GREEK DEBT

Brief History of Greek Debt

the birthplace of theatre, philosophy, democracy and the first radical left
government in Europe, but nothing outshines the bizarre economic traditions that
the small Balkan country has managed to establish since its inception
it has a long-standing habit of borrowing vast sums of money with painfully large
interest rates, only to fork it right back over by buying various goodies from the West
primarily weapons.
Before recognize as sovereign state, it took out the first major loan(1823). British
Bankers Group granted an 800,000 loan to the leadership of the Greek revolution
against the Ottomans.
 THE FIRST BANKRUPTCY
Fail to pay off the loans interest
barely four year after the first loan
1893-Prime Minister Charilaos Trikoupis
announced Greece's second bankruptcy with the
historic phrase: "Regretfully, we are bankrupt."
first British loans were spent on the civil
conflicts that followed the revolution of
1821.
Bankruptcy happened because of over-
borrowing, but those loans resulted in
infrastructure projects that actually
benefited the Greek people
GREECE AFTER THE GREAT WAR
their finances were spent on high society
functions and weddings, while the Communists
strengthened, until they finally installed a
tightly-controlled administration.
1950s, American correspondents in Athens spoke
of about 5,000 members of the Greek upper
class who were basically siphoning off the
country's international financing even using fuel
sent for agricultural machinery for their own cars.
Konstantinos Karamanlis' eight years of governing
Greece (1955-1963), the situation only got worse.
The credit system began handing out money, mainly to
construction contractors
 GDP GROWTH DATA CREDIBILITY

GOVERNMENT
GOVERNMENT DEFICIT CAUSES OF THE SPENDING
DEBT CRISIS

CURRENT ACCOUNT
GOVERNMENT DEBT
BALANCE

BUDGET COMPLIANCE TAX EVASION

 GDP GROWTH

2008- GDP growth rate lower than anticipated by the Greek national statistical
agency.
Redirect government spending from non-growth sectors into growth stimulating
sectors.
Greek minister of Finance reducing salaries and bureaucracy to improve
competitiveness.
Global financial crisis leave a large impact on the Greeks GDP growth rate,
especially in tourism and shipping which is the countrys largest earner.

Government deficit

Fiscal imbalances developed from 2004 to 2009

The Ministry intended to implement real expenditure cuts that

would allow expenditures to grow 3.8% from 2009 to 2013

The deficit needed to decline to a level compatible with a

declining debt-to-GDP ratio
 Government Debt Data credibility

2009- Debt increases higher than expected Unreliable data- when Greece applied for
government deficit and higher debt-service cost Euro membership in 1999

Greek government assessed that structural Flawed data made it impossible to predict
economic reforms GDP growth, deficits, and debt.

2010, Greek government deficits are

Budget compliance estimated to be 13.6%
Government forecast show that public debt
hit 120% in 2010.(actual ratio closer to
Budget Compliances improvement are 150%)
acknowledged.

2009- it was found to be "a lot worse than

normal, due to economic control being
more lax in a year with political elections".
2010- strengthen monitoring system,
making it possible to track revenues and
expenses, at both national and local levels.
 Government spending
capital inflow coincided with a higher budget deficit
From 197480 the government had budget deficits
below 3% of GDP, while 19812013 deficits were
above 3%.
after the removal of the right-wing military junta in
1974, Greek governments wanted to bring left-
leaning Greeks into the economic mainstream and
so ran large deficits to finance military
expenditures, public sector jobs, pensions and other
social benefits.
Current account balance
Greece ran current account (trade) deficits
averaging 9.1% GDP from 20002011.
Greece's large budget deficit was funded by
running a large foreign financial surplus.
inflow of money stopped during the crisis,
reducing the foreign financial surplus, Greece was
forced to reduce its budget deficit substantially
sudden reversal in capital flows typically devalue
their currencies to resume the inflow of capital;
however, Greece was unable to do this, and so has
instead suffered significant income (GDP)
reduction, another form of devaluation
 Tax evasion

Corruption in Greece

estimated tax evasion losses for the Greek government amounted to over
$20 billion.

the most corrupt country in the EU.

estimated that the amount of evaded taxes stored in Swiss banks is

around 80 billion Euro.

Data for 2012 places the Greek "black economy" at 24.3% of GDP