Greece, its creditors and euro
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Department of Business and Industrial Management, Surat
Presentation on “Greece, its international creditors and euro”From Economic & Political Weekly 14th Feb.
2015 issue no.7 vol. 50
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Greece, its international creditors and euro
Stay in euro
Reverse austerity
Stay in power
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• 25th January 2015 SYRIZA won greek election (coalition of Radical left and Anel party)
• Alexis Tsipras – Prime Minister• Yanis Varoufakis (economist)– Finance
Minister
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Origins of Greece’s Problems
• “Maastricht treaty” (treaty that established the euro zone) in 1992
• Greece entered in Jan 2001• From 2001-2007 avg. GDP of Greece : 4.3%
Euro zone avg. GDP : 3.1%
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USUK
GERMANYFRANCE
GREECE
• Monetary expansion in the advanced capitalist countries (US, UK, Germany, France) of the centre.• private capital started to flow from the centre to the periphery which includes Greece
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Good GDP Easy Credit
private consumption and
government spending
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Trouble
Non productive spending
Athens Olympics in
2004
Militaryspending
Global Financial Crisis in June 2007
private capital flow surge reversed
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• Beginning until 2009 the Greek governments had been masking their sovereign debt and budget deficit through “creative” accounting and off balance sheet transactions as well as complex currency and credit derivatives.
• Papandreou government which was elected in October 2009 stopped this and released the true numbers.
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• Greece has been in depression since 2009• GDP down about 25%• Youth unemployment is above 50%• Public debt to GDP ratio 175%
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Bailed out Leave the euro zone
Hyper inflation
Bank failures
Savings devalued
austerity
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troika
IMF
ECBEC
• EC : European commission (executive body of European union)
• ECB : the European Central Bank• IMF : international monetary
fund • Euro group : conference of FM
of 19 member state (euro zone) for discussion of matter related to EURO
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Euro Group
European financial stability
Facility (EFSF)
European Stability Mechanism (ESM)
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• EFSF : It’s a private company established in 2010, a special purpose vehicle created as a temporary crisis resolution mechanism.
• ESM : Permanent rescue mechanism with same mission established in 2012.
• Unlike GFL ,EFSF & ESM funds its operations by issuing money market as well as medium & long term debt.
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Macroeconomic Adjustment Programmes : Bailed outs package of 2010
Greek Loan facility (GFL)
from may 2010 to June
2013
IMF€ 30 Billion
Euro group
€ 77.3
Billion
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Bailed out package of march 2012
MAP
€164.5 Billion from 2012 to
end 2014
IMF€19.8 Billion
Euro group
€144.7
Billion
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• MAPs were imposed & overseen by troika which consists of – Fiscal reforms to generate “Savings” (austerity)– Structural reforms to “enhance competitiveness &
growth”– Financial reforms to “enhance financial stability”
Here European Central Bank (ECB) does not provide financial assistance in bailed out but it only provides technical expertise
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Beneficiaries of Bailed outs
1. Greece’s Private Lenders2. German & French banks
• Here Varoufakis appears right when he claimed that “it was the banks that got bailed out, not Greece & that Greece got deformed, not reformed ”
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Main objectives of SYRIZA government
1. Write off 50% of sovereign debts2. Reverse austerity3. Reverse structural reforms4. Remain euro zone members
• since then PM and FM are working on it
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But still the question remains!
Stay in euro
Reverse austerity
Stay in power