...Topic: PIIGS (European debt crisis) 吳宇綸D0131292 劉昱顯D0131156 王謙 周雋彥D0125599 Contents 1. Introduction 2. Overview of the European sovereign debt problem 3. Relief measures of the European sovereign debt crisis 4. European debt crisis 5. Conclusion 6. References I. Introduction The PIIGS is a group that composed of five countries that have some commonality in location and economic environments. In this case, PIIGS includes Portugal, Italy, Ireland, Greece and Spain. The countries which be mentioned are all part of European Union members and have been noted for having weak economics and bad situation of financial problems. In 2008, economic crisis came to all over the world, during the worldwide economic crisis, Portugal, Italy, Ireland, Greece and Spain began to come out the grave and serious concern in the European Union refer to the enormous amount of sovereign debt that they were carrying. The problem with the PIIGS is that speculators dropped, compounding their debt issues and the situation might be much more worse. Many European Union members were also unwilling to rescue these struggling nations although when it became very clear that assistance would be needed. The sovereign debt crisis sparked a number of conversations about reforming financial policy in the European Union to prevent similar problems in the future. The members of PIIGS felt displeasure at the negative allusions and some have...
Words: 6354 - Pages: 26
...1. In Greece the banks didn’t sink the country. The country sank the banks. Discuss this view. Which are the main differences between the Greek crisis and the crisis of Ireland and Portugal? The main cause of the Greek crisis is the ongoing disclosure of statistics that were well hidden from the eyes of the public, leaving people in ignorance about their own country and the future. When the figures started to become revealed, breaking up the shocking news about the forgery that lasted for over 30 years, it left the world in wonder – how is it possible to disclose such a thing for so long, and how is it possible that such action remains unpunished? The problems caused by the global recession were compounded by revelations that national statistics had been altered in order to cover the fact that Greece, in terms of debt levels, exceeded limits set down by the EU. The country's debt is already well over 100 percent of GDP and is still rising. According to euro zone rules, total government debt should not exceed 60 percent of GDP. The country's budget deficit in 2009 was almost 13 percent of GDP, more than four times the 3 percent limit allowed in the euro zone. But beyond the debt there is more deficit. What Greeks did when they got all this borrowed money, they gave away incredible sums to citizens, raised the wages to such an extent that it created a serious budget deficit. Inefficient Government? Corrupted mentality? Call it as you like, but it caused consequences that citizens...
Words: 2957 - Pages: 12
...Midterm Examination Xingtian Zhan Early October 2009, the Greek government suddenly announced that the 2009 government budget deficit and public debt to GDP ratio is expected to reach 12.7% and 113%, respectively, far exceeding the EU's "stability and growth pact" provides for 3% and 60 percent limit. In view of the significant deterioration in the financial position of the Greek government, the world's three major credit rating agencies, Fitch, Standard & Poor's and Moody's credit ratings have been lowered Greece's sovereign Greek debt crisis kicked off. With sovereign credit rating was lowered, the Greek government borrowing costs increase sharply. Greek government had to take austerity measures in Greece held another round of strike activity, economic development worse. Until February 2012, Greece, Germany and France and other countries still rely on rescue loans to survive. In addition to Greece, the financial situation of Portugal, Ireland and Spain and other countries also attracted attention from investors, European countries sovereign credit rating was lowered. Greece was just entering the euro zone. According to the provisions of some countries of the European Community signed in 1992 "Maastricht Treaty", the European Economic Monetary Union member states must meet two key standards, namely the budget deficit it can not exceed 3 percent of GDP, the debt ratio below 60% of gross domestic product. However, the accession of Greece just to see yourself far away from...
