...THE IDEA OF ETHICS AND THE EUROZONE CRISIS Prepared for: Ms. Homayara L. Ahmed Assistant Professor Prepared by: Bijon Islam (Roll: 21) Faruk Ahmed (Roll: 20) EMBA 14th Batch IBA, Dhaka January 04, 2012 January 04, 2012 Ms. Homayara L. Ahmed Assistant Professor Institute of Business Administration University of Dhaka Sub: Term Paper Submission- The Idea of Ethics and the Eurozone Crisis Dear Madam: Thank you for giving us the opportunity for working on such an exciting topic. Looking at the Eurozone crisis from an ethical perspective reveals several insightful and interesting insights including a look into the idea of equality among the member states, financial camouflage practices and the focus on immediate gains both in private sector and at national level. We have tried to map out such factors that have contributed to ethics mismanagement among the euro member states which have finally culminated into the crisis. We hope that you enjoy reading this paper as much as we did writing this and look forward to your views. Please feel free to contact us anytime if you feel the need for any additional support that we may provide. Kind Regards Bijon Islam – Roll 21 (EMBA 14) Faruk Ahmed – Roll 20 (EMBA 14) pg. 1 CONTENTS EXECUTIVE SUMMARY ...................................................................................................................................................3 1. A. B. C. D. E. 2. A. B. 3. A. B. C. D. E. F. 4. 5. 6. THE STORY...
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...contained to the big banks and investment firms based mostly in New York City. By the time bailouts were implemented by the United States government, the effects of the financial crisis were exported to Europe. States similar, but not limited to Portugal, Ireland, Italy, Greece, and Spain (PIIGS) have each been in the media spotlight in recent years as attempts to rescue their respective financial markets are implemented. Unfortunately, many efforts made by Eurozone member states and other international actors have failed in alleviating the financial stresses of the region. Considering this, then, is there really a permanent solution that can not only relieve financial markets but also prevent the crises from spreading? To date, the European Unions’ collective response up to this point has been insufficient in order to curb the further slide into Europe’s second recession. I contend, then, that Europe and the Euro would greatly benefit from following many if not all of Germany’s internal budgetary constraints in order to fix the overall problem of debt and spending. One of original intentions of the euro when it was established in 1992 was to limit the amount of budget deficit a sovereign member state could have. Furthermore, the euro was designed to prevent a “bailout” should a state be unable to meet its debt obligations. Consequently, the euro indirectly served as a scare tactic for member states to “pay their bills” or face a default. However, as the credit boom of 2003 – 2007...
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...Greek debt crisis in 2009 occurred as a result of an understated financial deficit and extreme spending. The stagnation of the Greek economy and the demotion in their debt rating did not aid their financial situation. Greece was then faced with the possibility of sovereign debt default. The failure of Greece to pay their debts required bailouts from the European Union (EU) and the International Monetary Fund (IMF). While the loan bailouts have eased short term liquidity problems, Greece still remained in financial turmoil which may even deteriorate. This research paper aims to explore the history behind the Greek debt crisis, the implications it has globally and on South Africa as well as the lessons that can be learnt from the crisis. Origins of the Greek debt crisis 2.1 Historical development: 2001-2008/09 In 2001 Greece became the twelfth member to join the Euro zone and was permitted to use the Euro (€) as its currency. Greece joined the Euro zone because of the benefits associated with being part of the Euro area. These benefits were essential to the economy of Greece who had a record of unpredictable inflation (Gibson, Hall & Tavlas, 2012). In addition, after Greece changed to the Euro they had the freedom to borrow money from foreign capital markets. During 2003-2007 government records showed Greece to be growing at 4% a year which gave investors’ confidence and made Greek bonds a popular investment. However, Greece falsified...
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...capitalvia.com G lobal Research Limited I MPACT of G REECE White Paper - Impact of Greece Crisis Global Research Limited Introduction Historically, financial crisis tend to lead to sharp economic downturns, low government revenues, widening government deficits, high levels of debt, pushing many governments into defaults. This is called SOVEREGIN DEBT CRISIS. GREECE is currently facing this, it accumulated high levels of debt during the decade before the crisis, when capital markets were highly liquid. As the crisis has unfolded and there was liquidity crunch in world economy, Greece may no longer be able to rol over its maturing debt obligations. Build – Up To The Current Crisis Between 2001-2008, Greece reported budget deficits averaged 5% per year, compared to Eurozone average of 2%. Also, its current account deficits averaged to 9% per year compared to Eurozone average of 1% Greece funded these twin deficits by borrowing in international capital markets, leaving it with chronically high external debt (115% of GDP in 2009) Some of the facts which can be depicted from following charts : www.capitalvia.com 2 White Paper - Impact of Greece Crisis G lobal Research Limited How Country Debts And Budget Deficits Compare? Projected budget deficit for 2009 Budget deficit figs as % of GDP Debt as % of GDP 68.6% UK 13% 112.6% Greece 12.5% 54.3% Spain 11.25% 65.8% Ireland 10.75% 114.6% Italy 5.3% 74.3% ...
