2. Flow of Greece Crisis
Introduction of Greece
Entry in European Union(EU)
Entry in European Economy and Monetary Union(EMU)
Reasons of Greece Crisis
Impact on European Union
Impact on US
Impact on India
Is situation solved or not
3. Country Profile Entry in EMU Euro as base currency
Fraud revealed After Olympics Hosting of Olympics
Deficit Rating declined Crisis
4. Impact on Banks Impact on Greece Effect on Greece stocks
Impact on Europe Impact on US Impact on India
Situation solved or not Austerity and bail out plan Measures taken
5. Introduction of Greece Economy
Introduction of Greece Economy
Population: 11.2 million (UN, 2009)
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)
6. Introduction of Greece Economy
27th largest GDP in the world
34th largest at Purchasing Power
22nd highest human development
Greece is a member of EU, WTO, OECD,
Greece main business is Tourism, Mining,
Petroleum, Chemicals, Food Processing,
Textile, Metal Products and Tobacco
7. Introduction of Greece Economy
Greece has Democratic Government.
Current Ruling party of Greece is
PASOK(Pan Hellenic Socialist
Current Prime Minister of Greece is
Current finance minister George
8. Entry in European Union(EU)
EU formed in 1958 by six
Main object to remove
regional disparity, improve
economy and and inflate
Greece joined EU in 1981
9. Entry in European Economy and Monetary
Greece entered in EMU in
Switch dratchma and adopted
Single market through a
standardized system of laws
which apply in all member
10. in 2004, Eurostat revealed that Greece understated
the budgetary statistics.
Eurostat used ESA95 methodology.
Country annual gove Long term
rnment interest rate
Reference max. 1% max. 3% max. 6%
Greece 2.5 3.4 6.4
11. Democratic government, Socialist population
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
12. Government spending focussed on consumption
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
Fraudulent Government and Fiscal Indiscipline
Secretly borrowing from Private and foreign investors to
Because of government borrowing supply for the private
13. 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.
14. After Olympic…
Athens was questioned on
$15 billion expenses by
the Greece Government
After Olympics stadiums
are vacant and not in use
15. ORIGINS OF GREECE'S DEBT CRISIS
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
17. 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
18. Stock market and Euro currency
The euro declined by 1.6 % to
The dollar jumped 1% on a
trade-weighted basis on haven
The yield of the Greek two-year
bond reached 15.3%
20. Greek banking sector is also in trouble
Banks stocks were the
worst affected because of
Decline in bank stock
prices by 47% since
Greek bank deposits
have fallen to 8.4 billion
21. Exposure of banks to Greece bonds
Name of Banks Holdings
BNP Paribas €5 billion
Dexia €3.5 billion
Generali (Italy) €3 billion
Commerzbank (Germany) €2.9
24. The crisis has reduced
confidence in other
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.
27. 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.
28. 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
31. 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.
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
32. 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.
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
33. Spending Cuts
Public Sector wages
Social benefits and pension
The austerity programme also states that €7bn will be raised in 2013, €13bn in 2014
and €15bn in 2015.
34. Stakes in various state assets will be placed on the auction block, in an effort to
raise €50bn by 2015.
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.
Stakes in betting monopoly OPAP
OPAP - Greek Organisation of Football Prognostics
Two port operators, Piraeus Port and Thessaloniki Port, will also be
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.
Next year, the government plans to sell stakes in Athens Water, refiner
Hellenic Petroleum, electricity utility PPC, lender ATE bank.
Government also plan to sell ports, airports, motorway concessions,
state land and mining rights.
It plans further sales to raise 7bn euros in 2013, 13bn euros in 2014 and
15bn euros in 2015.
38. 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
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.
39. 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.
40. In May-2010 IMF and EU proposed a bailout plan
for Greece worth EUR 110 bn
Greece Bailout Distribution (in bn Euros)
2010 2010 2011 2011 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
41. 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.