Words: 1771 - Pages: 8
...THE FACULTY OF ECONOMICS LJUBLJANA THE CRISIS IN GREECE subject: TAXES MAY 2013 TAXES THE CRISIS IN GREECE author: P.Fux Contents INTRODUCTION ...................................................................................................................... 3 GENESIS OF THE FINANCIAL CRISIS (USA) ................................................................. 3 THE TIPPING POINT ........................................................................................................... 3 IMPACT OF BANKING CRISIS ON EU - DEVELOPMENT OF FISCAL CRISIS .............. 4 WHAT HAPPENED IN GREECE............................................................................................. 4 DEBT IS HER OLDEST COMPANION ............................................................................... 5 CRISIS HAS SHOWN FIRST EFFECTS.............................................................................. 5 HOW MARKETS SAW GREECE ........................................................................................ 6 GREECE'S PROBLEMS SINCE THE CRISIS HAS ARISEN and BAILOUTS ..................... 7 The huge numbers of Greece's debt in pictures (2012) ...................................................... 9 A FEW WORDS ABOUT GREECE'S RATIOS ..................................................................... 10 THE GOVERNMENT SPENDINGS ..............................................................
Words: 6764 - Pages: 28
...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 as...
Words: 3676 - Pages: 15
...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...
Words: 7675 - Pages: 31
...and economic crisis 3.1. The global financial and economic crisis has revealed the macroeconomic imbalances and structural weaknesses of the Greek economy. The global economy is in the midst of its most severe financial and economic crisis since the 1930s. The strong turbulence that started in the United States in August 2007 and spilled over to the rest of the world is continuing for the second year running, with occasional episodes of intensification. The persistence of the financial turmoil has caused the global outlook for output, employment and trade to deteriorate rapidly, especially during the last few months. At the current phase, developments in the financial and the real sectors of the global economy form a negative feedback loop, whereby the dysfunctioning of financial markets squeeze activity and, in turn, the fall in economic activity further undermines the capital position of the financial sector and its ability to finance enterprises and households. Exit from this vicious circle will not be easy or fast. The global crisis has negatively affected the Greek economy, especially since the intensification of the crisis in September 2008. The growth rate of the Greek economy, which had been steadily high since the second half of the 1990s, decelerated markedly in 2008, while economic activity is projected to stagnate in 2009. The financial crisis is affecting economic activity in Greece in two ways: on the one hand, the tightening of banks’ credit standards for...
Words: 681 - Pages: 3
...Background: As the consequence of the 2008 U.S. banking crisis, Europe was hit by one of the worst debt crisis. Starting from Greece in autumn 2009, the crisis spread to other European countries, especially Spain, Italy, Ireland and Portugal and forced European policy makers to take many actions to limit its consequences (BOG, 2014, p.42). While others European economies such as Spain, Portugal avoided the severe crisis by following advisory strategy like austerity, reducing public spending…, Greece situation did not improved. To help Greece improve its situation, the IMF and Eurozone governments sealed a deal for two bailouts in 2010 and 2012, totalling €240 billion. On July 5, 2015 the majority of Greek citizens voted to reject the Europe’s plan to bail out the country’s economy, which caused the fear about the potential exit from the European Union, Greece’s future and world economy as well. Despite that fact, Eurozone leaders still reached an agreement on a third bailout programme to save Greece from bankruptcy on July 13. Although Greece overcame the severe situation, there is no indicator that the crisis will stop. This essay will discuss Greek situation involving 3 main issues, which are mistakes leading to crisis, financial regulation and the role of banks, potential financial contagion and moral hazard. Discussion: 1. Mistakes leading to crisis: One of mistakes leading to crisis was supposed to involve economic statistical data fraud. According to a comprehensive...
Words: 2431 - Pages: 10
...Sharma Guohan.Wang The Debt Crisis of Greece Early October 2009, the Greek government suddenly announced that in 2009 the government budget deficits and public debt as a percentage of GDP was expected to reach 12.7% and 113% respectively, far more than the EU's <stability and growth pact> rules of the upper limit of 3% and 60%. Given the Greek government finances deteriorated significantly, the three major credit rating agencies fitch, standard & poor's and moody's have cut Greece's sovereign credit rating, the debt crisis in Greece officially kicked off. However, when joining the EU, Greece saw himself was far away from the two standards related. This was not a good thing of Greece and the Euro zone. Especially when the euro first came out and then began to depreciate. Greece would then turn to the U.S. investment bank Goldman Sachs for assist. Goldman Sachs then design a set of currency swaps for Greece in order to cover up a sum of up to 1 billion Euros public debt, which made the Greek conform to the standard of Euro members. In addition, Goldman Sachs designed for Greece a variety of ways to accumulate capital and at the same time they did not lead to rising debt. Such as the national lottery and aviation tax income in the future as a mortgage, in exchange for cash. This kind of mortgage now became a sale in statistics instead of debt. In other words, it became the securitization of bank creditor's rights. The root cause of the debt crisis in Greece was that the...
