MULTIMEDIA UNIVERSITY CYBERJAYA

TRIMESTER 2, 2014/2015

FINANCIAL MARKET AND INSTITUTION
BFN 2224
ASSIGNMENT 1
NAME
Nur Salina Yusoff
Wan Nurul Ain Wan Ibrahim
Melody Sarli
Waheda Amalin Suhaimi

ID
1131121695
1131122338
1101109215
1091102909

LECTURE: Noor Ashikin Binti Mohd Rom
SECTION: BO1
SUBMISSION: 13th January 2015

1.0 Table of content
2.0 Abstract

3
1

3.0 Introduction

4

4.0 Literature review

5

5.0 Greece Crisis & Economic Impacts

8

6.0 Ukraine crisis and economic impact

10

7.0 Social impact of Greece

16

8.0 Politics impact of Ukraine

17

9.0 Greece action taken to recover crisis

18

10.0 Ukraine action taken to recover crisis

20

11.0 Conclusion

23

12.0 Reference

24

2.0 Abstract

2

According to economies condition, there is still a current plausibility for Greece and
Ukraine to exit the crisis. if the event in those situations works out, it will decrease the bad
impacts on Greece’s economy lifecycle and Ukraine’s economy lifecycle as well. Although,
both of these nations went through bad economy crisis at once but still the country itself
suffering through the crisis which it leads to low life standards for the country’s population
itself. Greece & Ukraine has been arranging of monetary movement alongside principle
financial variables since then in order to improve the country.As everybody knows in 2008
Greek government went into debt crisis which also affect some other nations and also has
been a lesson for a lot of countries, Greece was having billout credit in amount of €110
billion, The installment of the bailout was booked to happen in a few payment from May
2010 until June 2013. At March 2014 Ukraine nation went into Crimean crisis, it is a
continuous debate, because of an universal crisis in 2014 including Russia and Ukraine over
the control of the Crimean Peninsula.
At research down you might face a name called Torika this is because in 2010 they
nicknamed European Central bank and International Monetary Fund . Russian units started
moving into Crimea very nearly close to the eastern fringe of Ukraine, where he called for
Putin to "restore request" in UkraineWhile in Ukraine, it should implement a series of urgent
economic reforms in the near future to enable it to achieve strong economic growth and create
good quality jobs in the next few years. Delaying the reforms is no longer an option but a
must because macroeconomics instability and static growth are beginning to take a charge on
the ordinary citizens in Ukraine.
Ukraine has very high standards of education, an exceptional density of people with PhDs,
and an overwhelming focus on mathematics, hard sciences and engineering. Ukraine has
some of the world's best talent (and science and capacity) in specialist steels, nuclear
engineering, aerospace and algorithm development. And Ukraine has a large workforce with
practical and technical/ tradesman skills also. If Ukraine were integrated in EU markets under
a normal legal and tax environment, there would certainly be massive investment (from car
manufacturers, Airbus, white goods manufacturers, software development businesses, etc).
New Ukrainian businesses would far more easily achieve lucrative deals with developed
world clients - and grow.
Ukraine is an obvious case where there is an inefficient capital-labour imbalance. Ukraine
has a massive highly skilled workforce in close proximity to massive markets. The only
problems are a lack of modern capital equipment and legal barriers. Remove the barriers,
build institutions that allow capital inflow, and in this environment direct investment is able to
achieve high single digit GDP growth rates. In particular, Ukraine has 12 new nuclear reactors
currently on-plan or under construction. Ukraine's electricity is less than a quarter the price of
neighboring Poland's or Slovakia's. If integrated in EU markets, Ukraine might as well build
extra reactors and export the electricity. Further, perhaps Ukraine's businesses could achieve
access and scale to export civilian nuclear technology (and reactor installations) across
Europe and globally (at far lower cost than prevailing French models). Greece & Ukraine has
been arranging of monetary movement alongside principle financial variables since then in
order to improve the country.

