BY:

ADARSH PANDEY E2
ASHEEN PRADEEP E11
ASHISH DUBEY E12
GEETHIKA NAIR E14
RAVJEET KAPANY E29
 GREECE CRISIS EXPLAINED

• Sovereign Debt Greece owed the European Union between 2008 and 2018.
• In 2009, Greece’s budget deficit was 12.9 percent of its GDP.
 CONTINUED

• In 2010, Greece implemented Austerity Measures and got 240 billion euros in emergency funds
in return.
• By 2012, Greece's debt-to-GDP ratio to 175 percent, almost three times the EU’s limit of 60
percent.
• In 2014, Greece’s economy appeared to be recovering, as it grew 0.7 percent. The government
successfully sold bonds and balanced the budget.
• In January 2015, voters elected the SYRIZA party to fight the hated austerity measures
• On July 5, Greek voters said "no" to austerity measures. The instability created a run on the
banks.
 CONTINUED

• The ECB agreed with the IMF to reduce Greece’s debt.

• In May 2017, Tsipras agreed to cut pensions and broaden the tax base. In return, the EU loaned
Greece another 86 billion euros
• 2018, the Greek parliament agreed on new austerity measures to qualify for the next round of
bailouts.
• On August 20, 2018, the bailout program ended. Most of the outstanding debt is owed to the EU
emergency funding entities. These are primarily funded by German banks.
WHO DOES GREECE OWE?
 EU EMERGENCY FUNDING ENTITIES

• European Financial Stability Mechanism and European Stability Mechanism: 168 billion euros

• Eurozone governments: 53 billion euros.

• Private investors: 34 billion euros.

• Greek government bond holders: 15 billion euros.

• European Central Bank: 13 billion euros.

• IMF: 12 billion euros.

 CAUSES OF THE CRISIS
• Though adopted euro in 2001, but still had high budget deficit
• France and Germany were also spending above limit
• Uncertain about what sanctions to apply
• Strengthening of Euro
WHY GREECE DIDN’T LEAVE THE EUROZONE?

• Could have reinstated the drachma & abandoned the euro

• 25%reduction in unemployment
• Converted euro based debt to drachma
• Printed more currency
• Lowered its euro exchange rate
• These actions would have-
1. Reduced its debts
2. Lowered the cost of exports
3. Attracted tourists for cheaper vacation
destination
 BUT…
• Foreign owners could have suffered deep losses
• Debase the value of repayments in their own currency
• Banks could go bankrupt
• Triggered hyperinflation as cost of imports skyrocketed
• Couldn’t attract new FDI
• Interest rates on other indebted countries also had risen
• Value of euro weakened
 CURRENT SCENARIO

• Government spending makes 40% of GDP

• EU bailouts contribute 3.3%
• Relies on tourism for 18%of GDP.
• Only 6 billion euros worth property sold till 2011
• Tax evasion gone up(black economy comprises 20.8% of GDP)
• Most jobs are part-time and pay less
 EVOLUTION
 A Different “Old” Debtor
 Contraction In The Interbank Loan Market
 Endemic Structural Problems
 Cheap Credit

 Austerity Measures
 Austerity Measures
 30-billion-euro ($40.3 billion) package of austerity measures on raising taxes and increasing the pension age in a
drive to shore up Italy’s strained finances and stave off a crisis that threatens to overwhelm the euro zone
 Measures where divided between €20bn of budget cuts and a further €10bn of measures to boost growth.
 Between 2009 and 2013, more than 1.7 million small and medium enterprises (SMEs) were forced to close
ITALY’S GDP
 GDP shrunk by a massive 10 per cent since 2007(Hardest Hit country after Greece)
 20 per cent of Italy’s industrial capacity had been destroyed
 ITALY’S PER CAPITA GDP

 Italy had regressed back to levels of 20 years ago

 CURRENT & POSSIBLE SCENARIO
 Italy Has The World’s Third-largest Sovereign Debt
Market With More Than $2.5 Trillion In Outstanding
Government Debt.

 Public-debt-to-GDP Ratio Of Over 130 Percent, It Is

The Eurozone’s Second-most Highly Indebted
Eurozone Member Country.

 Banks will be in need of a Government Bailout as

They Now Hold More Than €400 Billion In Italian
Government Bonds.

