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Greece Financial Crisis - Case Study

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This for people who are giving a starter presentation on greece financial crisis.

This for people who are giving a starter presentation on greece financial crisis.

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    • 1. GREECE – A CASE STUDY
    • 2. Availability of capital• Formation of Euro Zone• Savings doubled to $70 trillion dollars in 5 yrs• Investors looking for alternatives
    • 3. Effect of excess capital• Low cost of Borrowing- paid to borrow !!!• Increased social security expenses• High cost of Production• Incompetent pricing in global market
    • 4. International Trade Imbalance
    • 5. 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 ?
    • 6. 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
    • 7. 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
    • 8. Possible spread to other Countries
    • 9. Measures adopted• Bailout package• Rescue package• European Stability Mechanism• European Commercial Bank• Austerity Measures
    • 10. ESM Austerity Package 2. Rescue Package 1. Bailout Package 4. ECBESM 3. Austerity ECBGreece Crater ESM Rescue Package
    • 11. Increasetax retirement age New of is levied on from 60 to 65 electricity charges 45% 23% Privatization byLuxury tax increased by 10% disinvestment Income VAT Tax Reduction in number ofNew duties levied on Petrol 19% 40% Municipalities Duties on imported carsBig cuts in public employee increased by 30% expenditures
    • 12. Other measures Sale of Assets to Other NationsConversion of Euro into the Earlier Currency “The Drachmas”
    • 13. 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
    • 14. Unemployment benefit only for 1 Year• < Euro 500 per month• 280k receive state benefits• Of the total 811k unemployed
    • 15. 7 out of 10 considering working abroad• Unemployment rate to reach 20% in one year• Economy’s biggest problem• 5% long-term unemployed
    • 16. 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
    • 17. 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
    • 18. 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%
    • 19. 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
    • 20. 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
    • 21. FOREIGN DIRECT INVESTMENT 1% 1% Mauritius 5% Euro Zone 7% Singapore 8% 46% USA UK 15% Japan UAE Switzerland 17%
    • 22. FII MOVEMENTFOREIGN INSTITUTIONAL Financial FII Flows INVESTMENT (US mn $) Year 2000-01 1,847US mn $ FII Flows 2001-02 1,5052003-04 10,918 2002-03 3772004-05 8,686 2003-04 10,9182005-06 9,926 2004-05 8,6862006-07 3,225 2005-06 9,9262007-08 20,328 2006-07 3,2252008-09 (15,017) 2007-08 20,3282009-10 29,048 2008-09 -15,0172010-11 29,422 2009-10 29,048 2010-11 29,422
    • 23. EXCHANGE RATES
    • 24. CONTROVERSIES• Rating agencies suffer from a conflict of interest• Role of the English language press questioned• Hedge fund managers launch bearish bets
    • 25. WILL GREECE SURVIVE?