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Sachin Rohatgi

3 Important Aspects
Background
Reasons
Result

Background
Capital Athens
Joined the European Union: 1 January 1981

Currency-Drachmas till 2000,after that (Euro).


In 2001 drachmas exchange to euro at the rate of
340.750 drachmas / euro.

Background

Prime Ministers of Greece

Kostas Simitis
22 Jan. 1996 -10 March 2004
Kostas Karamanlis 10 March 2004 - 6 Oct. 2009
George Papandreou 6 Oct. 2009- 11 November 2011
He resigned in 2011 due to debt crisis.
Alexis Tsipras
26 Jan. 2015- Till date

Background
TheMaastricht treaty , which was signed in Feb.1992

and entered into force on 1 Nov. 1993, outlined the 5


convergence criteria EU member states are required to
comply with to adopt the new currency the euro.

1) Harmonised Index of Consumer Prices(HICP):


The euro area HICP is a weighted average of price
indices of member states who have adopted the
euro.
The primary goal of the ECB is to maintain price
stability, and keep HICP below but close to 2% for the
medium term.

Background
2) Government budget deficit:The ratio of the annual
general government deficit relative to GDP at market
prices, must not exceed 3% at the end of the preceding
fiscal yearand neither for any of the two subsequent
years.
3)Government debt to GDP ratio :The ratio of
grossgovernment debtoutstanding at the end of the
year, relative to GDP at market prices, must not exceed
60% at the end of the preceding fiscal year.

Background
4) Exchange rate stability:Applicant countries should
not have devalued the central rate of their euro pegged
currency during the previous two years.
5) Long-term interest rates: It Shall be not be more
than 2.0% higher, than the unweighted arithmetic
average of the similar 10-year government bond yields in
the 3 EU member states with the lowest HICP inflation.

Reasons
In early 2010, economy commissionerOlli Rehn said,

Greece is the only member state that cheated with its


statistics for years and years.

It was revealed that Goldman Sachs and other banks

had helped the Greek government to hide its debts.

To keep within guidelines, the government of Greece

had also for many years misreported the country's


official economic statistics.

Reasons
At the beginning of 2010, it was discovered that Greece

had paid Goldman Sachs and other banks hundreds of


millions of dollars in fees since 2001, for arranging
transactions that hide the actual level of borrowing.

Reasons

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Reasons
Greeces

problems began when the George


Papandreou government elected at the end of
2009,revealed that its predecessor had been cooking
the fiscal books and the budget deficit of 6.8% of
GDP for 2009 was actually 12.7%.
This figure was later revised to 15.7%

Reasons
After the crisis of 2008, Greek debt was downgraded

to junk bond status , the banking system comes under


stress and the interest rate began to rise.
Years of unrestrained spending, cheap lending

and failure to implement financial reforms left


Greece badly exposed when the global economic
downturn struck.

Result
In 2010 Greece need emergency funding and the

troika :
a) European central bank (ECB)
b) European Union (EU) governments
c) IMF
Provide 1st bailout package 110 billion, given on
the condition of fiscal consolidation and structural
reforms including labour market reforms.

Result
The programme failed within two years . The fiscal

deficit reduced but by much less than what was


needed.
Second rescue package was negotiated in mid 2012.
The 2nd troika package provided an additional 140
billion for the period up to the end of 2014.

Result
The second programme also failed.
The fiscal deficit improved ,and the current account

deficit also fell, but the real economy deteriorated.


The real GDP fell by 6.6% in 2012,and further by
3.9% in 2013.
The unemployment increased to 24.6% in 2013 and
27.5% in 2014.Youth unemployment was 50%

Result
O n July 2015, in the summit of euro zone leaders the

third bailout of 86 billion is given to Greece.


However the terms of this bailout are draconian.
One of these terms concerned the disposition of
Greeces remaining public assets.
The Greek public assets will be transferred to a fund
which in turn sold out these assets for the debt payment.

Result
In a survey conducted by Bloomberg of 34 economist

70% said that reckon Greece should be safe for the


rest of 2015,though remaining have a view that 86
billion bailout package is too small for Greece.

Grexit back on agenda in 2016.