 The Italian Government Seems Intent On Rolling

Back The Modest Labor Market And Pension
Reforms Of The Previous Italian Government
 Italian Government Seems To Be Intent On Delivering On Its Costly
Election Campaign Promises Even Though This Might Mean Running Up
Budget Deficits In Flagrant Violation Of The Eurozone’s Budget Rules

 It Has Announced Lavish Public Spending Plans That Will Involve An

Increased Budget Deficit Of 2.4 Percent Of GDP For 2019

 “Italexit” Or “Quitaly
CAUSES THAT LED
TO RECESSION

 Began in 2008 during the world financial crisis of 2007–08

 Main cause of Spain's crisis was the burst of Housing Bubble

 Other factors : low productivity of the Spanish workforce, the

lack of flexibility in the labor market, the price rise of raw
materials (such as copper and oil) and a high level of
indebtedness in both the public and the private sectors.
 EFFECTS OF RECESSION IN SPAIN

Market

Housing

GDP

Unemployment

Healthcare
 GDP

UNEMPLOYMENT
 RECOVERY MEASURES IMPLEMENTED

Banking sector reforms

Labor market reforms

Restrictive and revenue increasing measures

 VAT
 Tax
 Infrastructure
 Wages
 Pension
 Privatization
 Temporary VAT reduction for new housing purchases
 EUROZONE CRISIS AND ITS IMPACT ON
INDIA
• Major IT exporters earn 20-30% from the European market.

• India as a whole appears to have greater exposure to the euro zone than to the US going by our exports. As of March
2011, 10% of our total exports were to the US while 18% were to Europe.

• Growth slowdown of the Indian economy by hurting our exports and affecting capital inflows into India.

• The capital outflows have resulted in crash in our stock markets that have affected investment sentiments of the corporate
world.

• Depreciation of Indian rupee.

• The slowdown in GDP growth to 6.2 per cent in 2011-12 and 5 per cent in 2012-13 was partly due to Eurozone crisis.
 IMPACT ON INDIAN COMPANIES

TATA STEEL HINDALCO

After the takeover of Corus in 2007, Tata Steel
earns almost 60% of its revenues from
operations in Europe.
Sluggish demand in the region.
Procurement costs for raw materials such as iron
ore and coking coal have risen sharply.
Company reported a 170% jump in per share
profit following the sale of its ailing Teesside
Cast Products subsidiary.
• Since the takeover of Novelis in 2007,
Hindalco earns about 32% of its consolidated
revenues from its European operations.
• With operations in Germany, France, Ireland
and Italy, among others, it runs 12 rolled
products facilities and one recycling facility.
 BHARAT FORGE

• Close to one third of its revenue comes from

European markets .
• Since the economic slowdown in 2008, it has
restructured its European operations and reduced its
overseas workforce by 30%.
• This has resulted in a turnaround in the performance TATA MOTORS
over the past two years.

• Tata Motors' sales from JLR units grew 25.6%

during FY11 to 2.43 lakh vehicles, with the UK
accounting for 24% of total vehicle sales during this
period.
• Europe, excluding Russia, contributed 22.4% to
sales.
• However, in the same year, in April-August, the
combined sales of the JLR grew only 10.9% to 1.02
lakhs units.
 SUZLON ENERGY

• Suzlon Energy's exposure to the euro zone is clearly

an outcome of its acquisition of the German-based
REpower Systems.
• One of the leading international manufacturers of
wind turbines, REpower accounts for nearly 40% of
Suzlon's total revenue.
• Its core markets are Germany, Italy, France, the UK,
Canada and North America.
• REpower was impacted of the slowdown as both
industrial production and consumer confidence had
taken a severe hit.
• Its revenue declined by about 7% in FY11.
 CURRENT SCENARIO
CURRENT SCENARIO
• On June 30, 2015, Greece became the first
developed country to default an IMF loan
payment of USD1.7 billion.
• Greece is at the verge of being declared a
bankrupt nation and is urgently needs another
bailout package to come out of the current
crisis.
• On June 29, Greece imposed capital controls
and closed the banks till July 6. Many things
would get clear after the country votes in the
referendum of July 5.
FACTORS BEHIND THE PRESENT
CRISIS
• Around 17.5% of the GDP is spent by Greece in
pension payments which is highest in the Europe.
• The debt to GDP ratio of Greece is as high as 172%
which too is highly unsustainable.
• Tax evasion in Greece is also at its peak where only
one third of the population pays taxes.
• On the balance of payments front also Greece
suffered a lot.
• Unemployment rate in Greece is also highest in
Europe at 25% which means that one in every four
persons is unemployed in Greece.