Greek Economical Crisis By Anastasios Basaras, Hellenic Institute for Strategical Studies

1. Greek Economical CrisisBy Anastasios Basaras, Hellenic Institute for Strategical Studies

2. Presentation Topics • Background Information • The Economic Crisis Milestones • Austerity Packages &Reforms • Greece’s Economics Data • Analysis of the Financial Crisis • The Status of the Crisis in Spring 2014 • The Way Ahead

3. Background Information Greece • Is a very old country with a very rich history, civilization, culture and language. In 1821, Greece stood up to the Ottomans and by the 1830s became a modern state. • Economy is 42nd (27th before crisis)(€ 182 Bln) largest economy in the world based on Gross Domestic Product (GDP). Per capita, ranked 63rd (24th before crisis)(€ 17,067). In human quality and development of life indices 29th (22nd before crisis) in the world • Is a Parliamentary Republic with Capitalist economy. Member of EU since 1981 and member of European Economic and Monetary Union (EMU) since 2001 (~2.5% of EMU’s economy). • Is a member of the OECD (Organisation for Economic Co-operation and Development), the World Trade Organization and the Black Sea Economic Cooperation Organization.

4. The Economic Crisis Milestones • In May 2010, EMU and IMF agreed on a €110bn bailout loan for Greece, conditional on compliance with Implementation of austerity measures to restore fiscal balance. • In October 2011, EMU agreed to offer a second €130bn bailout loan, conditional with implementation of another austerity package. • In November 2012, the Greek parliament passed the conditional "Labor market reform" & "Midterm fiscal plan 2013-16"(2-year extension of the bailout programme, cost €32.6bn of extra loans from Troika (€15bn in 2013-14 and €17.6bn in 2015-16).

5. Austerity Packages&Reforms First austerity package (Feb. 2010) Second austerity package (March 2010) Third austerity package and reforms (May 2010) Fourth austerity package and reforms (June 2011) Fifth austerity package and reforms (Feb. 2012) Sixth austerity package and reforms (Nov. 2012) Including amongst others: cuts in: salaries, bonuses, pensions, overtime work, work-related travels, public sector allowances, rise of: VAT, taxes on: petrol/ gas prices, imported cars, company profits, increase of Average retirement age, Changes to laws to make it easier to lay off public employees and workers, Health, Education and Defense spending cuts, and numerous other cuts and reforms…

6. Greece’s Economics Data

7. Analysis of the Financial Crisis • The causes of the crisis • EMU ramifications of the crisis

8. The causes of the Crisiscontinued Generic Causes • Miss-management and poor control and auditing of the Social Security Organizations, Pension Funds, Share Funds, Health Funds, Public Finance Organizations and Institutions, Burse and Banking System (Accumulative warranties debiting the Public Debt by more than €150Bn after the year 2000). • Poor and no systematic efforts to control expenditure, tax collection &continuous annual deficits in the last 40 years. • Lack of a central European Union fiscalpolicy and control • Inefficient and ineffective planning and management of the economy development pillar (little or not productive investments and public projects) • A parliamentary system of governance, where executive and legislative branches blend and tend to be dominated by the same actor (spending more and saving less for the sake of vote). • Greece was living beyond its means even before it joined euro (Public spending soared, wages and pensions i.e., rose 50% between 1999 and 2007 - far faster than in most other EMU countries.)

9. The causes of the Crisiscontinued Generic Causes • Greece entered EMU without adequate preparation. Continuous worsening of competitiveness after EMU entry. • Since, Greece joined EMU, it has ceded control of monetary policy to ECB and can no longer print money. • Two of its largest pillar industries, maritime shipping and tourism were hit strongly from the global economic downturn. • Mismanaged, mal-organized, poorly-IT-organized, corrupted,bureaucratic, overpopulated, clientism-driven and mal-syndicated public sector with numerous procurement scandals • Reluctance in foreign/domestic investments • Considerable transfers from Greek banks to foreign banks • Giant illegal immigration and respective fund transfers • A mal-syndicated working system of the public/private sector with numerous strikes • Over-expansion and over-expenditure of the Health & Education systems

