Presented By :Members Mayur Chordia Dilip Pandey Naseem Khan Mayur Patel Nitin Parmar Ronak Modi Anup verma Sandeep Dube Roll No. 15 66 40 72 74 57 76 21 Topic Introduction Greece Overview Contribution to world Present Crisis Impact on India Role of Germany Bailout Solutions to Crisis Current News
Abhishek Pathare 71
Trade Blocs
A trade bloc can be defined as a µpreferential trade agreement¶ (PTA) between a subset of countries, designed to significantly reduce or remove trade barriers within member countries. OR A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where regional barriers to trade (tariffs and non-tariff barriers) are reduced or eliminated among the participating states.
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Regional Trade Agreement/Integration Agreement Natural Trade Bloc Regionalism Old Regionalism & New Regionalism
³The first waves of PTAs appeared in the 1930s leading to a fragmentation of the world into trade blocs´
Emergence of Trade Blocs
Few Trade Blocs in world
(1) In Europe, the European Union (EU) (2) In United States, the North American Free Trade Agreement (NAFTA) (3) In Latin America, the Common Market of the South (MERCOSUR) (4) In Asia, the Association of Southeast Nations (ASEAN)
Eurozone
The Eurozone-officially the euro area, is an economic and monetary union (EMU) of 16 European Union (EU) member states which have adopted the euro currency as their sole legal tender. OR
A geographic and economic region that consists of all the European Union countries that have fully incorporated the euro as their national currency.
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It currently consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.
Eight (not including Sweden) other states are obliged to join the zone once they fulfill the strict entry criteria.
Emergence of Eurozone
European Central Bank
The European Central Bank (ECB) is the institution of the European Union (EU) tasked with administrating the monetary policy of the 16 EU member states taking part in the Eurozone.
It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt, Germany. The current President of the ECB is Jean-Claude Trichet.
Objectives
The primary objective of the ECB is to maintain price stability within the Eurozone, or in other words to keep inflation low. The key tasks of the ECB are :(1) To define and implement the monetary policy for the Eurozone (2) To conduct foreign exchange operations (3) To take care of the foreign reserves of the European System of Central Banks (4) To promote smooth operation of the financial market infrastructure.
WHERE IS GREECE?
Geographic Location ´ Greece is located at the southeast end of Europe . ´ Greece is referred to as a southern European country, because geographically part of this region. ´ It·s capital city is Athens ´ It is famous for its beautiful beaches and sea. ´ Greece is 5005.13 Km from New Delhi .
GREECE MAP
LITERACY RATE OF GREECE
In Greece, people were considered literate when they graduate the 6 years of primary school. In some other countries literate means someone that can read and write. The literacy rate in Greece is 97.5%.
LITERACY RATE OF GREECE
In Greece education is free and compulsory for all children between the ages of 6 and 14. The remaining years of secondary school are optional and also free. Greece steadily increases its literacy rate specifically for youths aged 15-24 years old is higher at 98.94%.
GDP GROWTH L
T IVE EAR
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GDP - r l gr t r t - . ( st.) . ( st.) r ( st.) r ( st.) r ( st.)
GREECE ECONOMY FIVE YEAR BACK
According to the data given by the International Monetary Fund for the year 2008:The service sector contributes 75.8% of the Industry 20.8%, Agriculture 3.4% of total GDP. The economy of Greece is the twenty-seventh largest economy in the world by GDP. The thirty-third largest by purchasing power
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Greece is the twenty-fourth most globalized country in the world and is classified as a high income economy. The Greek economy grew by nearly 4.0% per year between 2003 and 2007 Rising debt levels (115% of GDP in 2009) lead to rising borrowing costs, resulting in a severe economic crisis.
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Budget deficit criterion of no more than 3% of GDP from 2001 to 2008. But the 2009 budget deficit stood at 13.6% of GDP.
MARITIME INDUSTRY
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The Greek maritime fleet is the largest in the world, at approximately 18% of the worlds maritime fleet. Today, shipping is one of the country's most important industries. It accounts for 4.5% of GDP, employs about 160,000 people (4% of the workforce), and represents 1/3 of the country's trade deficit. According to the BTS, the Greek-owned maritime fleet is today the largest in the world, with 3,079 vessels accounting for 18% of the world's fleet capacity (making it the largest of any other country).