3.0 INTRODUCTION
Since the first few months of 2010, the Greek economy has emerged as the first casualty of
a sovereign debt crisis that threatens to destabilize the euro area and put the fragile recovery
of the European economy from the recession of 2009 at risk. The Greek fiscal situation came
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to the center of international attention after the elections of October 2009. The fiscal deficit of
Greece worsened significantly during the crisis, as was also the case in many two other
economies in the euro area and the rest of the world. In addition, after many years of
significant economic growth, in 2009 the Greek economy entered into a prolonged recession,
the end of which is not yet visible.
The international financial crisis of 2008 hit the Greek economy at its Achilles heel: The
refinancing of the high public debt, which was accumulated mainly during the 1980s.
Although the fundamentals of the Greek economy had improved significantly in the twenty
years to 2008, during preparations for entry into the euro area and since Greece’s entry, public
finances and international competitiveness had remained as persistent and significant
problems throughout the period. Although there were short periods of significant
improvement in the fiscal situation, there were many instances of relapse, especially around
election years. After a steep rise throughout the 1980s, public debt had stabilized at about
100% of GDP since the early 1990s. Greece had no problem refinancing its debt until the end
of 2008. However, in the circumstances of the international financial crisis, the refinancing of
the debt started becoming a problem, and spreads over the German benchmark rates started to
widen. The problem became much more serious after the elections of October 2009. Greece
found itself at the center of a wave of criticism by the international press, international
organizations, rating agencies and the European Commission. Despite the fact that the fiscal
situation in 2009 worsened throughout Europe and the rest of the world, in many countries
much more than in Greece, Greece was the first sovereign to find itself in the middle of a
confidence crisis.
There are three likely reasons for this. The first was the high level of Greece’s public debt.
Greece’s public debt had stabilized since the early 1990s at roughly 100% of GDP, versus
70% for the average of the Euro area. The second reason was the announcement of a large
deterioration of the projected deficit for 2009, by the government elected in October 2009.
This took the markets by surprise and contributed to the confidence crisis. The third reason is
related to the shortcomings of the fiscal program initially adopted by the newly elected
government, which appeared to be leading to a further widening of the fiscal deficit rather
than a contraction. Under these circumstances, Greece faced a severe confidence crisis, a
sustained speculative attack on its bonds, and the eventual setting up of a special European
Support Mechanism, with the participation of the IMF. Since the end of April 2010 Greece
has effectively been excluded from international financial markets. Some economists have
suggested that Greece could benefit from abandoning the euro and issuing a new national
currency, although doing so would raise the real value of Greece’s external debt and possibly
trigger runs on Greek banks and contagion of the crisis more broadly within the Eurozone.
The United States and the EU have strong economic ties, and a crisis in Greece that threatens
to spill over to other Southern European countries could impact U.S. economic relations with
the EU and the general economic recovery from the financial crisis. Additionally, the
exposure of U.S. banks is estimated at $16.6 billion. Eurozone reopened credit swap lines
with the European Central Bank (ECB), among other major central banks, to help ease
economic pressures resulting from the crisis in Europe.
Furthermore, in the Ukraine developing countries were hit hard by the financial and
economic crisis, although the impact was somewhat delayed. Every country had different
challenges to master. The closer the development countries are interconnected with the world
economy, the crasser the effects and the incipient recovery that is becoming noticeable is, for
the time being, restricted to only a few countries and regions. The crisis was transmitted
primarily by trade and financial flows forcing millions back into poverty. Attainment of the
Millennium Development Goals is seriously jeopardized in many countries. Many developing
countries did not and do not have the resources to stimulate the economy and protect their
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socially disadvantaged populations to the same extent to mitigate the effects. Developing
countries have also increased their cooperation with one another and are urgently demanding
a greater voice in global economic affairs. The industrialized countries are for the most part
more concerned with their own problems. Their readiness to provide more extensive aid is
limited. They are under pressure from the international institutions to relax their previous
dominance in favour of the increasingly strong emerging countries. A shift in power and
influence that was already noticeable before the financial crisis is deepening. As inconsistent
as the recovery pattern is now, there was a similar lack of consistence in the impact of the
financial and economic crisis on the individual countries and regions worldwide. For long
term it was hoped that the threshold and developing countries would be able to disconnect
from the financial crisis in the developed countries of America and Europe due to their
improve macro-economic structural conditions. However, the nation of disconnecting from
the crisis proved false.
The crisis did impact the developing countries, principally via financial flow and through
trade. The developing countries and international organizations took a number of steps to
mitigate the effects of the crisis, but with varying results. Nevertheless, the impact of the
global liquidity crisis on Ukraine was even deeper than in most other emerging markets.
Ukrainian economy so vulnerable to the current global economic slowdown, this vulnerability
was partially due to the lack of consistent policies to support long-term sustainable economic
growth. The economic growth was supported by two main factor, first is by cyclically high
commodity prices for export and second is by high domestic demand fueled by expansionary
monetary policies and by banking sector credit financed primarily by foreign capital. A
financial crisis is the final outcome of persistent macroeconomic imbalances. Furthermore, if
these imbalances are driven by a narrow set of factors linked to global economics cycles, then
the stability of the national economy become hostage to developments in the global markets.
Ukraine was exposed to this particular type of macroeconomic imbalance, which resulted
from the global rise in commodity prices and a period of ample liquidity in the global capital
markets. This vulnerability made Ukraine more susceptible to an international financial crisis
is a rapidly widening current account deficit, increasing external short-term indebtedness of
bank and corporations and growing weaknesses of the banking system on the back of rapid
credit expansion and inadequate credit standards for borrowers. This vulnerabilities made
Ukraine more susceptible to an international financial crisis.

4.0 Literature Review
The European Sovereign Debt Crisis has been ongoing since 2010. Its impact should not be
overlooked because the whole European Union, even the whole world, will be affected by its
consequence. The countries that are hit hardest by this crisis include Greece. Currently,
international agencies such as the International Monetary Fund and the European Central
Bank are trying to figure out ways to reduce the damage. The debt crisis of the euro zone,
particularly linked to the Greek crisis, gradually started to give the first signal in the third and
fourth quarter of 2011, and as indicates, the real GDP growth started to slow down, almost in
the entire region.
Mitsakis (2014) The crisis in the Greek economy initially began as an emergency of the
European budgetary framework and as a consequence of the subsidence because of GEC, and
accordingly came about to a general social and political crisis. The crisis has further
developed into a liquidity emergency in the territorial nations, and after that turned into an
obligation and dissolvability emergency, while nowadays, it is communicated as a nonstop
emergency of the presence and attachment of the Eurozone inside worldwide measurements.
In Greece, before the end of 2009, budgetary markets found that the money related union
5

