In-depth view of what happened in Greece, whats happening, about Bailout Packages, Austerity measures, etc.

1. Greece’s Economic Crisis
&
INDIAN Interests
Produced & Directed By:
Swapnil J. Hadpe
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2. Subtitles
• Sovereign Debt= Govt’s Borrowing from its own Citizens or
Investors around the World
• Sovereign Debt Crisis= Govt. doesn’t have the capacity to repay
• Govt. Bond= Piece of paper over which the Govt. Promises to Pay
a Fixed Rate of Interest over a Specific Period (Gilt
Edged Securities)
• Bond Market= Place where Buying & Selling of Bonds take place
• Working Population=Above 15 Years aged Population who are
Employed or Employable
• Bailout= Giving Financial Support to a Company or Country which
faces Serious Financial Difficulty or Bankruptcy
• Austerity= Set of policies with the Aim of reducing Govt. Budget
Deficits
• Deflation= Decrease in general Price Level of Goods & Services
(- Inflation)
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3. Main Characters
IMF
ECB Troika
EC
Christine Laggard Mario Draghi Jean Claude Juncker
Antonis Samaras Alexis Tsipras George Papandreou
(PM, Jun, 2012 – Jan 2015) (PM, Greece) (Former PM, Oct 2009 – Nov 2011)
‘Aam Aadmi’ of Greece (above 18)
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4. Intl. Monetary Fund (IMF)
• One of the Bretton Woods Organization
• Founded 27th Dec, 1945 (29 Founding Countries)
• Current Membership – 188
• H.Q: Washington D.C
• Aims: To Foster Global Monetary Co-Operation, Secure
Financial Stability, Facilitate Intl. Trade, Promote High
Employment & Sustainable Economic Growth & Reduce
Poverty
• Organs: 1. Board of Governors (2 Governors from each
country)
2. Executive Board (24 Executive Directors)
3. Managing Director (Chairman of Executive
Board, European, currently Christine Laggard,
France) Swapnil J. Hadpe 4

5. European Central Bank (ECB)
• One of the 7 Institutions of the EU
• Est. by Treaty of Amsterdam in 1998
• H.Q: Frankfurt, Germany
• Aims: Price Stability within the Eurozone, Define & Implement
Monetary Policy for Eurozone (19 Member Countries), Foreign
Exchange Operations, Promote Smooth Operation of Financial Market
Infrastructure
• Platform for Settlement of Securities in Europe
• Issuance of € Banknotes
• Organs: 1. Executive Board (President, Vice-President & 4 other
Members; term 8 Years; meets on Tuesday)
2. Governing Council (6 Members of Exec. Board +
Governors of National Central Banks of Member Countries)
3. General Council (President, Vice-President + Governors of
all EU’s National Central Banks; exist till all EU Member
States adopt ‘€’)
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6. European Commission (EC)
• Executive Body of EU
• Est. 1958;
• H.Q: Brussels, Belgium & Luxembourg,
Luxembourg
• Operates as a Cabinet Govt. with 28 Members (1
Member per Member State) of the Commission
• President + 27 Commissioners; current one is
Juncker Commission (Luxembourg)
• Aims: Develop Medium-Term Strategies, Draft
Legislations, Represent EU in Trade
Negotiations, Draft Budget of EU, Scrutinise
Implementation of Treaties & Legislation
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7. Background of the Crisis
• 1999- ‘€’ as Currency of the Country; increased
Labour Cost; Exports less Competitive; CAD & TD
increased (15% of GDP in 2008-09)
• No Depreciation of Currency
• 2008 Sub-Prime Crisis
• 20% Wages Fell- from Mid 2010-14 (Deflation);
GDP Fell; Rise in Debt: GDP
• Unemployment Increased- Approx. 25%
• ‘Borrowing Beyond Capacity’; rule of EU of not
borrowing beyond 3% of the GDP per year of the
Country; Greece borrowed upto 13%
• October, 2009 Announcement
• Bond Yield Surged Swapnil J. Hadpe 7

