1. Crisis and Impact
Renzil D’cruz
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2.  Introduction
financial crisis of 2007–2008
Greek government-debt crisis
Causes for deteriorated economic
Tax evasion and corruption
Unsustainable and accelerating debt-to-GDP
ratios
Impact of the Greece Economic Crisis on India
India’s Crisis Responses and Challenges

3. How Crisis Started?
Country Profile
Fraud revealed
Deficit
Entry in EMU
After Olympics
Rating declined
Euro as base currency
Hosting of Olympics
Crisis

4. Impact of Crisis!
Impact on Banks
Impact on Europe
Situation solved or not
Impact on Greece
Effect on Greece stocks
Impact on US
Impact on India
Austerity and bail out plan
Measures taken

5. 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:
1.2% (2009)
Unemployment rate:
9% (2009)
Greece is the 15th largest economy in the 27 member EU
Greece is ranked 29th in the world at $27,875 nominal GDP
33rd in the world $27,624 for purchasing power parity(PPP)
Greece is a member of EU, WTO, OECD, BSECO

6. Introduction of Greece Economy
• Greece has Democratic Government.
• Current Ruling party of Greece is
PASOK(Pan Hellenic Socialist
Kleptocrats).
• Current Prime Minister of Greece is George
Papandreou.
• Current finance minister George
Papaconstantinou

7. Industry Contribution to GDP
GDP
service sector 80%
industry 12%
agriculture 5%
Greece main business is Tourism, Mining, Petroleum, Chemicals, Food
Processing, Textile, Metal Products and Tobacco Processing.

9. Government budget deficit, inflation, GDP growth and debt-to-GDP ratio (1970–2015)
Source: Eurostat and European Commission
Greek national
account
Public
expenditure4 (%
of GDP)
Structural
deficit5 (% of
GDP)
GDP
deflator6 (annua
l %)
Real GDP
growth7 (%)
Public
8 (billion €)
debt
Nominal
GDP8 (billion €)
Debt-to-GDP
ratio (%)
- Impact of
Nominal GDP
growth (%)
- Stock-flow
adjustment (%)
- Impact of
budget deficit
(%)
- Overall yearly
ratio change
(%)
2006
2007
2008
2009
2010
2011
20122
20132
20142
45.0
47.2
50.5
54.0
51.3
51.7
50.7
49.6
48.1
6.8
7.9
9.6
14.7
8.7
5.4
1.5
-0.7
-0.4
2.4
3.3
4.7
2.3
1.1
1.0
-0.5
-1.2
-0.4
5.5
3.5
−0.2
−3.1
−4.9
−7.1
−6.0
-4.2
0.6
224.2
239.3
263.3
299.7
329.5
355.7
344.6
347.6
349.3
208.6
223.2
233.2
231.1
222.2
208.5
195.0
184.5
185.0
107.5
-7.6
8.1
5.7
6.3
107.2
-7.0
0.3
6.5
-0.3
112.9
-4.6
0.5
9.8
5.7
129.7
1.0
0.1
15.6
16.8
148.3
5.2
2.7
10.7
18.6
170.6
9.7
3.1
9.4
22.3
176.7
11.8
-12.5
6.8
6.1
188.4
10.1
-3.8
5.5
11.7
188.9
-0.5
-3.6
4.6
0.5

10. Entry in European Union(EU)
• EU formed in 1958 by six
countries(Belgium,France,Ital
y,Luxembourg,Netherlands,W
est Germany)
• Main object to remove
regional disparity, improve
economy and and inflate
trading.
• Greece joined EU in 1981

11. Entry in European Economy and Monetary
Union(EMU)
 Greece entered in EMU in
2001.
 Switch dratchma and adopted
Euro currency.
 Single market through a
standardized system of laws
which apply in all member
states.

12. Financial crisis of 2007–2008 :
• the worst financial crisis since the Great
Depression of the 1930s
• threat of total collapse of large financial
institutions
• the bailout of banks by national governments
• downturns in stock markets around the world
• housing market also suffered, resulting
in evictions, foreclosures and prolonged
unemployment.
Renzil D’cruz
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13. Result in fall of long term interest rates

14. Fall in annual GDP

15. Greek government-debt crisis:
• GDP growth rates
• Government deficit
• Government debt-level
• Budget compliance
• Statistical credibility
Renzil D’cruz
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16. • in 2004, Eurostat revealed that Greece understated
the budgetary statistics.
• Eurostat used ESA95 methodology.
Inflation rate
annual gover
nment
defecit to
GDP
Long term
interest rate
Reference
value
max. 1%
max. 3%
max. 6%
Greece
2.5
3.4
6.4
Country
Renzil D’cruz
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17. Reasons of internal Greece
Crisis
Democratic government,
Socialist population
Welfare schemes
Hiring of more Government jobs
 increase in of Government employees Salary
Evasion of tax
High taxes witch lead to high tax evasion
loosing 30 billion Euros per year
36.6% of the gross government revenue

18. Reasons of Greece Crisis
Government spending focussed on consumption expenditure
 Greek government expenditure approximately 104 billion
Euros which is equal to 49% of the GDP
 Large spending on Interest payment
 20% of government revenues diverted into long term
investment expenditure
Fraudulent Government and Fiscal Indiscipline
 Accumulated debts
 Secretly borrowing from Private and foreign investors to
hide deficits
Because of government borrowing supply for the private
sector decreased

19. 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 $11
billion
• The tab for security alone
was more than $1.2 billion.

