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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 Measures taken Is situation solved or not
Country Profile
Entry in EMU
Fraud revealed
After Olympics
Hosting of Olympics
Deficit
Rating declined
Crisis
Impact on Banks
Impact on Greece
Impact on Europe
Impact on US
Impact on India
Measures taken
Parity(PPP) 22nd highest human development Greece is a member of EU, WTO, OECD, BSECO Greece main business is Tourism, Mining, Petroleum, Chemicals, Food Processing, Textile, Metal Products and Tobacco Processing.
PASOK(Pan Hellenic Socialist Kleptocrats). Current Prime Minister of Greece is George Papandreou. Current finance minister George Papaconstantinou
2001. Switch dratchma and adopted Euro currency. Single market through a standardized system of laws which apply in all member states.
max. 6% 6.4
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
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
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.
After Olympic
Athens was questioned on
$15 billion expenses by the Greece Government After Olympics stadiums are vacant and not in use
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 3050% of their money back
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%
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
Name of Banks
BNP Paribas
Holdings
5 billion
Dexia
Generali (Italy)
3.5 billion
3 billion
Commerzbank (Germany)
2.9
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.
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.
The Dow managed to recover but still ended in negative territory, The Dow closed down 347 points.
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.
Bailout Package
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
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
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. Its a state owned company. Thessaloniki Water Supply And Sewerage Company SA is a Greece owned company that supplies water to the Thessaloniki urban complex.
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.
2012
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.
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.
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.
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 EU Total
10.4 27.6 38
13.3 26.7 40
8 16 24
5.8 2.2 8
30 80 110
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.