needed of monetary coordination and information of the proper systems so having the
capacity to rectify issues coming about because of aggressiveness' disparities among the part
states. Greece structure shortcomings have even scrutinized the presence of a typical Greece
cash. To that end, numerous experts foresee that the monetary emergency in Greece could
turn into the most exceedingly bad subsidence in cutting edge world history as the dominant
part of the associations have been adversely influenced in any case to highlight a decay of in
excess of 7.1% in GDP.
Bartlet and Prica (2011) .Countries whose growth is dependent on exports will suffer more
as in 2009 when the global financial crisis affected the economies of these countries. A
general growth slowdown throughout 2011 is visible for countries with available quarterly
statistics. Based on sector composition and economic and financial interdependencies, there is
a general perception that in 2012 there will be worse effects. Growth forecasts have been
revised almost in all Balkan countries
Mylonas (2013) Obviously, the Greek banking sector is experiencing unprecedented
challenges from the escalating economic crisis which tests system’s resilience under the
profound recession, Greek debt’s restructuring and the overall reduction of the traditional
liquidity sources coming from the international markets due to the deterioration of the
creditworthiness of the Greek government Even worse for banks, Greek economy’s outlook
still remains gloomy with most analysts foreseeing the economy contracting by 2.5 to 3.5 per
cent as fiscal consolidation, private sector wage cuts and high unemployment bite.
Consequently, Greek financial crisis’ escalation led to a rapid deterioration in the banking
system. This gradation centered in Greece in the second half of 2009 and early 2010, created
an extremely challenging economic and financial environment. Nevertheless to point out that
economic crisis’ effect on the banking sector affected other companies as well by limiting
their access to credit.
Matsaganis (2013) There is no doubt that the most characteristic feature of the Greek social
landscape in the current crisis is the steep rise in joblessness. The unemployment rate had
fluctuated around the 10 per cent mark in the first half of the previous decade. It then began to
fall when unemployment figures reached their lowest level for over a decade (325,000
workers or 6.6 per cent of the labour force). Thereafter it started to rise, gathering pace as the
recession deepened. Long-term unemployment increased even faster, to 889,000 workers or
18 per cent of the labour force in the first quarter of 2013 from 184,000 and 3.7 per cent in
the second quarter of 2008. As many as 65.6 per cent of all unemployed workers were out of
work for more than 12 months in the first quarter of 2013, compared to 51.5 per cent in the
second quarter of 2008. That primary earners were badly hit by the crisis is also clear from an
inspection of employment rates. As a matter of fact, the fall in employment was greatest
among male workers aged 30 to 44 from 2008 till the first quarter of 2013, a massive drop of
almost 20 percentage points in the space of less than five years. Many of the workers affected
now found themselves living in jobless households and with few other resources to draw
upon.
Vickstrom (2012) In order to facilitate and maintain the stability, Greece has implemented a
fiscal monitoring to watch over Greece debt crisis. In the face of the Greek debt crisis, deficit
levels and the possibility of a Greek default on its debt, the EU has modified its economic
model and policymaking. Adopted in March 2011 as the more stringent successor to the SGP
and using the EU's open method of coordination, the Euro-Plus Pact (EPP) created concrete
commitments in which the member nations of the EU are forced to abide to a list of fiscal and
political reforms intended to enhance their fiscal strength, discipline, and competitiveness.
This renewed effort for stronger economic policy coordination for competitiveness and
convergences consists of four main strategic goals: fostering competitiveness, fostering
employment, contributing to the sustainability of public finances, and reinforcing financial
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stability. Recently, an additional fifth issue was added in order to successfully coordinate tax
policy, which addresses all member nations of the pact. Fiscal policy is defined as
government spending policies that influence macroeconomic conditions, such as tax rates,
budgets, and government spending, in an effort to control the economy and limit public
expenditures. Trying to integrate an individual Eurozone member nation's fiscal policies was,
and still is, a very sensitive subject area because it reduces national sovereignty.
Furthermore, in Ukraine, Coporale and Gi-Alana (2013) studies the existence of long
memory for the Ukraine stock market by using Whittle estimator. They concluded that the
returns are characterized by a small degree of long memory. Also, the authors found evidence
of long memory in volatility. The results obtained highlighted that the presence of long
memory is influenced by the day of the week effect. Monday and Friday are characterized by
higher dependency.
Firms tend to employ trade credit market for various reason, behind informal financing,
they benefit in transactions and gets an instrument to advance their growth or simply retain
their market share and survive in case of tight financial constraints. Love, Preve & SarriaAllende (2007) state that credit crunch that affects financial lenders also effects non-financial
lenders (i.e. trade credit) and countries that experience a sharper decline in bank credit also
experience a shaper decline in trade credit. Garcia-Appendinia & Montoriol-Garriga (2013)
find that firms with high precrisis liquidity levels raised the trade credit extended to other
companies and subsequently exhibited better performance comparatively to cash-constrained
firms, which were more exposed to the crisis and reduces the trade credit provided. The result
are consistent with firms providing liquidity insurance to their clients when bank financing is
insufficient and present an important precautionary motive for accumulating cash.
Companies accrue cash reserves because they expose themselves to risks caused by late
payments and they want to compensate forthcoming costs associated with possible cash
discounts, late payment penalties, or the opportunity cost from a possible impairment in credit
rating. The same precautionary motive induces firms to hoard more cash as an effective
device to hedge against the fluctuations in cash flow and financial constraints during the crisis
period. Additionally, banks also are prone to require larger cash balances, since the risk of
firm default is raised in crisis, while increased information asymmetry between borrowers and
creditors impedes the lenders to assess firms’ credit- worthiness more accurately (Arslan,
Florackis & Ozkan 2006).
Zatonatska and Stavytskyy (2006a, 2006b, 2007a, and 2007b) have conducted some initial
analysis concerning the influence of state, local and private investments on GDP. The aim of
the work was investigation of the influence of each separate type of economic activity
expenditures on GDP, considering changes in the economic system because of some political
factors.

