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GREECE – A CASE STUDY
Availability of capital
• Formation of Euro Zone

• Savings doubled to $70 trillion
  dollars in 5 yrs

• Investors looking for
   alternatives
Effect of excess capital
• Low cost of Borrowing- paid to borrow !!!

• Increased social security expenses

• High cost of Production

• Incompetent pricing in global market
International Trade Imbalance
Loss of Investors Confidence
 Loss of Investor Confidence
 • Non compliance of T & C’s
         - Budget Deficit 3% of GDP

         - Debt level – 60% of GDP



 • “AAA+“ – was that right ?
Pre 2008 Era


 Availability of cheap debt
 Capital inflows were not used to help
  the economy grow
 Beginning of the global financial crisis
 Shipping and tourism industry affected
  by the changes in business cycle
 Debt began to pile up rapidly


        2000             2004                2008
Post 2008 Era


           Global financial crisis of 2008-09 strained
           public finances
           Fear of European sovereign debt crisis started
           in early 2010
           Difficulty in raising funds
           Bailout package requested from EU & IMF
           Debt rating downgraded to “Junk” status.
           Worldwide impact on stock markets

    2008               2012
Possible spread to other Countries
Measures adopted

•   Bailout package
•   Rescue package
•   European Stability Mechanism
•   European Commercial Bank
•   Austerity Measures
ESM
                     Austerity
                      Package
                 2. Rescue Package
                1. Bailout Package
                   4. ECBESM
                       3.




                       Austerity
                             ECB
Greece Crater
                     ESM


                 Rescue Package
Increasetax retirement age
   New of is levied on
      from 60 to 65
    electricity charges

    45%           23%
      Privatization by
Luxury tax increased by 10%
       disinvestment
  Income           VAT
    Tax
 Reduction in number of
New duties levied on Petrol
                  19%
   40%
      Municipalities

 Duties on imported cars
Big cuts in public employee
     increased by 30%
       expenditures
Other measures


  Sale of Assets to Other Nations
Conversion of Euro into the Earlier
   Currency “The Drachmas”
Unemployment rate at 19.8%




• Highest since Greece joined Eurozone
• 230 thousand people lost job in last year
• @42.5% for 15-24 age group, 22.6% for 25-34
Unemployment benefit only for 1 Year




• < Euro 500 per month
• 280k receive state benefits
• Of the total 811k unemployed
7 out of 10 considering
        working abroad




• Unemployment rate to reach 20% in one year
• Economy’s biggest problem
• 5% long-term unemployed
65,000 Retail stores closed




• Private Sector wages cut by 10-20%, Govt. 20-30%
• Consumption fell 8.6%, HH reduced spending by 1.6B euros
• Consumption is Greek economy’s driving force, production lags
  behind
NGO support critical

• Significant increase in the number of people
  relying on NGO’s
• 25% increase in homelessness
• At the main canteen, 3500 people/day come
  for food & clothing, compared to 100
  people/day 5 years ago
• Average age of people seeking help reduced to
  45 from 60 in 2 years
Debt crisis causes political turmoil




• 87% said they are unhappy with the quality of their
  lives
• > 100k supporters/day irrespective of the parties
• Support for being part of Euro came down to 58%
  from 72%
Change in Leadership




•   PM George Papandreou quits in Nov 2011
•   Lucas Papademos to lead the new unity Govt.
•   No party have enough support to win
•   Rejection of the current political system has
    added to the uncertainty
EXPORTS
             INDIA’S EXPORT PROFILE
             Region   FY 2010 (%) FY 2011 (%)
    EU Countries           20.20        18.60
    Africa                  5.80         6.50
    Asia                   21.80        22.70
    WANA                   22.00        22.60
    ASEAN                  10.10        10.90
    North America          11.60        10.70
    Greece                  0.25         0.14
FOREIGN DIRECT INVESTMENT
                1% 1%
                              Mauritius
               5%
                              Euro Zone
          7%
                              Singapore
     8%
                        46%   USA

                              UK
    15%                       Japan

                              UAE

                              Switzerland
               17%
FII MOVEMENT
FOREIGN INSTITUTIONAL
             Financial FII Flows
     INVESTMENT (US mn $)
             Year
                       2000-01      1,847
US mn $    FII Flows   2001-02      1,505
2003-04   10,918       2002-03        377
2004-05   8,686        2003-04     10,918
2005-06   9,926        2004-05      8,686
2006-07   3,225        2005-06      9,926
2007-08   20,328       2006-07      3,225
2008-09   (15,017)     2007-08     20,328
2009-10   29,048       2008-09    -15,017
2010-11   29,422       2009-10    29,048
                       2010-11    29,422
EXCHANGE RATES
CONTROVERSIES
• Rating agencies suffer from a conflict of
  interest

• Role of the English language press questioned

• Hedge fund managers launch bearish bets
WILL GREECE SURVIVE?