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TOURISM SECTOR
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Greece attracts more than 16 million tourists each year, thus contributing 15% to the nation's Gross Domestic Product. In 2008, the country welcomed over 16.5 million tourists. The number of jobs directly or indirectly related to the tourism sector were 659,719 and represented 16.5% of the country's total employment.
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t has been criticised many times for lagging behind other Western European nations in terms of tourism infrastructures and amenities
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According to a survey conducted in China in 2005, Greece was voted as the Chinese people's number one choice as a tourist destination. ´ [4] In November 2006, Austria, like China, announced that Greece was the favourite tourist destination for its citizens. ´ In line with these observations, Greece's former Minister of Tourism Aris Spiliotopoulos announced the opening of a GNTO office in Shanghai until 2010.
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EXPORTS
MAJOR EXPORT PARTNERS
MAJOR IMPORT PARTNERS
TECHNOLOGY UPGRADATION
GREECE BALANCE OF TRADE
Year Trade Deficit
2007 41499.2
2008 44048.8
2009 30760.4
2010 5542.6
GREECE INFLATION RATE
Year Inflation Rate
APRIL 2007 2.5
APRIL 2008 4.4
APRIL 2009 1
APRIL 2010 4.8
GREECE STOCK MARKET INDEX
Year INDEX
MAY 2007 4836
MAY 2008 4196
MAY 2009 2192
MAY 2010 1630
GREECE GOVERNMENT BOND
Year
MAY 2007 4.50
MAY 2008 4.75
MAY 2009 5.24
MAY 2010 12.45
Rate of increase
GREECE UNEMPLOYMENT RATE
FEARS OF CRISIS
In early 2010 fears of a sovereign debt crisis developed concerning some countries in Europe.
Greece, Ireland ,the United Kingdom, Spain and Portugal .
GREECE CRISIS
Public debt . Greece has 13% of fiscal deficit and 113% of public debt as percentage of GDP. Greek government debt was estimated at ½216 billion in January 2010.
There are a few reasons for this.
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Income inequality has been growing in Greece. Declining unit labour costs, aimed at increasing export competitiveness, Greece, among other European countries like Spain, Portugal and Ireland, lost out to Germany. There are two portions of government debt ² principal and interest payments. Last but the most important, this would not have been such a big problem had Greece not been a part of the EMU.
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If they had an independent currency . But as soon as a country becomes a part of a unified currency under a common Central Bank, its independent monetary policy practically disappears, particularly for the relatively poorer and less powerful countries.
Other reasons
The global financial crisis that began in 2008 had a particularly large effect on Greece. Two of the country's largest industries are tourism and shipping, and both were badly affected by the downturn with revenues falling 15% in 2009. To keep within the monetary union guidelines, the government of Greece has been found to have consistently deliberately misreported, in other words falsified, the country's official economic statistics.[
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In 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 hid the actual level of borrowing. The purpose of these deals made by several subsequent Greek governments was to enable them to spend beyond their means, while hiding the actual deficit from the EU overseers.
Role Of Germany
Germany Holds The Key: With Greece threatened with a default, European
Union leaders have been debating potential rescue deals for the Greek economy.
Most EU leaders as well as the governments of most EU member states, supports bailout package for Greece to help it survive this debt crisis.
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However, Germany has proven to be highly reluctant to fund such a bailout, as a majority of German voters oppose such a move and as the center German government faces a key state election in Germany¶s largest state in the near future.
If Germany blocks an EU bailout for Greece, there be little choice for the Greek government but to turn to the IMF, a move that will likely be greeted with hostility in many EU member states, but one that is acceptable to Germany.
What German Chancellor Mrs. Angela Merkel says about Bailout
The German chancellor was said for taking a hard line against an European bail-out of Greece.
That was before George Papandreou, the Greek prime minister, bowed to the inevitable on April 23rd and asked for the ¼30 billion ($40 billion) loan pledged by Greece¶s eurozone partners,
Of, which Germany¶s share is about ¼8 billion. A further slice, of perhaps ¼15 billion, may come from the IMF.
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Now, Mrs. Anegla Merkel, Reported politicians¶ estimates of the whole bill have soared to ¼120 billion and far beyond, with a correspondingly greater contribution from Germany. Many Germans feel they are being forced to choose between two basic principles of their economic stability and integration within Europe. They also says that German taxpayers would not have to pay for other members¶ mistakes. It should not be forgotten that one of the first countries to break the original eurozone rules on government borrowing was Germany itself. In fairness though, Germany got itself back in line ² without having to get financial help from other members.