5.0 Greece Crisis & Economic Impacts
Dissimilar to the worldwide financial crisis where the genuine area was for the most part
influenced and the budgetary framework stayed stable, now the parts are inverse because of
the abnormal state of presentation of these nations to the Greek financial. Different timetables
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put the begin of the Greek emergency at diverse focuses. Master budgetary news outlets have
a tendency to concentrate on exact specialized indicators, while daily papers weave a longer
narrative. Daily papers and radio sources have a tendency to decorate the emergency as a
more expound story including prior forerunners and parallels.
It is imperative to recognize what for monetary experts are the key drivers in this
trajectory for danger appraisals, which are the yield on 10 years Greek government securities
bouncing from 5% toward the end of 2009 to close in on an unsustainable 20% by middle of
2011. An alternate prominent measure for likely default is the spread speculators interest to
hold Greek 10 years securities rather than comparable development German bonds, which
had moved to a chronicled high of in excess of 14% by middle of 2011. Money related
experts will regularly report how close Greece is to "sovereign default" as the consequence of
these yields: the higher these are, the more they show an absence of certainty by market
sectors in the capacity of Greece to reimburse its debts.
In the event that it climbs excessively high, the legislature will never again have the capacity
to raise the trusts important without paying corrective rates of investment, which then will
undermine the whole country's practicality. There is much media theory that if Greece can no
more rein in uses to reach its commitments, there will be blood in the city, with some
compelling hypotheses theorizing common war, military autocracy, and euro zone
breakdown.
Austerity measures and trepidation of come back to a weaker cash imply that rich savers
and speculators are slowly withdrawing their stores from Greek banks and setting
speculations abroad in stronger outside monetary standards. Unmistakably, such references by
financial markets to the likelihood of sovereign default are genuine and undermining insofar
as they shake markets and financial specialist opinion around the world, and influence
decisions all through the European zone. The destiny of the euro, the European Union, and
the monetary suitability of individual nations are likewise guaranteed to be in question. This
is the reason the Greek crisis has turned into a critical issue for all European nations and, for
sure, globally. The steady scope on the TV, the stories of calamity, of crisis, everybody is
apprehensive. Some individuals have been determined to suicide but then no one is paying for
these lost lives. (Anita, thirty-eight, Trikala, Au-blast 2012).
An at one time unthinkable subject in provincial Greece, suicide is currently all that much
piece of neighborhood reality. In summer 2012 prominent instances of suicide talked about in
the media resounded with four cases within a month in Trikala alone, the individual deserted
a note expressing financial destroy and appetite as the"cause of death." The worldwide effect
of " mediascapes " (Appadurai 1990) encompassing the Greek emergency is striking, and
Trikalinoi are very much aware of the media representations past national outskirts.

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As indicated by the Greek National Statistical Service, Greece is among the initial 15 travel
destinations on the planet and the second most went by nation in Europe. As you know, the
economy started to turn down at 2008. The noteworthy drop in traveler entries was not by any
stretch of the imagination because of Greece's obligation crisis. Nations worldwide were
confronting genuine monetary issues and, as the unemployment rates were quickly
expanding, more individuals chose to put off their getaways (Conrady, 2010). Understanding
the vitality of keeping up the cash flows in tourism, the Greek government dropped costs and
made the nation less costly for outside guests. Greek government fundamental need is to keep
the emergency principally financial and support the improvement of tourism and delivery,
two of the most critical divisions of the economy.

Results demonstrated that Greece's methodology for 2010 keep on reducing costs and build
the nature of administrations was effective among Romanians. Besides, travel organizations
in both nations showed that the quantity of Romanians who crossed out their vacation to
Greece due to the challenges in Athens was extensive little contrasted with the individuals
who decided to fly out to Greece in the same period. Better travel bundles and a strong faith
in the national security of the nation persuaded numerous Romanians to set out to Greece
regardless of the exhibits. An alternate focal point of Greece in these troublesome times is
nationals' long involvement in tourism.
Greece remains for convention and society and its values are well protected by the
populace. In drawing in visitors, Greeks show appreciation to their visitors and, most
importantly, friendliness. All these things, make the Greece's crisis less emotional for the
Romanian shoppers. The unemployment figures demonstrate that the Western Balkans had
genuine unemployment levels even before the crisis. All nations have higher unemployment
rates than the EU normal of 8.9%. Anyhow while the greater part of the nations have high yet
still sensible issues, in FYROM, Bih and Kosovo more than a third, quarter and about 50% of
the working energy, separately, is authoritatively unemployed. Exports are considered as a
transmission channel, so the information demonstrates that Greece is a real fare market for
FYROM and Montenegro and to a degree lesser degree for Albania. Given the moderately
low exports bases of most western Balkan economies, the offer of fares to Greece in respect
to GDP is genuinely little in almost all nations in the district. In this way, a conceivable
further decrease in exports to Greece would in itself not be relied upon to distress the
respective economies.

6.0 Ukraine crisis and economic impact
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The potential bankruptcy of many of the major banks in Ukraine and the extremely high level
of foreign and domestic indebtedness of many households, exacerbated the downturn in the
real economy (figure 1)

Figure 1: Foreign exchange loans in total loans
Source: International Monetary Fund (IMF)

The world financial crisis, especially after the Lehman Brothers bankruptcy, combined with
the rapid downturn in the domestic economy, led to a severe fall in the value of the Hryvnia
against hard currencies (figure 2). At the same time international lending to emerging
economies dried up as bank lending entered a very restrictive phase (figure 3). This was
reflected in the astonishing rise in the risk margin on credit default swaps. The impossibility
of refinancing foreign loans meant that many of the banks were unable to meet their
obligations. Bank lending to individuals and companies dried up completely and there was a
rush on the banks as individual depositors tried to withdraw their money. The banking crisis
reinforced the downturn in the economy.