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...www.capitalvia.com Global Research Limited IMPACT of GREECE White Paper - Impact of Greece Crisis Global Research Limited Introduction Historically, financial crisis tend to lead to sharp economic downturns, low government revenues, widening government deficits, high levels of debt, pushing many governments into defaults. This is called SOVEREGIN DEBT CRISIS. GREECE is currently facing this, it accumulated high levels of debt during the decade before the crisis, when capital markets were highly liquid. As the crisis has unfolded and there was liquidity crunch in world economy, Greece may no longer be able to rol over its maturing debt obligations. Build – Up To The Current Crisis Between 2001-2008, Greece reported budget deficits averaged 5% per year, compared to Eurozone average of 2%. Also, its current account deficits averaged to 9% per year compared to Eurozone average of 1% Greece funded these twin deficits by borrowing in international capital markets, leaving it with chronically high external debt (115% of GDP in 2009) Some of the facts which can be depicted from following charts : www.capitalvia.com 2 White Paper - Impact of Greece Crisis Global Research Limited How Country Debts And Budget Deficits Compare? Projected budget deficit for 2009 Budget deficit figs as % of GDP Debt as % of GDP UK 13% Greece 12.5% Spain 11.25% Ireland 54.3% 68.6% 112.6% 65.8% 10.75% 114.6% 5.3% Italy Germany 3.5% 74.3% Source:...
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...What is the European Debt Crisis? By Thomas Kenny, About.com Guide See More About: * economics * europe * bonds ------------------------------------------------- Ads LIC Pension 1.45 करोड़छोटा निवेश जो आपको करोड़पति बनाये = PensionPolicyBazaar.com/PureInvestment Mobile Trading On-the-GoTrade Forex, Commodities, CFDs. Low Fixed Spread, Start Now!www.4xp.com/Mobile What is Sensex?You don’t need tuitions to learn. The First Step Kit teaches enough.Sharekhan.Sharekhan-Firststep.com Bonds Ads * Bonds * Debt * European Crisis * Type of Bonds * AAA Corporate Bonds ------------------------------------------------- Ads Investment CalculatorA Free, Safe & Simplified Tool for Managing Your Money. Try It Now!www.perfios.com/managingyourmoney Looking for Major Debt?Find Major Debt on Facebook. Sign Up Free Now!www.Facebook.com The European debt crisis is the shorthand term for the region’s struggle to pay the debts it has built up in recent decades. Five of the region’s countries – Greece, Portugal, Ireland, Italy, and Spain – have, to varying degrees, failed to generate enough economic growth to make their ability to pay back bondholders the guarantee it’s intended to be. Although these five were seen as being the countries in immediate danger of a possible default, the crisis has far-reaching consequences that extend beyond their borders to the world as a whole. In fact, the head of the Bank of England referred to it as “the most serious financial...
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...The European Sovereign-debt Crisis Throughout history, debt has been an issue and a concern for many countries around the world. Nations borrowing money, unnecessarily spending, corruption, inability to pay back loans and a variety of other factors have contributed to the devastating and lasting effects of monetary absolution. In recent years, some of the most significant and devastating economic occurrences that have taken place were released to the general public. One that has received a great deal of attention is known as the European Sovereign- debt Crisis or the Euro zone crisis. The European Sovereign Debt crisis is an ongoing financial crisis that has made it impossible for some countries in the Europe to repay or refinance their government debt without the assistance of third parties (Wikimedia). Countries across the European Continent are struggling to find ways to cope with the crisis and the impact that it has taken on debt stricken nations. Europe’s politicians, regulators, and market players are trying different approaches to deal with the problems at hand (Bloomberg LLP). Due to the number of countries that are involved this financial crisis is not only affecting these countries but the entire world. The Euro zone crisis had a variety of origins that grew their roots over a course of many years, but the situation was not released to the general public until back in late 2009 when the concerns intensified. Fears of a Sovereign Debt Crisis arose among investors...
