Greece accumulated high levels of debt in the decade before the financial crisis when markets were liquid. This led to a sovereign debt crisis as the financial crisis deepened and liquidity dried up, making borrowing more difficult and expensive. The crisis impacted Greece through lower incomes, savings, capital flows and sector output like tourism and shipping that contribute significantly to GDP. The European Union, IMF and ECB implemented measures like bailout loans and austerity programs to reduce Greece's deficit while the ECB also engaged in bond purchases to increase confidence. Protests have occurred against austerity cuts while leaders debate solutions to the dilemma of whether to continue supporting Greece or risk default.

1. Greece Crisis and its ImpactPresented by:SumitTamrakarBhartiVidyapeeth’s Institute of management &Information Technology,Mumbai

2. ContentsIntroduction to Greece Economy.Reasons for Greece Crisis.Impact of US Sub Prime crisis on Greece.Impact on Major European Economies.Impact on India. Measures taken by ECB, IMF ,ESM, EFSF to overcome crisis.Current News. Conclusion.

3. Introduction to Greece EconomyCapital – AthensCurrency before Euro – DrachmaAdopted Euro as currency in the year 1999Main Sectors with greater contribution to GDP a) Shipping b) Tourism

4. Reasons for Greece CrisisGreece is facing Sovereign Debt Crisis since it accumulated high levels of debt during the decade before the Financial crisis when the market was highly liquid. As the crisis got deepened there was a liquidity crunch in world economy thereby making borrowings difficult as well as expensive and thereby improper debt repayments on time.Reasons : Excessive Expenditures

5. Mismanagement

6. Unregulated Labor Market

7. Obsolete Pension SystemImpact of US Sub-Prime Crisis on GreeceIncome and savings had a downward trend worldwide after the SUB-PRIME Crisis UnleashedVolatile Capital markets due to liquidity crunch resulted in lower capital flowsStrict norms were made for Banks to grant loans and rates were also increased thereby making borrowings costlier for Greece compared to earlierOverall Effect on Prime Sectors ( Tourism, Shipping) contributing to GDP.

8. The Boom in the Market!Greece borrowed heavily in international capital markets to fund government budget and current account deficits.Accumulated high levels of debt during the decade before the crisis, when capital markets were highly liquid.

9. Greek economy - significant problems:Government expenditures increased by 87%, revenues grew by only 31%.Rising Unemployment.Insufficient Bureaucracy.Tax Evasion.Corruption.

10. Impact of Crisis:South-eastern Europe:Greece’s foreign policy focus on the region and growing trade volumes between the countries, neighbouring Serbia, Albania, Macedonia, Romania, Bulgaria and Turkey cannot remain indifferent to the magnitude of the crisis next door.

11. Exposure to GreeceDirect exposure of U.S. banks to the Greek government is relatively small. Direct U.S. exposure to Greece more generally includes the Greek government and the Greek private sector. The BIS defines “other potential exposures” as derivative contracts, guarantees, and credit commitments.

12. Impact of Greece Crisis on IndiaTrade

13. Markets

14. Liquidity Situation

15. Rupee Value

16. BorrowingsMeasures The European union , the IMF & the ECB set up a tripartite committee (the TROIKA) to prepare an appropriate programme.First round of crisis response (May 2010 ): 3 years package of €110 billion ,Contributed by IMF (€ 30 billion) and Euro zone (€ 80 billion).ECB provided substantial liquidity support to Greek’s private banks [b/w Jan 2010 to May 2011– €51 billion.Again Euro zone provided loan - July 2011 € 109 billion.

17. Measures5.ECB starts buying govt. debt from secondary market to reduce bond spread and to increase the confidence of investor . Between May 2010 to June 2011 ECB purchased €78 billion bonds ,out of which €45 billion from Greece govt.

18. Measures6. EFSF(European Financial Stability Fund ) : The EFSF is intended to consist of a fund of €750 billion, which would be made up as follows:(a) €440 billion would be made available in loan guarantees from Euro zone Member States;(b) €60 billion would consist of emergency funds made available by the European Union itself; and(c) €250 billion would be provided under arrangements with the International Monetary Fund.

19. Measures7.EU also made a proposal to make a single authority responsible for tax policy and govt. spending.8.Austerity measure are outline in Feb 2010 (1st austerity measure)aimed to reduce government budget deficit to 3% of GDP by 2014. Freeze in the salaries of all govt. employees.

20. 10% cut in Bonuses & payment of overtime work.