10

Figure 2: hryvnia/US dollar exchange rate
Source: International Monetary Fund

Figure 3: Emerging market bond index
Source: International Monetary Fund

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In these circumstances it was vital for Ukraine to obtain new foreign loans to keep the
financial system afloat. The key support came from the International Monetary Fund (IMF)
which agreed to a two-year standby loan of around $US16 billion to be disbursed in four main
tranches, of which three were disbursed in 2009. The IMF loan was vital both from a financial
point of view but also as an indicator of confidence in Ukraine's capacity to master the disastrous
economic and financial situation. The conditions attached to the loan were initially very tight but
have progressively being weakened as the depth of the recession became fully appreciated by the
IMF. The IMF estimates the initial public cost of restructuring the five private banks has
amounted to approximately 3% of GDP, while that of the two state banks represents an additional
2% of GDP.
Ukrainian banking system for the first time faced with the negative impact of financial
globalization: firstly, lack of cheap foreign resources has led to greater use of internal, more
expensive, resources and this in turn caused a rise in deposit interest rates, and secondly, foreign
banks, who worked in Ukraine in the event of liquidity problems of national banks began to sell
their temporarily free resources on the domestic interbank market, which greatly increased the
interest rates on interbank loans. The share of foreign capital in the domestic banking market is
measured with the part of the banks’ capital in the total number of banks in Ukraine, as well as
their participation in the assets. The main methods of penetration of foreign capital in Ukrainian
banking sector are: the establishment of a branch or subsidiary, the acquisition of existing local
bank in the privatization or bankruptcy, portfolio investment in current local bank and gradually
increase equity participation up to full control, merger or acquisition of another foreign bank,
which owns a branch or subsidiary in that country.
It is necessary for the subjects of the Ukrainian banking system to regain the confidence of
the population, to resume lending to the economy, to achieve exchange rate stability and
predictability. Elimination of the consequences of the financial crisis in the long term involves
creating a stable financial system that is at a lower cost will be to overcome the negative impact
of future crises. Building today the perfect resistant to bankrupt financial system capable of in
the event of adverse developments in the economy to maintain normal functioning, it is virtually
impossible, because of the interdependence of the financial and real sectors of the economy.
However, increasing the efficiency of macroeconomic policy, financial regulation and
supervision, will make the financial system more resilient. During the crisis central banks and
other regulators of financial systems face enormous risks. To overcome the crisis, they must act
carefully and clearly, taking measures to eliminate obstacles to the flow of funds.
Ukraine Economy Crisis
Ukraine economy crisis can be classified as developed economy, given its overall level of
industrial and agricultural output. However, the economy of Ukraine suffered because of various
weaknesses deriving from over centralized command economy during Soviet period.
Ukraine Economy Past
Large and inefficient state-owned factories, enterprises and collective farms wasted resources
and focus their attention on quantity over quality. Prices were randomly set, and consumer goods

12

were often in short supply. Excessive spending on the military hurt the civilian economy, while
technological development lagged in the civilian area.
Ukraine Market Economy
For the last years, Ukraine is moving to market money, where the forces of supply and demand
and private ownership guide the allocation of resources. The transformation to market economy
is politically and socially difficult because the population must suffer rising inflation,
unemployment, and economic that lack of certainty before it experiences the long-term benefits
of market economy.
In addition, Ukraine defined again its economic relationship with Russia and other former Soviet
Republics. As a way of safeguarding its political independence and limiting its economic
vulnerability, Ukraine has its own currency called the hryvnia, from 1992. The economic reforms
also cut military production and transform military factories and technologies to benefit the
civilian economy and the population.
Ukraine economy: Agriculture
Historically, Ukraine is well known for its agricultural production. Among its main agricultural
products are sugar beets, wheat, meat, and dairy products. Other crops include barley, corn, rye,
and tobacco. Most Ukraine farms are very large state-owned farms of more than 8,000 acres.
Smaller private plots have historically been the most productive throughout the former Soviet
Union, and their importance should grow in the future.
Ukraine Economy: Resources
Ukraine mineral resources have played an important role in supporting Ukraine industrial
development and in providing for its energy needs. During the 1980s nuclear power also became
a significant source of electrical power, accounting for about 25% of Ukraine’s electricity. The
accident at Chernobyl power station in 1986, however, created strong opposition to nuclear
power in Ukraine, and efforts are now being made to phase out reliance on nuclear energy.
Ukraine Economy: Industries
Ukrainian major industries are metal works, machine building, construction, chemicals, food,
and light industry. Ukraine is a major producer of steel and iron. Ukraine accounted for 33% of
Soviet steel and iron production. About one-third of its industrial manufacturing comes from
machine-building sector, which produces tractors, machine tools, and mining equipment.
Transportation vehicles manufactured by Ukraine economy include cars, trucks, buses, railway
cars, diesel locomotives, airplanes, and ships. The chief output of Ukrainian chemical industry is
fertilizer, while Ukrainian food industry is involved with sugar refining, meat packaging, food
canning, and wine production. Among consumer goods produced are television sets,
refrigerators, washing machines, and clothes.
Ukraine Economy: Transportation System
Overall, Ukraine has a well-developed and diverse transportation system. Ukrainian railroad
network is extensive and links major cities with industrial enterprises. Waterways such as Dnepr
River and Black Sea and Azov Sea, and their port cities, play an important role in shipping.
Ukrainian highway system comprises about 147,000 kilometers (91,000 miles) of paved roads.
13

Ukrainian subway systems exist in Kiev and Kharkov. There are major airports near Kiev (at
Boryspil), Kharkov and Odessa cities.
Ukraine Economy: Export and Import
Ukrainian major exports include grain, sugar beets, coal, construction equipment, and select
manufactured goods. The primary Ukrainian import items are oil, natural gas, wood products,
rubber, and consumer goods. Some of Ukraine major trading partners are Russia, Poland, USA,
Hungary, Germany, France, and Iran. Ukraine is seeking to reduce its economic ties with Russia.

Ukraine economy export and import 1996-2006

Figure 5: Ukraine Industrial Production in 2014

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Figure 6: Ukraine Gross Domestic Product (GDP) Billions of U.S dollars

Figure 7:Ukraine Inflation Rate

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Figure 8: Ukraine Unemployment Rate
Unemployment
The unemployment rate increased to 9.5% at the beginning of 2009 as a result of the global
finance crisis, and today stands at 7.5%. While firms in the country face a shortage of skilled
workers, many university graduates can’t find any jobs. They end up in jobs that do not use their
skills or called skills mismatch.
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7.0 Social Impact of Greece
There is no doubt that the most characteristic feature of the Greek social landscape in the
current crisis is the steep rise unemployment. The unemployment rate had vacillated around the
10 per cent check in the first half of the earlier decade. It then started to fall until May 2008,
when unemployment figures arrived at their most reduced level for over 10 years 325,000
specialists or 6.6 every cent of the work power. From there on it began to climb, get-together
pace as the retreat developed. In May 2013, the most recent month for which information were
accessible at the time of composing 1 , the quantity of jobless laborers was just about 1.4 million
and the unemployment rate at 27.5 per cent. That contrasted with 26.3 every penny in Spain,
17.2 per cent in Portugal, 13.5 every penny in Ireland and 12.1 per cent in Italy.