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...loss 11 3. Lehman Brothers 14 3.1. Reasons for Bankruptcy 14 3.2. LEVERAGE 15 3.3. LIQUIDITY 15 3.4. LOSSES 15 3.5. Final words 16 4. Greece Financial Crisis 16 4.1. Current Greece Financial Crisis 16 4.2. Greece before Financial Crisis 18 4.3. Industry 19 4.4. Tax Evasion 20 4.5. Populism and Corruption 22 5. Conclusion 23 5.1. Fundamental defect in the euro area – The impossible of independent monetary policy worsen the Economic Crisis of Europe. 23 5.2 Fundamental defect in the euro area – The Eurozone, which was established without financial alliance makes the financial crisis to the banking crisis. 26 REFERNECES 28 Introduction In June, whole world paid attention to Greek economic crisis. Greece, had undergone crisis because of financial crisis from United States since 2008, has evaded a default with two times of relief loans from European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF). But Greece announced that they couldn’t pay back the loan to IMF and then implemented a referendum; pros and cons to additional relief loans. After the referendum, a negotiation of debt redemption of Greek government had been proceeded between Greece and creditors and it was concluded that Greek government would take appended loans and conduct structural reform. Why did Greece negotiate with creditors by implementing the referendum? More radically, why...
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...their debt obligations. Financial crises tend to lead to, or exacerbate, sharp economic downturns, low government revenues, widening government deficits, and high levels of debt, pushing many governments into default. As recovery from the global financial crisis begins, but the global recession endures, some point to the threat of a second wave of the crisis: sovereign debt crises. Greece is currently facing a classic sovereign debt crisis. Greece accumulated high levels of debt during the decade before the crisis, when capital markets were highly liquid. As the crisis has unfolded, and capital markets have become more illiquid, Greece may no longer be able to roll over its maturing debt obligations. Some analysts have discussed the possibility of a Greek default. To avoid such a default, however, the Greek government has introduced a variety of austerity measures and, on April 23, 2010, formally requested financial assistance from the other 15 European Union (EU) member states that use the euro as their national currency (the Euro zone) and the International Monetary Fund (IMF).Greece’s debt crisis has raised a host of questions about the merits of the euro and the prospects for future European integration, with some calling for more integration and others less. Some have also pointed to possible problems associated with a common monetary policy but diverse national fiscal policies. This report provides an overview of the crisis; outlines the major causes of the crisis, focusing...
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...Greece and the fiscal crisis in the EMU Willem H. Buiter Chief Economist, Citigroup Ebrahim Rahbari Economist, Citigroup 07-09-2010 1 Abstract The paper analyses the sovereign debt crisis in Greece and other Euro Area countries and the response of the national authorities, the EU institutions (including the ECB) and the IMF. We use economic and political economy perspectives and consider both positive and normative aspects of the crisis and the policy responses. Authors: Willem H. Buiter Chief Economist Citigroup Citi Investment Research and Analysis Citigroup Centre Canada Square, Canary Wharf London E14 5LB, UK Phone: +44 (0) 20 7986 5944 PA Phone: + 44 (0)20 7986 3213 Fax: +44 (0) 7986 3221 Mob: +44 (0)7540961927 Skype: willemhbuiter Web: http://www.nber.org/~wbuiter Ebrahim Rahbari Economist, Citigroup Citi Investment Research and Analysis Citigroup Centre Canada Square, Canary Wharf London E14 5LB, UK Phone: +44 (20) 7986-6522 Fax: +44 (0) 7986 3221 Key Words: Sovereign default, fiscal sustainability, bail-out, Euro Area JEL Classification: E42, E44, E58, E62, E65, G01, H62 2 1. Introduction The saga of the Greek public finances continues. But this time, Greece is not the only country that suffers from doubts about the sustainability of its fiscal position. Quite the contrary. The public finances of most countries in the Economic and Monetary Union (EMU) are in a worse state today than at any time since the industrial revolution, except for wartime...
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...Can austerity lead an economy out of a debt crisis and recession? Was it successful in the Baltics? “Austerity describes policies used by governments to reduce budget deficits during a period of adverse economic conditions.” These policies may include combination of spending cuts or/and tax increases, or a mixture of the two. But does applying austerity helps countries to grow out of debt? The thesis of this essay is that austerity cannot lead an economy out of a debt crisis and recession, due to its negative effect on economic growth, tax revenues (higher taxes - less revenues) and employment (increased unemployment). The failure of it in many countries (Europe, including “successful” model Latvia) proves its inability to work efficiently and help countries after recession. Firstly, applying austerity measures, the tendencies which occurred in all countries showed that austerity is not efficient and its effect in most cases turns out to worsen the situation in country. After financial crisis of 2008, in order to be able to reduce deficit (reduce the debt), some countries, especially in Europe, were forced to embark on austerity measures (e.g. Greece). The first tendency was that the rate of unemployment in all countries got bigger. Austerity states that “budget cuts can spur growth by giving businesses increased confidence”. The increase of unemployment rate because of austerity could be expected in short-term, but the real situation is different. Eurostat reported...
