Greece

Debt
Crisis
Presented By :
Chirag Gupta 80303180067
Devyani Lakhera 80303180103
Yugalkishore 80303180067
Naman Bhatia 80303180024
 The Greek economy – its Weakness
• A small country – with a weak economy: Tourism, Shipping, Food, textiles, few industries

• For Energy, Greece is today heavily dependent upon imports (Oil and Gas)

• Apart from Tourism and shipping services, Greece has no important export industry

• However: From 1960 to 1973 Greece experienced its First „Economic Miracle“, Growth rates of 7.7%
(second only to Japan), the highest in Europe

• A very weak tax State - Tax compliance traditionally very low in Greece, Tax Exemptions abound, Greek
tax Authorities are not very efficient, Massive Tax Evasion

• Rather large black economy ( 24.3 % of GDP in 2012)

• The rule of oligarchies since Ages – A few big corporations run by Families and an extremely high
percentage of Small and Tiny enterprises (31.9 % are officially Self-Employed)
 Greek Debt Crisis
• The Greek debt crisis is the dangerous amount of sovereign debt Greece owed the European Union between 2008 and
2018. Since the debt crisis began in 2010, the various European authorities and private investors have loaned Greece
nearly 320 billion euros.
• October 2009 : A new (Socialist) Government led By Giorgios Panpandreou came to power. The new left Government
revealed the fiscal misreporting of the previous Governments. The official Greek government Deficit Rose quickly from
11 to finally 15,7% (the highest in the EU)

• In 2010, Greece said it might default on its debt,

threatening the viability of the eurozone itself. To
avoid default, the EU loaned Greece enough to
continue making payments.
• In return for the loan, the EU required Greece to
adopt austerity measures. These reforms were
intended to strengthen the Greek government and
financial structures. They did that, but they also mired
Greece in a recession that didn’t end until 2017.
 The Origins of Greece's Debt Crisis
• The story about Greek Governments (conservative) forging the Government debt statistics (with active Help by
Goldmann Sachs) in order to meet the EU criteria, is wrong.

• A Greek economic ‚Miracle‘ with Growth rates of 4,2 % per Annum?

• yes, Until 2008 Greece had 14 consecutive years of economic growth

• Since 2001 Greek Bank and Greek Borrowers / Debtors profited
from the much larger capital Market and the much lower longterm
interest rates in the Eurozone.

• A Massive inflow of foreign Capital , due to a rising Trade deficit

and Current Account Deficit
• Heavy Borrowing by the Greek government in order to Finance an
Already overdimensioned public Sector, Hence rising government
deficits.
 MEASURES
• First round of crisis response (may 2010): 3 years package of €110 billion by IMF (€ 30 billion) and Eurozone(€
80 billion).

• ECB provided substantial liquidity support to Greek’s private banks (b/w Jan 2010 to May 2011) - €51 billion.

• The European union, the IMF and the ECB set up a tripartite committee (The TROIKA) to prepare an appropriate
programme.

• Again Euro zone provided loan - July 2011 €109 billion.

• ECB started buying government bond from secondary market to reduce bond spread and to increase the confidence of
the investors.
• Between May 2010 to June 2011 ECB purchased €78 billion
bonds, out of which €45 billion from Greece government.
• EU also made a proposal to make a single authority responsible
for tax policy and govt. spending.
 AUSTERITY MEASURES
Austerity measures are outlined in Feb 2010.

• Freeze in the salary of all gov. employees

• 10% cut in bonuses & payment of overtime work

• 30% cut in Christmas & leave for absence

• Increase in VAT as 23% goods and services,11% on

food and 5.5% on stationary

• Return of a special tax on high pensioners

• Average age of retirement for public sector employee

had increased from 61 to 65
 IF GREECE RECEIVED BILLIONS IN BAILOUTS, WHY
HAS THERE STILL BEEN A CRISIS?
• The money was supposed to buy Greece time to stabilize its finances
and quell market fears that the euro union itself could break up. While
it has helped, Greece’s economic problems have not gone away.

• The bailout money mainly goes toward paying off Greece’s

international loans, rather than making its way into the economy. And
the government still has a staggering debt load that it cannot begin to
pay down unless a recovery takes hold.

• Greece’s relations with Europe are in a fragile state, and several of its
leaders are showing impatience, unlikely to tolerate the foot-dragging
of past administrations.
CONCLUSION
• Due to over public expenditure and over borrowed, Greece was at the verge of default.

• Greece govt. has taken tight austerity measures to bring down budget deficit to 0.9% of GDP
by 2015. But due to excessive expenditure cut and unemployment, the disposal income(saving)
of public will be reduced.

• The EU, IMF, ECB lending to Greece to solve the underlying problem. But the maximum money
is spent for repayment of debt not for productive use.

• Though they are pumping money in Greece, they are not sure for the future of Greece
economy.