Long-term unemployment increased even faster, to 889,000 workers or 18 per cent of the
labour force in the first quarter of 2013 (from 184,000 and 3.7 per cent in the second quarter of
2008). As many as 65.6 per cent of all unemployed workers were out of work for more than 12
months in the first quarter of 2013, compared to 51.5 per cent in the second quarter of 2008.

8.0 Politics impact of Ukraine
December 1991, after the broken up of Soviet Union, Ukraine has had a nationwide
referendum and 90% of people, including majority of those living in the Crimean peninsula,
voted for independence from Russia. But Ukraine remained much more closely aligned with
Russia than many other former Soviet Republics did. For instance, Estonia which is now part of
the European Union (EU). In 2004, there was an election and there were widespread reports of
vote rigging or electoral fraud, but the Russian-friendly Viktor Yanukvych was elected. The
opposition leader, Viktor Yushchenko led massive street protests in Kiev that came to be known
as the Orange Evolution. Yushchenko was injured and almost died as a result of mysterious
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poisoning. Coincidence, the number of “mysterious poisonings” in Russia and Eastern Europe
has increased rapidly since Putin came to power in Russia. The Orange Revolution protests led
to a second election, and the poisoned opposition leader, Yushchenko won.
For one thing, a lot of people in Ukraine, especially in Eastern part, want to be more closely
allied to Russia and also despite being an economist; Yushchenko wasn’t very good at running
the Ukrainian economy. Also, Yushchenko couldn’t push through difficult economic condition
measures needed to deal with Ukraine’s rising debt and his friendliness towards Europe and
enrage Russia which cut off gas supplies catastrophically to Ukraine in 2006. By 2010, Ukraine
was being led by the Europe friendly and somewhat corrupt, Yulia Tymoshenko but then there
were other elections. The presidential election, declared free and fair by international observers,
was won by the Russian-friendly, Viktor Yanukovych. In November 2013, Yanukovych
announced that Ukraine would abandon an agreement to strengthen ties with European Union
(EU) and would instead become a closer ally to Russia.
That is when the protests began in Kiev’s Independence Square. The decision provoked
demonstrations in Kiev on what became known as the Euromaidan by protesters seeking to align
their future with Europe’s and speaking out against corruption. These protests grew and grew
until February 20th when dozens of protesters were killed by military and police and the next day
Yanukovych disappeared from Kiev. Yanukovych government’s crackdown after three months of
protests. Protesters had won. They installed a new temporary government to prepare for a new
elections, then Putin regime marched into the Crimean peninsula, apparently to protect Russians
ethnic over there and Russian military installations, but this violation of Ukraine territorial
integrity is known in diplomatic circles as a really big deal. Concerns are mounting about
separatism in Crimea and eastern Ukraine, as well as the potential for conflict between Ukrainian
and Russian forces on the peninsula, which could spur further clashes elsewhere in Ukraine.

9.0 Greece action taken to recover the crisis
1) Default officially.
Greek bonds have been exchanging at huge discount throughout recent months, and transactions
to lessen the Greek government's obligations have been running non-stop in the background.
Puzzlingly, then again, the government has continued to pay all the interest owed to select groups
of creditors. An authority default would permit Greece to experience an all the more systematic
kind of insolvency methodology, deciding the "rank" of different cases essentially, which ones
get paid first and afterward arranging with loan bosses while installments stayed solidified. A
while later, Greece would have some major snags getting from worldwide credit markets for
quite a while, maybe a few years. Its pioneers would need to structure a tough government,
which thusly would need to exhibit the capacity to use dependably to win back the businesses'
confidence.
2) Dropping the euro.

The euro is a huge obstacle to Greece's come back to fiscal health. In a nation with its own
particular currency, an administration can utilize expansion to lessen the estimation of its
obligations in respect to its assessment income. Issuing more money makes costs and wages
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climb, yet the sum owed to borrowers are still the same. The Greek government can't issue more
euros, however; only the European Central Bank can. Nor can the Greek government depress the
value of its currency to help its exports, a common strategy for hastening an economic recovery.
A return to the drachma would put the tools of monetary policy back in Greek hands. It would
almost certainly lead to a default, too, since the government would have a hard time putting
together enough depreciated drachmas to pay its euro-denominated debts. But after an initial
scare, the country would be well equipped for future growth. Tourism and other exports would
undoubtedly benefit from having a flexible currency, as would purchases of Greek assets by
foreigners.