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...MACROECONOMICS Greek debt crisis: causes Instructor: Mou Hui Student: Galina Bogdanova JX1208903 Contents Introduction 3 Timeline of the Greek Debt Crisis 4 Causes 8 Internal 8 1. GDP growth rates 8 2. Unrestrained spending 11 3. Greek public debt 12 4. Statistical credibility 14 External Causes of the Greek Crisis 14 Influence on the evaluation of the crisis 15 Impact of the crisis on the country's macroeconomic indicators 18 Conclusion 22 References 24 Introduction International crisis 2008 has not only exacerbated the Greek economic situation, but has also intensely brought forward the economy’s deeply rooted and chronic weaknesses. The main argument of the paper is that the main cause of the Greek economic crisis is not the recent global economic instability, neither the outcome of political management practices of the latest Center Right government (2004-2009). Rather, the situation in Greece is the obvious outcome of a series of incorrect government choices and omissions during the last three decades and not a recent phenomenon at all. Greek economy fulfills the main criteria of a “weak economy”. Economic and fiscal measures undertaken by the Socialist government under the guidance of the IMF will fail to succeed unless they are followed by clear, transparent development initiatives, which is not the case until now. The purpose of this paper is to approve that the current Greek crisis is the consequence of inappropriate domestic...
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...Article Critique Euro Crisis Fin 311 Certification of authorship “I certify that I am the author of this paper that any assistance I received in its preparation is fully acknowledged and disclosed herein. I have also cited any source from which I used data, ideas or words, either quoted directly or paraphrased. I also certify that this paper was prepared by my specifically for this course and is not a replication of a paper submitted for another course. ” Mateo Salazar Abstract The main question about this article that we must ask ourselves is that in what way or how does the European financial crisis affects us. In this article critique we are going to explore and find out how and why is this article relevant to the course and why did I choose it. This article by Martin Feldstein talks about the European economic crisis and how this crisis was foretold long time ago. It analysis the countries involved in this crisis and how did they got there in the first place and how each one is affected by this anomaly. The critique shows us what caused the crisis and what is being done to stop this economic crunch, we will also review what countries are involved, what caused the crisis, what solutions are presented and find out the larger implications and think why and how this will affects people in America. Lately every day seems to bring chaotic news about the way our economy is doing. However, the most shocking or the one that everybody is scared of, would be the Euro...
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...identity, the Euro certainly brings many advantages to Europe. However, the political and economic instability that both caused and was caused by the Euro crisis threatens the further perpetuation of this currency. The onset of the Euro crisis came about when the Greek government admitted to a budget deficit much larger than they had previously divulged. Interest rates skyrocketed and, despite efforts to reduce spending, Greece ultimately fell bankrupt. Concerns over the decline of a state that represents only 2.5% of the EU’s GDP could have been redressed, had it not been for inflexible provisions of the Treaty on European Union. The “no-bailout clause” did not permit the EU or any national governments to undertake the debts of another state, a rational but perhaps detrimental provision in 2010. Moreover, one may argue that the Eurozone was in jeopardy from the start when more than half of its members did not meet the debt limits. The Stability and Growth Pact, an instrument created to monitor these debt limits, was quickly ignored. Even Germany and France, the EU’s most influential members, regularly exceeded deficit allowances and thus smaller states like Greece were able to build debt unchecked (see Appendix A). If the EU had taken more decisive actions in early 2010 to remit significant loans to impose austerity measures on Greece, the world’s confidence may have quickly revived. Instead, Greek bonds were downgraded and investors began to fear the subsequent decline of other...
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...disadvantages include loss of sovereignty, cost of Euro and budget position. Thus, the significant influences of Euro dollar from birth to now, it can be known that Euro currency is defined under flexible exchange rate system. With flexible exchange rate, the currency can be effort between the capital movements, tax and subsidize international trade and therefore the currency from overseas will influenced the demand. 2. Analysis 1. History of Euro In January of 1999, single currency, Euro has been introduced by members of European Union. It has been approved by Maastricht Treaty and used by its members currently who called as Eurozone. Those members consists of 16 members which are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, Spain. Hence, United States, Denmark and Sweden are those countries only which not adopted by same currency. Meanwhile, the “Maastricht criteria” was set with some specific conditions to meet its major purpose which is economy stabilization. Those conditions include specific conditions. First, the inflation rate should not be...
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