measures
Measures adopted

14. Greece
Crater
1. Bailout
Package
2. Rescue
Package
Rescue
Package
ESM
3. ESM
ESM
4. ECB
ECB
Austerity
Package
Austerity

15.  On 2 May 2010, the European
Commission, European Central Bank(ECB)
and International Monetary Fund (IMF), later
nicknamed the Troika, responded by
launching a €110 billion bailout loan to
rescue Greece from sovereign default and
cover its financial needs throughout May
2010 until June 2013
 On conditional implementation of austerity
measures, structural reforms, and
privatization of government assets

16.  A year later, a worsened recession along with a
delayed implementation by the Greek government of
the agreed conditions in the bailout programme
revealed the need for Greece to receive a second
bailout worth €130 billion (including a bank
recapitalization package worth €48bn), while all
private creditors holding Greek government bonds
were required at the same time to sign a deal
accepting extended maturities, lower interest rates,
and a 53.5% face value loss
 This meant a total of €240 billion was to be
transferred to Greece in regular tranches throughout
the period of May 2010 to December 2014

17.  In December 2012 the Troika agreed to provide
Greece with a last round of significant debt relief
measures, while the IMF extended its support with an
extra €8.2bn of loans to be transferred during the
period of January 2015 to March 2016
 Due to an improved outlook for the Greek economy,
with achievement of a government structural
surplus both in 2013 and 2014 – along with a decline
of the unemployment rate and return of positive
economic growth in 2014, it was possible for the
Greek government to regain access to the private
lending market for the first time since eruption of its
debt crisis – to the extent that its entire financing gap
for 2014 was patched through a sale of bonds to
private creditors

18. Income
Tax
45%
40%
VAT
23%
19%
Luxury tax increased by
10%
New duties levied on
Petrol
New tax is levied on
electricity charges
Duties on imported cars
increased by 30%
Big cuts in public
employee expenditures
Privatization by
disinvestment
Reduction in number of
Municipalities
Increase of retirement
age from 60 to 65

20.  12,31,000 people are unemployed
presently
 @42.5% of 15-24 age group, 22.6% of
25-34

21.  Alexis Tsipras led Syriza party came to power in snap
election in Greece.
 The new Syriza-led government refused to
respect the terms of its current bailout
agreement
 The rising political uncertainty of what would
follow, caused the Troika to suspend all
scheduled remaining aid to Greece under its
current programme

23.  The Eurogroup granted a further four-month technical
extension to negotiate its second bailout programme
 So that the financial transaction could be completed by
end of June
 The Greek government unilaterally broke off negotiations
late on June 26
 A few hours later, Alexis Tsipras announced on Greek
national television that instead a referendum would be
held on July 5, 2015 to approve or reject the latest counter
proposal submitted and offered by the Troika on 25 June,
for a new set of updated terms ensuring completion of the
second bailout agreement
 Referendum resulted in a NO with 61% citizens against it
 Negotiations between Greece and other Eurozone
members continued in the following days to try to procure
funds from the European Central Bank in order to decide
whether Greece should or should not remain a member of
the Eurozone area
 On July 13, after 17 hours of negotiations, Eurozone
leaders reached a provisional agreement on a third bailout
programme to save Greece from bankruptcy. But a final
deal needs further negotiations, and requires ratification
in several national parliament

24.  Greek GDP fell from €242 billion in 2008 to €179 billion
in 2014, a 26% decline overall
 GDP per capita fell from a peak of €22,500 in 2007 to
€17,000 in 2014, a 24% decline
 The public debt peaked at €356 billion in 2011; it was
reduced by a bailout program to €305 billion in 2012
and has risen slightly since
 The annual budget deficit (expenses over revenues) was
3.4% GDP in 2014, much improved versus the 15% GDP
of 2009
 The unemployment rate has risen considerably, from
below 10% (2005–2009) to around 27% (2013–2014)
 An estimated 44% of Greeks lived below the poverty line
in 2014
 Greece defaulted on a $1.7 billion IMF payment on June
29, 2015

25. Sale of Assets to Other NationsConversion of Euro into the
Earlier Currency “The
Drachmas”
OTHER MEASURES

26. Exit the Eurozone or "Grexit“
 the Greek economy can recover from the
severe recession by exiting the Eurozone and
launching a national currency, the drachma
 The devaluation of the currency may help
Greece boost its exports and pay down its
debts with cheaper currency

27.  In return for an expected €85bn package of loans to meet
payments over the coming three years, Greece will agree to
softened economic targets including hitting a 'primary' budget
surplus before debt repayments of 0.5 per cent in 2016, rising to
1.75 per cent in 2017 and 3.5 per cent in 2018.
 The Greek economy is expected to contract this year and next.
The economy is expected to shrink by between 2.1pc and
2.3pc this year and and 0.5pc in 2016. Policymakers are
expecting growth of 2.3pc in 2017.
 A review of the welfare system, phasing out early retirement,
scrapping tax breaks for islands by the end of 2016,
deregulating the energy market and proceeding with a
privatisation program already in place.
 The Guardian says the specifics of how to manage the proceeds
from €50bn worth of privatisations remains a key issue to
resolve.
 A spokesperson for the Greek delegation suggested agreement
could be reached by 11 Aug, which would allow time for approval
by finance ministers later in the week and for the deal to be
ratified in the parliaments of Greece, Germany and elsewhere
before a €3.2bn bond repayment falls due to the European
Central Bank on 20 August