3) Raise taxes to stop the crisis.
At the moment, the Greek government's revenue is about 42 percent of GDP. That's a middlingto-low figure for the euro area, where the IMF predicts that Belgium, Finland, and France will all
top 50 percent this year. Raising tax rates and improving tax collection could bring the
government's revenue more in line with its spending and eventually balance the budget. In fact,
raising tax rates wouldn't necessarily result in higher revenue. At the same time, experienced and
skilled as the Greeks seem, by all accounts, to be in maintaining a strategic distance from
expenses, there's confirmation that the nation is still on the left-hand side of the Laffer bend. In
fact, it is also recommends that Greece could upgrade its income by up to 5.6 rate purposes of
GDP before the bend began to slant descending.
4) Cutting the spending of Greece.
The main reason of this crisis is considered the unproductive spending of the Greek
Government. So to handle this crisis it is expected from the Greek Government to show mature
behavior towards the welfare of state. It is also recommended to Greek government to reduce the
cost of production because before this crisis a huge amount was spent as the wages of employees
and ultimately there was an increase in the production cost. Right now, the budget deficit is still
about 7 percent of GDP and on track to stay around 5 percent in the long term. That's already a
lot lower than the 11/10 percent figures of two years ago. Like them or not, more cuts would
finish the job. Of course, cuts could also hamper the Greek economy's recovery by doing away
with government jobs and spending in other areas. And also increase productivity level while
maintaining quality. With such little confidence in Greece amongst investors and corporate
managers, it's hard to believe the private sector would instantly fill the gap. Cuts would end the
fiscal crisis and enhance trade relations with surplus countries to boost the exports and the
concept of currency devaluation. As due to devaluation in the value of currency there will be
more chances of growth and political stability. And there will be the reduction in the real value of
debt.
5) Strong and strengthen banking system in
The ECB and the U.S. Federal Reserve have also played a role in responding to the crisis. The
ECB start buying European government bonds in secondary markets to increase confidence and
lower bond spreads for Eurozone bonds under market pressure. Between May 2010 and June
2011, the ECB purchased government bonds. The ECB has also provided substantial liquidity
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support to private banks in Greece and other countries in the Eurozone, and has provided more
flexibility in doing so than it did before the crisis. More than that, the Fed has supported the
crisis response by re-establishing temporary reciprocal currency arrangements, known as swap
lines, with several central banks in order to increase dollar liquidity in the global economy. These
swap lines had been previously used during the global financial crisis. The swap lines were set to
expire but have been subsequently extended until August 2012. While the swap lines were used
most heavily immediately after the Fed re-established them, there has not been any amount
outstanding on the swap lines between 2010 and 2011.
6) A devoted and strong society
Similarly the evaluation system of public spending and financial auditing system in Greece is not
up to the mark. A proper check and balance system should be introduced to avoid the negligence
of people which is creating disturbance in the smooth working of country. It is also beneficial for
the Greek Government to pay attention towards its tourist and energy industry. As in earlier of
Greece these both industries was playing the major role in its growth. Last but not least
according to the circumstances it’s better for the Greece to quit the Euro-Zone and also take
some quick measures because after leaving Euro the banking system of Greece can be badly
affected.
7) Liquidated.
Though a small country, Greece has a lot of valuable stuff. Its monuments are recognized around
the world. Its countryside and beaches are beautiful. Its museums are filled with the riches of
early Western civilization and some of the East as well. And for a small country, it has a lot of
fancy embassies and consulates dotting the globe, not to mention the snazzy military hardware it
has bought at a higher rate than China. All of these assets can be sold, and indeed some of them
already have been. But there's a further step by selling the country. When a company goes
bankrupt, its creditors have the option of chopping it up into pieces to recoup their debts and
claim their shares. Greece could do the same, offering all or part of itself to other countries in
Europe and beyond. Along its northern and western edges are large, ethnically Albanian,
Macedonian, and Turkish communities that have occasionally been the subject of extraterritorial
claims by groups in neighboring countries. These countries might be willing to pony up a lot of
cash in return for a change in Greece's borders.

10.0 Ukraine action taken to recover the crisis
1)

Russia Brotherly Relationship

Back to the ninth century, Russia has strong brotherly ties with Ukraine and the founding of
Kievan Rus, the first eastern Slavic state, whose capital was Kiev. Ukraine was part of Russia for
centuries and they both continued to be closely in line through the Soviet Socialist Republics era,
when Ukraine and Russia were separate republics. Ukraine is also an economic partner that
Russia would like to incorporate into its proposed Eurasian Union, a customs union due to be
formed in January 2015 whose likely members include Kazakhstan, Belarus, and Armenia.
Ukraine’s membership would increase the union’s population.
20

2)

Energy Trade

Ukraine also plays an important role in Russia’s energy trade; its pipelines provide transit to 80
percent of the natural gas Russia sends to European markets, and Ukraine itself is a major market
for Russian gas. Militarily, Ukraine is also important to Russia as a buffer state, and it is home to
Russia’s Black Sea fleet, based in the Crimean port city of Sevastopol under a bilateral
agreement between the two states.
3)

Trade Deal with Russia

During huge protests, Ukraine's President Viktor Yanukovych reached agreement with Russia for
a $15-billion loan and a more than 30% cut in the price of Russian natural gas, deals. It seems
aren't likely to win him peace from his European-leaning opposition. Yanukovych enraged his
political opposition by rejecting trade ties with the European Union, previous mention that is to
avoid alienating Russia. "Given the problems of Ukraine's economy, connected to a greater
degree with the world financial and economic crisis, and with the purpose of supporting
Ukraine's budget, the government of the Russian Federation decided to invest $15 billion … in
Ukrainian government bonds," - Vladimir Putin.
After years of arguments over energy, Putin also said Russia would reduce the price of natural
gas it sells to Ukraine to $268.50 per thousand cubic meters from $410, providing a significant
boost to Ukrainian industry. When Yanukovych failed to sign an association and trade agreement
with the EU last month, he said Ukraine would have needed at least $20 billion to adjust to the
changes such a pact would entail. Including the gas deal, he in effect received that amount from
Russia. Critics said it came with strings attached.
"I will put things the way they are: This work wouldn't have been accomplished with such
optimal speed but for the political will of Russia's President Vladimir Putin," Yanukovych said at
the news conference. "Today's meeting proved that the interaction between Ukraine and Russia
has a powerful base and good perspective for further development," – Viktor Yanukovych.
(Loiko.S.L., December 2013).
Russia considers Eurasian Union efforts to expand Ukraine, even through a parallel limited
association agreement, as an aware step because it opens the doors to strengthen Western
institutional impressive display ties at the expense of Russian ones. The EU’s Eastern Partnership
Program, which established on 2009, is only aimed at shaping tighter bonds with other former
Eastern alliance countries. Russia sees it as a stepping-stone to organizations such as NATO,
which was for Russia’s security initiate as a threat. Ukraine belongs to NATO’s Partnership for
Peace program but is seen as having little possibility of joining the alliance in the futurity.
Russian president Vladimir Putin has describe his country’s role in Ukraine as a shield or shelter
ethnic Russians worried by unregulated law that spread at east from the capital, where leaders in
Kiev demanded as a provocations. In the case of Crimea, Putin has stressed Moscow is not
imposing its will, but rather, supporting the free choice of the local population, drawing parallels
with the support Western states gave to Kosovo’s 2008 declaration of independence from Serbia.
4)