20. After Olympic…
• Athens was questioned
on $15 billion expenses
by the Greece
Government
• After Olympics stadiums
are vacant and not in use

21. ORIGINS OF GREECE'S DEBT CRISIS
BOOM
1999-2001 and 2005-07
Private debt increases much more than public debt
Private debt increases spectacularly
BUST 2002-04 and 2008-09.
economy is driven into a recession
government revenues decline
social spending increases.
government is forced to issue its own debt to rescue
private institutions.

22. Rising debt levels 12.7%
of GDP in 2009
Rising borrowing cost
High social spending

23.  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

24. Effects of declined rating
 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%

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

26. 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

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

28. Greek banking sector is also in trouble

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

30. Impact on European Union
 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.

32. Greece Government Bond ownership by region
Asia 3%
Europe
Greece
Other
USA
Asia

33. 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.

34. Impact on India
 Greek imports from India include cotton, synthetic fibres, fabrics, vehicles,
iron, steel and fruit.
 while 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.

35. Measures Taken
Internal Measures
 Austerity Package
 Privatization
External Measures
 Bailout Package

36. Internal measures
Austerity Package
First Austerity Package announced on 9th Feb 2010
The Greek Parliament votes 155-138 in favor of $40 billion in painful budget
cuts and tax increases over the next few years.
Tax Increases
Income Tax
 People will now pay tax on income over €8,000 a year, down from €12,000
 This basic rate of tax will be set at 10%
 1% for earning between €12,000 (£10,800) and €20,000 a year
 2% for earning between €20,000 and €50,000
 3% for earning between €50,000 to €100,000
 4% for earning €100,000 or more
 Lawmakers and public office holders will pay a 5% rate

37. Internal measures
Sales Tax
 VAT rate for restaurants and bars is being hiked from 13% to the new rate of 23%
 This rate already covers many products in the shops, including clothing, alcohol,
electronics goods and some professional services.
Wealth Tax
Tougher luxury levies will be introduced on yachts, cars and swimming pools, along
with higher property taxes
The changes should bring €2.32bn this year, rising to €3.38bn in 2012, €152mn in 2013
and €699mn in 2014
Spending Cuts
 Public Sector wages
 Social benefits and pension
 Social contribution
 Public investment
The austerity programe also states that €7bn will be raised in 2013, €13bn in 2014 and
€15bn in 2015.

38. Privatization
Stakes in various state assets will be placed on the auction block, in an effort to raise
€50bn by 2015.
2011
 Stake in Hellenic Telecom to Deutsche Telecom
Greece decided to sell 10% stake in Hellenic telecom which is state owned to
German telecom company Deutsche Telecom for €400m. Deutsche Telekom
already owns a 30 percent stake in O.T.E. that it bought in 2008.
 Hellenic Post bank and Thessaloniki Water are also scheduled for sale
Hellenic post bank is a retail bank of greece which owned by Hellenic
Republic. It’s a state owned company. Thessaloniki Water Supply And
Sewerage Company SA is a Greece owned company that supplies water to the
Thessaloniki urban complex.

39. Privatization
2011
 Stakes in betting monopoly OPAP
OPAP - Greek Organisation of Football Prognostics
 Two port operators, Piraeus Port and Thessaloniki Port, will also be
partially
Piraeus Port Authority S.A. is a Greece owned company engaged in the
management and operation of Piraeus port. Thessaloniki Port Authority SA
is a Greece-based company involved in the management and operation of
Thessaloniki port.
Renzil D’cruz
http://RenzilDe.com
http://about.me/renzilde
http://linkedin.com/in/renzilde

40. Revised Austerity Package
Introduced new Austerity package
on 2 May 2010. Greece and its
international lenders have agreed
to revise the country's five-year
austerity plan to include more
tax increases and less spending cuts.
 The revised 2011-2015 fiscal plan is the key to unlocking
further EU-IMF loans for the debt-laden country.
 It includes a total €28.4bn (£25.3bn) of fiscal measures, €155m more
than in an initial version of the plan.
 The revised plan foresees a total €14.32bn of spending cuts, about
€490m less than in the previous version. It also calls for €14.09bn of tax
measures, €649m more than in the initial version.

41. Austerity Package
Tax increases
 Taxes will increase by €2.32bn this year, with additional taxes of
€3.38bn euros in 2012, €152m in 2013 and €699m in 2014.
Cutting public sector wage
 By €770m in 2011, and €600m in 2012, €448m in 2013, €300m in 2014
and €71m in 2015.
Cuts in social benefits
 By €1.09bn this year, €1.28bn in 2012, €1.03bn in 2013, €1.01bn in
2014 and €700m in 2015.
Renzil D’cruz
http://RenzilDe.com
http://about.me/renzilde
http://linkedin.com/in/renzilde

42. External Measure
In May-2010 IMF and EU proposed a bailout plan for
Greece worth EUR 110 bn
Greece Bailout Distribution (in bn Euros)
2010
2010
(Actual)
2011
2011
(revised)
2012
2013
Total
IMF
10.4
10.4
13.3
10.8
8
5.8
30
EU
27.6
21.1
26.7
35.6
16
2.2
80
Total
38
31.5
40
46.4
24
8
110

43. Situation Solved or not
Now situation has become
critical and Greece debt has
increases to 370bn. We consider
the three broad options open to
Greece, the EU and the IMF: no
restructuring (essentially an
extension of EU/IMF loans),
voluntary restructuring and a
hard restructuring event. Our
conclusion is that a voluntary
restructuring is the most likely
outcome.

44. Thank You.
• Questions ???
• Comments #@$%
• Concerns !!!
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