The German Factor in Greece¶s Crisis (Part II)
After heated debate, the German government recently approved a rescue package for Greece.
Former Irish Prime Minister John Bruton argues that such assistance should not be portrayed as charity ² but as a loan that is being extended in the rational self-interest of both the lender and the borrower.
Germany leaders today approved the country¶s share of the rescue package for debt ± laden Greece after a big debate in which the finance minister told them they had no alternative to the unpopular measure. The lower house of parliament authorize granting as much as 22.4bn Euros in credit over three years.
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Mr. John Bruton, believed that it was both fair and reasonable for Germany and others to insist on a long-term and detailed austerity program from Greece before releasing funds.
It is true that these measures will depress the Greek economy in the short term, but that had to happen sooner or later anyway, and the sooner it is done, the sooner Greece will get back on a sustainable path.
France, Italy, Spain and Portugal also approved their share of a the bailout to keep Greece from imminent default as the 16 leaders from countries using the Euro.
What is Bailout
A bailout is an act of giving capital to an entity (a company, a country, or an individual) in danger of failing in an attempt to save it from bankruptcy, insolvency, or total liquidation and ruin; or to allow a failing entity to fail gracefully without spreading contagion.
Bailout: -
International Monetary Fund(IMF) approves the bailout package for the Greece crisis of 250bn Euro.
Eurozone countries approves the bailout package for the Greece crisis of 440bn Euro
What triggered THE RISE?
The Euro 750bn received from Eurozone & IMF packaged , which rise a rally in stock markets world wide, forced traders to cover their short positions, thereby covering their losses.
Impact On India
Solution to Crisis
THE WAY FORWARD- PAUL KRUGMAN
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Greece comes out of the European Monetary Union. Greece stays in it but bailing it out in that case becomes implausible due to various political forces at work.
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FURTHER IT CAN COME OUT OF THE CRISES BY STAYING WITH THE EMU
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Greek workers could redeem themselves through suffering, accepting large wage cuts that make Greece competitive enough to add jobs again. The European Central Bank could engage in much more expansionary policy, among other things buying lots of government debt, and accepting, indeed welcoming ³ the resulting inflation; this would make adjustment in Greece and other troubled euro-zone nations much easier. Greece could become to Athens what Washington is to Sacramento ³ that is, fiscally stronger European governments could offer their weaker neighbors enough aid to make the crisis bearable.
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LIMITATIONS OF DRASTIC WAGE CUTS
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None of the alternatives seem politically plausible. Drastic wage cuts might not increase the export competitiveness since German goods could still be preferred to the Greek goods purely because of their quality. Greece would be competing with other nations as well for the external markets Decreasing wages also means a declining domestic market. Therefore, it is very likely that the marginal increase in exports would be overweighed by the decline in domestic consumption.
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LIMITATIONS- INVOLVEMENT OF EMU
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Based on an unsubstantiated belief that a higher money stock automatically leads to inflation since "more money chases the same goods". Greece has idle capacity and unemployment, European Central Bank's money would chase an increased amount of goods instead of the same goods, thereby, avoiding inflation.
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LIMITATIONS OF BERLIN, EMU AND IMF, ARE COMING TOGETHER
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Berlin and EMU, along with the IMF, are coming to the rescue of Greece by announcing the bailout package, it is coming with strings attached. It might force the Greek government to decrease its deficit in its immediate future and balance its budget in the long run. Budget deficit can be decreased through increasing tax rates or by decreasing government expenditure or both.
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WAYS TO WAIVE OFF CRISES
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Without accepting the IMF's deflationary and extremely painful path to recovery. The answer lies in what IMF does not want Greece to do i.e. increase tax rates. The Greek government could decide to increase the direct tax rates while maintaining its expenditure on job-creating activities. This would have a dual effect. It would increase the growth rate and at the same time decrease the debt burden of the government by increasing the tax revenues for the same expenditure.
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Instead of joining the rat race for export competitievness which leads to declining wage share, they should concentrate on domestic sources of growth. One of the primary sources is the wage growth which Increases the domestic consumption. Above path, however, would require Greece to gradually break away from the EMU and have strict capital controls.