10. The causes of the Crisis (2008-09) 2008-2009 Developments and the Crisis • Extremely-reluctant and slow reaction of the Greek political and managing system despite the warnings. • Failure to address the economic issues present in almost every country. • When global financial downturn hit the state was ill-prepared to cope. • Huge expenditure overruns and revenue short falls. • Reluctance and Unwillingness to take coherent significant fiscal measures to correct the situation. • Huge account deficits. The State income was hit by widespread tax evasion, limited fee-collection, inter-banking transfers and corruption. • Panic-hit state rulers, politicians, public-finance managers, bankers

11. EMU Ramifications of the Financial Crisis The contagion risk for other EMU countries has been eliminated. This is mainly due to: - A successful fiscal consolidation & implementation of structural reforms, which significantly improved their financial stability. - Establishment of a permanent financial Stability Support Mechanism (ESM), with guarantees by ECB to offer additional financial support in the form of some yield-lowering bond purchases for all eurozone countries involved in a sovereign state bailout program from EFSF (European Financial Stability Facility)/ESM.

12. The Status of Crisis in Spring 2014 • The status of the debt and the 2014’s Budget • The debt payment timeframe • The Greek Public Debt Interest Payment 2008-18 • Highlights of Greece’s Entrance to International Markets • The European Debt Crisis Visualized(if time permits)

13. The Status of the Debt and the 2014’s Budget

14. The Greek debt payment timeframe

15. The Greek debt payment timeframe

16. Greek Public Debt Interest Payment 2008-2018

17. Highlights of Greece’s Entrance to International Markets • Greece has (is being) implemented, satisfactorily, a wide ranging set of reforms, as well as the budget for 2013 in line with the Medium Term Fiscal Strategy 2013-16. • Europe’s leaders have been preaching austerity for years, arguing that only deep budget cuts will revive the economy and inspire the necessary confidence among investors. Now, they have symbolic proof, as Greece returned to the capital markets. • The bonds of both Portugal and Ireland have been in strong demand since those countries returned to the markets early this year. • Investors are energized by a pledge from the European Central Bank’s president, Mario Draghi, to do “whatever it takes” to prevent the crisis from breaking out anew.

18. Highlights of Greece’s Entrance to International Markets-continued • Greece achieved a primary government budget surplus in 2013 of about € 3 billion. • In April 2014, Greece returned to the global bond market with a bang (The sale had been at least 8 times oversubscribed), ending a four-year exclusion by raising €3 billion worth of five-year government bonds at a yield of 4.95% (30% at the height of the crisis, expected 5-5.5% just before raising), sending a major signal that the eurozone debt crisis is fading. • The sale is a big step in Greece's financial resurrection after two EU-IMF bailouts. • However, the economy of Greece remains weak, with high unemployment, pending structural reforms and a non sustainable Public Debt (expected to be regularized within EMU this year).

19. The way ahead continued • Implement and apply closely the remaining actions and measures of the medium term fiscal strategy MOU 2013-16. • Maintain Political stability. • Regularize/Restructure Public Debt so that to become sustainable (Reduction of Interest Rate to: average ~1%, Extension of payment timeline to: NLT 50Years, Conversion of floating interest rate part of debt (~€80Bn) to constant interest rate of ~1%, Removal of Bank Recapitalization Fund (BRF)~€45Bl) from Public Debt, Usage of remaining ~11€Bn from BRF for Public Debt needs of years 2015-16. 2014-15’s Bond Payment Time Shift.)

20. The way ahead continued 4. Improve the psychology of economy. 5. Eliminate recession and improve growth by restoring and improving investments, touristy, maritime and agricultural and other industries. 6. Speed up exploitation of natural resources of the country. 7. Face/eliminate efficiently and effectively the massive and uncontrollable illegal immigration. 8. Recall back and taxate the Greek money, illegally, transferred abroad. 9. Punish all the persons involved in procurement scandals and laundering, the earlier the better.

21. The European Debt Crisis Visualized At the heart of the European debt crisis is the euro, the currency that tied together 18 countries in an intimate manner. So when one country teeters on the brink of financial collapse, the entire continent is at risk. How did such a flawed system come to be? Bloomberg Television and Jonathan Jarvis present "The European Debt Crisis Visualized." (Source: Bloomberg)Published on 24/2/2014 An Interesting Video if time permits!

22. Questions-Sources \