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Financial Crisis in Greece presented to : Dr.HAYTHAM YASSINE presented by: Samira khan : 

Financial Crisis in Greece presented to : Dr.HAYTHAM YASSINE presented by: Samira khan

Debt is $413.6 billionOne of the worst countries with debt in Europe : 

Debt is $413.6 billionOne of the worst countries with debt in Europe GREEK CRISIS

An Overview… : 

An Overview… What is really the problem with Greece? Years of… Unrestrained spending Cheap lending Failure to implement effective financial reform Failure to collect taxes a.) citizens b.) officials How big are these debts? National debt, put at €300 billion ($413.6 billion), is bigger than the country's economy, with some estimates predicting it will reach 120 % of GDP in. The country's deficit –how much more it spends than it takes in –is 12.7 %.

Causes of Greece’s Crisis : 

Causes of Greece’s Crisis Greece’s current economic problems have been caused by a mix of domestic and international factors. Domestically, high government spending, structural rigidities, tax evasion, and corruption have all contributed to Greece’s accumulation of debt over the past decade. Internationally, the adoption of the euro and tax enforcement of EU rules aimed at limiting the accumulation of debt are also believed to have contributed to Greece’s current crisis.

Domestic FactorsHigh Government Spending and Weak Government Revenues : 

Domestic FactorsHigh Government Spending and Weak Government Revenues High economic growth rates were driven primarily by increases in private consumption (largely fueled by easier access to credit) and public investment financed by the EU and the central government. Over the past six years, however, while central government expenditures increased by 87%, revenues grew by only 31%, leading to budget deficits well above the EU’s agreed-upon threshold of 3%.22 Observers also identify a large and inefficient public administration, costly pension and healthcare systems, tax evasion, and a general “absence of the will to maintain fiscal discipline” as major factors behind Greece’s deficit.

Structural Policies and Declining International Competitiveness : 

Structural Policies and Declining International Competitiveness Greek industry is suffering from declining international competitiveness. Economists site high relative wages and low productivity as a primary factor. Greece have increased at a 5% annual rate in wages since the country adopted the euro, about double the average rate in the Eurozone as a whole. Greek exports to its major trading partners grew at 3.8% per year, only half the rate of those countries’ imports from other trading partners. Some observers argue that for Greece to boost the competitiveness of its industries and reduce its current account deficit, it needs to increase its productivity, significantly cut wages, and increase savings.

International FactorsIncreased Access to Capital at Low Interest Rates : 

International FactorsIncreased Access to Capital at Low Interest Rates Greece’s adoption of the euro as its national currency is seen by some as a contributing factor in Greece’s buildup of debt. With the currency bloc anchored by economic heavyweights Germany and France, and a common monetary policy conservatively managed by the ECB, investors have tended to view the reliability of euro member countries with a heightened degree of confidence. The perceptions of stability conferred by euro membership allowed Greece, as well as other Euro zone members, to borrow at a more favorable interest rate than would likely have been the case outside the EU, making it easier to finance the state budget and service existing debt. This benefit, however, may also have contributed to Greece’s current debt problems: observers argue that access to artificially cheap credit allowed Greece to accumulate high levels of debt. Critics assert that if the market had discouraged excess borrowing by making debt financing more expensive, Greece would have been forced to come to terms earlier with the need for austerity and reform.

Slide 8: 

Situation Biggest problem: the inflation rises higher than the GPD and the unemployment is falling slowly 185000 joblosses it reached a peak of 17 million unemployed people.

So what's the problem in Greece? : 

So what's the problem in Greece? Years of unrestrained spending, cheap lending and failure to implement financial reforms left Greece badly exposed when the global economic downturn struck. This whisked away a curtain of partly fiddled statistics to reveal debt levels and deficits that exceeded limits set by the euro zone

What is Greece doing? : 

What is Greece doing? As already mentioned, the government has started slashing away at spending and has implemented austerity measures aimed at reducing the deficit by more than €10 billion ($13.7 billion). It has hiked taxes on fuel, tobacco and alcohol, raised the retirement age by two years, imposed public sector pay cuts and applied tough new tax evasion regulations.

Are people happy with this? : 

Are people happy with this? Predictably, quite the opposite and there have been warnings of resistance from various sectors of society. Workers nationwide have staged strikes closing airports, government offices, courts and schools. This industrial action is expected to continue.

How Greece is going to fix it : 

How Greece is going to fix it Raise taxes on fuel, tobacco, and alcohol Raise the retirement age by 2 years Greeks are upset with government

Structural Reforms : 

Structural Reforms Greece need for longer-term structural reforms to the Greek economy. At this end, it has proposed wide-ranging reforms to the pension and health care systems and to Greece’s public administration. It has concerned to boost Greek economic competitiveness by enhancing employment and economic growth, fostering increased private sector development, and supporting research, technology and innovation.

Challenges and Prospects : 

Challenges and Prospects Greece’s relatively drastic contradictory fiscal policies could going an ongoing recession in the country. So in Greece, people were unemployed. To counter these trends by attracting new foreign investment in Greece and by boosting exports of goods and services. In addition to advancing institutional reforms designed to more efficiently disburse Greek and EU investment and development funds, it intends to target sectors where it believes Greece has strong comparative advantages for trade and investment. These include its geographic location, particularly as a potential hub for regional trade and investment in energy and transportation networks; the renewable energy sector; and already strong global shipping and tourism sectors.

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