U.S. and European Policy Options in Ukraine

U.S. officials have repeatedly expressed their desire to see Ukraine become a stable democracy
with firm economic and political connections to the European Union. In response to the
developments in Crimea, the preferred outcome for Washington and many states, says CFR
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President Richard Haass, “is to see the Russians be persuaded to leave Crimea in exchange, say,
for some participation in an economic package and some protection for Russian speakers.” EU
and U.S. policymakers have begun a series of steps that include:
i) Economic aid
The European Union has announced $15 billion over the next several years conditioned on
Ukraine reaching an agreement with the International Monetary Fund and enacting tough
reforms like ending gas subsidies. Washington has promised $1 billion in U.S. loan guarantees
and technical assistance.
ii) Sanctions
The U.S. State Department on March 6 announced a visa ban on “Russian and Ukrainian
officials and individuals responsible for or complicit in threatening the sovereignty and territorial
integrity of Ukraine.” President Barack Obama also signed an executive order sanctioning
individuals and entities deemed responsible for the crisis, but no officials or entities have yet
been identified. The EU said it had frozen the assets of Yanukovich and seventeen other officials
suspected of human rights and other abuses. But the United States and EU countries such as
Germany and Britain disagree on whether to level tough sanctions on Russia.
iii) Energy aid
Some experts and U.S. lawmakers have called for accelerating the approval of U.S. natural gas
proposals, which would take advantage of booming U.S. production to help lessen the reliance of
European partners and Ukraine on Russian natural gas. Some experts say it is unlikely a U.S.
export boost would make inroads on Russian gas sales in Europe.
5)

Lifeline loans

The International Monetary Fund (IMF) has given a green light for Ukraine to receive the
second loan of financial assistance totalling $1.39 billion, meaning more difficult economic
condition measures for the already struggling economy. The completion of this review enables
the disbursement of SDR 914.67 million (about US$1.39 billion), which would bring total
disbursements under the arrangement to SDR 2.97 billion (about US$4.51 billion),”the statement
reads. The international body also approved Ukraine's request to merge the third and fourth
installments of its financial assistance. Ukraine's weak economy may now be eligible for a $2.3
billion bailout if another review is passed by the end of 2014.
All this, as the IMF says Ukraine's GDP will contract by 6.5 percent this year, while the
hryvnia has fallen over 60 percent against the dollar this year. “Under the IMF's articles of
agreement, it [IMF] is not allowed to lend money to a country that is unable to pay. The
repayment of these demands is going to cause the Ukrainian currency to fall way down...the
economy will be killed under the condition of this loan.”- Michael Hudson, Wall Street Analyst.
To receive the IMF funds, Kiev opted for severe austerity program that includes getting rid of
24,000 government jobs, withdrawing subsidies on natural gas, raising taxes, and selling off state
assets. Ukraine received the first IMF loan of $3.16 billion in May after the IMF approved a $17
billion package in the form of a two-year stabilization program (RT, August 2014).

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11.0 Conclusion
The Greek sovereign debt crisis is one of the most-debated issues in contemporary European
politics. It was caused not by inadequate economic institutions, but by the insufficient application
of the convergence criteria to Greece, the disintegration of the Stability and Growth Pact, and the
resulting perverse incentives of banks to lend irresponsible amounts of money to Greece. The
EU’s policies so far loans for Greece, reducing debt, and ensuring bank liquidity have been
helpful but not altogether sufficient. Broader institutional reforms must also be made. The
European Union must reform the European banking system, calm financial panic through
economic convergence and preventing excessive debts and deficits, and encourage growth in
Greece and other peripheral countries. Of these, it have already started to aim for the economic
convergence that should have been upheld at the EMU’s founding. However, other long-term
institutional reforms such as encouraging Greek growth provide fewer short-term benefits to
political leaders outside of Greece.
The burden of this financial crisis has already shifted to the shoulders of new government of
Greece, which must enforce the application of callous & detested spending cuts. The government
should operate on a balanced Federal budget, just as the states are forced to do. It should run the
nation as we run our own personal finances. To achieve this goal, Greece needs to elect
politicians that have the foresight to do this. Some economists have suggested that Greece should
issue new national currency and should abandon Euro (Rein frank, 2010). Greek’s government
should also focus on improving exports and foreign investment. Greece should focus on those
sectors and industries in which it has strong competitive and comparative advantage for trade and
investment. It should also remain focused on austerity measures in long run along with in short
run. The great opportunity for Greece is that for its rescue, European Union is there. It will take
years to recover Greece from these crises. It can only be happen if it gets sincere leadership and
assistance from politicians, society and member countries as well.
While for Ukraine, the most prolonged and deadly crisis since its post-Soviet independence
began as a protest against the government dropping plans to forge closer trade ties with the
European Union and has since spurred a global standoff between Russia and Western powers.
The crisis stems from more than twenty years of weak governance, a lopsided economy
dominated by oligarchs, heavy reliance on Russia, and sharp differences between Ukraine’s
linguistically, religiously, and ethnically distinct eastern and western halves. After the dismissal
of President Viktor Yanukovych in February 2014, Russian moves to take control of the Crimean
Peninsula signaled Moscow’s intent to retain its sphere of influence and raised serious questions
about the ability of the state’s new leaders to provide stability and a path to meaningful reforms.
Ukraine's economy realistically could be standing to grow at over 4% annually for the next
quarter century. Better policy can bring that growth forwards (higher growth rates, faster catch
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up growth). Yes, Ukraine has been devastated by incompetent government, by pillaging oligarchs
and by Russia holding it captive. Yet Ukraine has the potential with only modest change to boom
and bloom.

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