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Global Crisis in an Integrated Region Context

Global Crisis in an Integrated Region Context. George P. Zanias Athens University of Economics and Business. Outline. Global crisis: the roots Financial, economic and employment crisis The Global impact The transmission to the region The regional impact The policy responses.

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Global Crisis in an Integrated Region Context

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  1. Global Crisisin an Integrated Region Context George P. Zanias Athens University of Economics and Business

  2. Outline • Global crisis: the roots • Financial, economic and employment crisis • The Global impact • The transmission to the region • The regional impact • The policy responses

  3. Global Crisis: the Roots • Financial System: a mean to an end. But... • Greedy Bankers • Complacent regulators • Global economic imbalances • Hyper-consumption and twin deficits in the US • Large savings in BRIC, Emirates, Japan • Huge current account deficits in emerging markets

  4. Global Crisis: the Roots …and the ignition: US subprime market …following up from: food and fuel crisis

  5. Implications for the Real Economy Bank Liquidity Access to credit Cost of credit Uncertainty Consumption Investment Savings Employment Unemployment Savings Demand Output

  6. Global Impact: Growth Projections

  7. Global Impact: Industrial Production and Trade Projections

  8. The transmission to the Region • Through Uncertainty • Through trade, the banking system, FDI • Open door trade policies and contraction of export markets • Reliance on foreign banks who reduced/cut lending to local subsidiaries • Reduced volumes of FDI

  9. Western Banks in Eastern Europe

  10. BSEC: Current Account Deficits(% GDP)

  11. Regional Impact: Financial markets

  12. Regional Impact: EU and Emerging Economies (EC + EBRD forecasts)

  13. Regional (BSEC) Growth Forecasts (EBRD, Greece: EC)

  14. Policy Responses • Cleaning banks (toxic assets, liquidity) • Monetary policy (lower interest rates) • Fiscal policy (demand stimulus packages) • Employment and SME policies • Safety net (social policy, precautionary savings)

  15. But: One size does NOT fit all(The regional context) • Heavy dependence on foreign banks • Interest rate support for currencies • Heavy dependence on FDI • New protectionism (credit and trade) • Lack of means for stimulus packages and larger informal sector in crisis situation

  16. …and some advantages • Possible benefits from foreign stimulus packages • Higher activity by IFIs • Access to cheaper funds • Investment projects to boost demand • SME packages

  17. Regional level response • Avoid protectionist measures • Coordinate possible financial and fiscal policies • BSTD Bank initiatives

  18. Thank you

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