Words: 1170 - Pages: 5
...Greece’s Accounting Problem Greece is back as a focal point of the world financial crisis. While coming elections are spooking the markets, the supposed cause of the crisis has not changed. Greece has a declared debt of 319 billion euros, or about $369 billion, 175 percent of its 182-billion-euro ($210 billion) gross domestic product. This sounds like a nearly impossible task for any government: to govern effectively, spur economic growth and avoid default. The shackles of the declared Greek debt have effectively paralyzed the country. Yet maybe all of this debt drama is unnecessary. The way this story is usually told, inside and outside Greece, is as a morality play: the profligate Greeks don’t pay taxes and their banks and elites, in turn, rob Greek citizens and foreign investors alike. The Greeks, it seems, need to be held accountable and to pay back their debt at any cost. The brutal and counterproductive response has been austerity. But given Greece’s problems, what the country really needs is transparency and accountability. Greece has a very weak tradition of accounting, with few homebred trained accountants. The government does not use International Public Sector Accounting Standards, or Ipsas, which measure liabilities and assets over time, similar standards to those used by leading governments, businesses, banks and investors at all levels. It’s of little surprise that without internationally verifiable accounting standards, no one feels the need to be accountable...
Words: 1047 - Pages: 5
...Greek economic problems Bc. Nikola Novosádová Field of study: European Business and Finance Course: Understanding Global and European Business Environment 1. year, 1. semester 2014 CONTENT General information about Greece 3 Greek economic problems 4 Greek government-debt crisis 4 Overpriced government contracts 4 Government budget deficit 5 Tax restriction and tax evasion 5 Trouble of main Greek sectors - tourism and transport 5 Problem with repayment of debts 6 Measures 6 Rescue packages by EU and IMF 6 Privatization of state assets 6 Current economic situation 7 Debt 7 High unemployment 7 Conclusion 8 General information about Greece The capital: Athens Official languague: modern Greek Official name: The Hellenic Republic, Elliniki Dimokratia Religion: Greek Orthodox Church Area: 131 960 km2 Number of inhabitants: 10 815 000 Currency: euro (from 2002) Member of EU from 1981 (7) Unemployment rate (2014): 25.9% (2) Greek flag: Greek economic problems Greek economic problems are caused among other reasons by influences of impacts of the Great Depression (Global economic crisis). But there was also other different reason. This causes, described in following paragraphs, didn’t came to this coutry from outside, from the world but rised inside Greece. Greek government-debt crisis It is also known as the Greek Depression. Government-debt crisis is definitely the main cause of current and previous Greek...
Words: 1370 - Pages: 6
...Greek CDS drama holds lessons for investors It’s over. The long-running drama over Greek credit default swaps finally came to end with a $2.5bn pay-out for those who had bought protection against default by Athens. Yet, while market disorder was avoided, there remain concerns that CDS are flawed. Market participants insist lessons need to be learned from the Greek debt restructuring deal and bond exchange, or these insurance-like instruments, untested in a sovereign restructuring before Greece and which are used as a protection against losses on bonds, could lose their appeal. An auction held by 14 banks set a market-wide payout of $2.5bn, or 78.5 per cent of the $3.2bn of net outstanding CDS as of March 9, when a so-called “credit event” was declared by the International Swaps & Derivatives Association, the industry body that rules on pay-outs. The payout was considered fair value by many strategists and investors. But these same strategists and investors said that this was more down to luck than design as the Greek debt exchange, under which private sector holdings of Greek debt were written down by about €100bn, failed to consider the potential negative fallout for CDS. Michael Hampden-Turner, credit strategist at Citi, says: “I would like to see the market look very closely at how CDS works in the event of future sovereign restructurings. We had a lucky break with Greece in that the process went smoothly, but it might not do so the next time round.” Portugal could...