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Greece Financial Crisis - Case Study

  • 1. GREECE – A CASE STUDY
  • 2.
  • 3. Availability of capital • Formation of Euro Zone • Savings doubled to $70 trillion dollars in 5 yrs • Investors looking for alternatives
  • 4. Effect of excess capital • Low cost of Borrowing- paid to borrow !!! • Increased social security expenses • High cost of Production • Incompetent pricing in global market
  • 6. Loss of Investors Confidence Loss of Investor Confidence • Non compliance of T & C’s - Budget Deficit 3% of GDP - Debt level – 60% of GDP • “AAA+“ – was that right ?
  • 7.
  • 8. Pre 2008 Era  Availability of cheap debt  Capital inflows were not used to help the economy grow  Beginning of the global financial crisis  Shipping and tourism industry affected by the changes in business cycle  Debt began to pile up rapidly 2000 2004 2008
  • 9. Post 2008 Era Global financial crisis of 2008-09 strained public finances Fear of European sovereign debt crisis started in early 2010 Difficulty in raising funds Bailout package requested from EU & IMF Debt rating downgraded to “Junk” status. Worldwide impact on stock markets 2008 2012
  • 10. Possible spread to other Countries
  • 11.
  • 12. Measures adopted • Bailout package • Rescue package • European Stability Mechanism • European Commercial Bank • Austerity Measures
  • 13. ESM Austerity Package 2. Rescue Package 1. Bailout Package 4. ECBESM 3. Austerity ECB Greece Crater ESM Rescue Package
  • 14. Increasetax retirement age New of is levied on from 60 to 65 electricity charges 45% 23% Privatization by Luxury tax increased by 10% disinvestment Income VAT Tax Reduction in number of New duties levied on Petrol 19% 40% Municipalities Duties on imported cars Big cuts in public employee increased by 30% expenditures
  • 15. Other measures Sale of Assets to Other Nations Conversion of Euro into the Earlier Currency “The Drachmas”
  • 16.
  • 17. Unemployment rate at 19.8% • Highest since Greece joined Eurozone • 230 thousand people lost job in last year • @42.5% for 15-24 age group, 22.6% for 25-34
  • 18. Unemployment benefit only for 1 Year • < Euro 500 per month • 280k receive state benefits • Of the total 811k unemployed
  • 19. 7 out of 10 considering working abroad • Unemployment rate to reach 20% in one year • Economy’s biggest problem • 5% long-term unemployed
  • 20. 65,000 Retail stores closed • Private Sector wages cut by 10-20%, Govt. 20-30% • Consumption fell 8.6%, HH reduced spending by 1.6B euros • Consumption is Greek economy’s driving force, production lags behind
  • 21. NGO support critical • Significant increase in the number of people relying on NGO’s • 25% increase in homelessness • At the main canteen, 3500 people/day come for food & clothing, compared to 100 people/day 5 years ago • Average age of people seeking help reduced to 45 from 60 in 2 years
  • 22. Debt crisis causes political turmoil • 87% said they are unhappy with the quality of their lives • > 100k supporters/day irrespective of the parties • Support for being part of Euro came down to 58% from 72%
  • 23. Change in Leadership • PM George Papandreou quits in Nov 2011 • Lucas Papademos to lead the new unity Govt. • No party have enough support to win • Rejection of the current political system has added to the uncertainty
  • 24.
  • 25. EXPORTS INDIA’S EXPORT PROFILE Region FY 2010 (%) FY 2011 (%) EU Countries 20.20 18.60 Africa 5.80 6.50 Asia 21.80 22.70 WANA 22.00 22.60 ASEAN 10.10 10.90 North America 11.60 10.70 Greece 0.25 0.14
  • 26. FOREIGN DIRECT INVESTMENT 1% 1% Mauritius 5% Euro Zone 7% Singapore 8% 46% USA UK 15% Japan UAE Switzerland 17%
  • 27. FII MOVEMENT FOREIGN INSTITUTIONAL Financial FII Flows INVESTMENT (US mn $) Year 2000-01 1,847 US mn $ FII Flows 2001-02 1,505 2003-04 10,918 2002-03 377 2004-05 8,686 2003-04 10,918 2005-06 9,926 2004-05 8,686 2006-07 3,225 2005-06 9,926 2007-08 20,328 2006-07 3,225 2008-09 (15,017) 2007-08 20,328 2009-10 29,048 2008-09 -15,017 2010-11 29,422 2009-10 29,048 2010-11 29,422
  • 29.
  • 30. CONTROVERSIES • Rating agencies suffer from a conflict of interest • Role of the English language press questioned • Hedge fund managers launch bearish bets

Notas do Editor

  1. Add a Chart here
  2. Chart Correction – Greece is
  3. Rupee Symbol