8. Swapnil J. Hadpe 8

9. Favourable Grounds for Crisis
• 27% Greek Total Working Population (1.2 Million
People) - Public Sector
• 80% Public Expenditure- Wages, Salaries &
Pensions
• Lots and lots of Laws- Approx. 2900 new laws per
year!!!
• Competition Limiting Rules- Opening & Closing
Hours fixed for Various Enterprises
• Unease of Doing Business- 1,000 such levies
(taxes)= over 30% of Country’s GDP
• Rent Seeking rather than Wealth Producing Society
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10. 1st Bailout = 1st Economic Adjustment
Programme for Greece
• European Stability Mechanism (ESM)
• May 2010 – June 2011
• 1st May Announcement of ‘Austerity Measures’
• EU-IMF Loan Package – € 110 Billion; 3 Years
• Interest Rate = 5.5%
• ‘New Austerity Package’; 5th May, 2010
National Strike
• 4th Austerity Package – 29th June, 2011
(155/300 MPs Approving it)
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11. 2nd Bailout Package = Second Economic
Adjustment Programme for Greece
• July 2011 – Present
• 21st July EU Summit in Brussels – extention of
Greek Loan Repayment Period from 7 to 15
Years; interest rate reduced to 3.5%
• Approved Construction of New € 109 Billion
‘Support Package’
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12. Austerity Measures
• Deep Budget Cuts- Lowering Min. Wage by 20%
• Privatization
• Pension Reforms
• Capital Controls- Banks & Stock Exchanges Closed on
Monday as well; withdrawal limit of € 60 Per Day
• Product Market Reform- Sunday Trading
• Tax Reforms- Increased Taxation, Ending Tax Evasion
• Streamlining the Govt.
• Strengthening Financial Sector- Action on NPAs
• Creditor Approval for Key Legislations
• Making Greece an Easier Place to do Business-
Liberalisation of Labour Laws
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13. Side Effects of Austerity Measures
• Welfare Programs Stopped or their Scope Reduced
• Salaries & Pensions Reduced
• Therefore, Less Money with People to Spend;
Demand Suppressed; Slowdown
• Increased Unemployment & the Cycle Continues…
• ‘Anti-Keynesian Practice’
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14. Story
• Parliamentary Elections – May 2012 (Interim Govt.);
Re-election; December, 2014 (Victory of Leftist
Syriza Party)
• 27th June, 2015 Announcement by Alexis
• 28th June’s Approval by Greek Parliament
• 5th July, 2015 Referendum – Victory of ‘NO’ (61%)
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15. Possible Sequel
• Selling off of Assets by Greek Govt. to pay down
Debt
• Greece to agree monitoring of Bailout Conditions by
the IMF
• Greek Parliament to Approve the ‘Terms of
Agreement’(Without Delay)
• Raise Taxes & Deductions in Pensions
• GREXIT
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16. GREXIT
• New Currency of Greece – ‘Drachma’
• Banking Crisis in Southern Europe (Spain, Italy,
Portugal = PIGS)
• Loan Default by Greece-Run out of €; all
Repayments Stopped; Greek Banks which have
lended to the Govt. would Bust
• Meltdown- Businesses would go bankrupt; costs of
imports (food & medicine) increased manifolds;
Tourism collapsed
• Social & Political turmoil
• Sovereign Debt Crisis for other Weak Eurozone
Nations (PIS)
• Recession in Europe Swapnil J. Hadpe 16

17. Monday’s Developments
• Greece & its European Creditors to resolves ‘Debt
Crisis’
• Agreed Bailout Package of € 86 Billion ($ 95 Billion)
over 3 Years
• Greek Parliament need to Approve the Deal till
Wednesday (15th July)
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18. Effect on INDIAN Interests
• Investors taking out money from Greece would Invest it
into US or other Markets; € converted into $; shortage of
$; $ more expensive; Crude Oil more Expensive;
Increased Inflation
• Adverse Rating of India by S&P, Moody, etc.
• Negative Sentiments of Europeans; Decreased demand of
Luxury Items, Indian Textile, Polished Diamonds;
Exports Fall
• Indian Exporters waiting for money from Greek Buyers to
suffer
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19. Thank You !!!
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