Words: 9710 - Pages: 39
...The Greek government-debt crisis (also known as the Greek depression)[2][3][4] started in late 2009. It was the first of five sovereign debt crises in the eurozone – later referred to collectively as the European debt crisis. In Greece, triggers included the turmoil of the Great Recession, structural weaknesses in the Greek economy, and a sudden crisis in confidence among lenders. In late 2009 fears developed about Greece's ability to meet its debt obligations, due to revelations that previous data on government debt levels and deficits had been misreported by the Greek government.[5][6][7] This led to a crisis of confidence, indicated by a widening of bond yield spreads and the cost of risk insurance on credit default swaps compared to the other Eurozone countries – Germany in particular.[8][9] In 2012, Greece's government had the largest sovereign debt default in history. On June 30, 2015, Greece became the first developed country to fail to make an IMF loan repayment.[10] At that time, Greece's government had debts of €323bn.[11] The 2001 introduction of the euro as a common currency reduced trade costs among the Eurozone countries, increasing overall trade volume. However, labour costs increased more in peripheral countries such as Greece relative to core countries such as Germany, making Greek exports less competitive. As a result, Greece saw its current account (trade) deficit rise significantly.[12] A trade deficit means that a country is consuming more than it produces...
Words: 557 - Pages: 3
...Introduction The financial crisis of 2007–08, also known as the Global Financial Crisis and 2008 financial crisis, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s. It threatened the collapse of large financial institutions, which was prevented by the bailout of banks by national governments, but stock markets still dropped worldwide. In many areas, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of U.S. dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European sovereign-debt crisis. The active phase of the crisis, which manifested as a liquidity crisis, can be dated from August 9, 2007, when BNP Paribas terminated withdrawals from three hedge funds citing "a complete evaporation of liquidity". Many causes for the financial crisis have been suggested, with varying weight assigned by experts.The U.S. Senate's Levin–Coburn Report concluded that the crisis was the result of "high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street." The Financial Crisis Inquiry Commission concluded that the financial crisis was avoidable and was caused by "widespread failures...
Words: 4934 - Pages: 20
...Policy Paper, spring 2012 ------------------------------------------------- Is a Greek exit from the European Union inevitable? 0909512 Table of Contents Pg. List of Illustrations 3 Executive Summary 4 1.0 Introduction 5 2.0 The Economic Cost and Benefit for State Membership of the EMU 5 2.1 Benefits of EMU Membership & Mechanisms 5 2.2 Costs of EMU Membership 7 3.0 Contextual Factors: The Profusion of Dept 10 3.1 The Eurozone Crisis 10 3.3 Greece- The Forefront of the Euro Area Crisis 13 4.0 Alternate Policies and the Effective Consequences 15 4.1 Predicament 15 4.2 Abetting Dependent on Austerity 16 4.3 Creditor-Led Default 17 4.4 Debtor-led Default and Greek Haircuts 19 4.5 Greek Exit 20 5.0 Recommendation 21 Appendices: Appendix 1: Preferential liberalization References List of Illustrations Pg. Illustration 1: The cost of EMU- Diminishing Domestic Flexibility to Asymmetric Macro Shocks 7 Illustration 2: Cost and benefit of Monetary Unions 9 Illustration 3: Evolution of Nominal Unit Labor Costs in the Eurozone Pre to the US Credit Crunch 9 Illustration 4: Current Account Balances in Percentage GDP 10 Illustration 5: Core Bank Exposure to the Weaker Eurozone Member States 12 Illustration 5: Holders of Greek Government Bonds and Dept (in billion Euro) 16 Executive Summary The standing...
Words: 6430 - Pages: 26
