DEBT CRISIS OF GREECE:

LESSONS FOR STABLE

ECONOMY
Section B | Group 1

20062 YUGAL SHETTY

20067 AMAN AGARWAL

2 0 0 6 8 A N A N YA M G O W D A

20071 ANVITH PRAKASH S

20073 BEENA N
 • G re e c e ' s e c o n o m y i s t h e w o r l d ' s 5 1 s t h i g h e s t , w i t h a n o m i n a l g ro s s
d o m e s t i c p ro d u c t ( G D P ) o f $ 2 0 9 . 8 5 3 b i l l i o n p e r y e a r.

• Wo r l d ' s 5 3 r d l a r g e s t e c o n o m y i n t e r m s o f p u rc h a s i n g p o we r p a r i t y, w i t h
a G D P o f $ 3 4 8 . 3 4 9 b i l l i o n p e r y e a r.

• S i x t e e n t h - l a r g e s t e c o n o m y i n t h e E u ro p e a n U n i o n ' s 2 7 m e m b e r s a s o f
2019.
Backgroun • G re e c e ' s G D P p e r c a p i t a wa s $ 1 8 ,1 6 8 i n n o m i n a l t e r m s a n d $ 2 9 , 0 4 5 i n
p u rc h a s i n g p o w e r p a r i t y i n 2 0 2 0 , a c c o r d i n g t o I M F e s t i m a t e s .

d of • G re e c e i s a d e v e l o p i n g c o u n t r y w i t h a n e c o n o m y d e p e n d e n t o n t h e s e r v i c e
( 8 0 % ) a n d m a n u f a c t u r i n g ( 1 6 % ) i n d u s t r i e s , w i t h a g r i c u l t u re a c c o u n t i n g

Greece's f o r a p p ro x i m a t e l y 4 % o f n a t i o n a l e c o n o m i c p ro d u c t i o n i n 2 0 1 7 wi t h
t o u r i s m a n d s h i p p i n g b e i n g t h e t w o m o s t i m p o r t a n t G re e k i n d u s t r i e s .

• A s o f 2 0 1 3 , G re e k - o wn e d v e s s e l s a c c o u n t e d f o r 1 5 % o f g l o b a l d e a d we i g h t
Economy t o n n a g e , m a k i n g i t t h e w o r l d ' s l a r g e s t m e rc h a n t n a v y.

• G re e c e i s a m e m b e r o f O E C D , O B S E C a n d t h e E u ro p e a n U n i o n .

• T h e c o u n t r y ' s e c o n o m y w a s r a v a g e d b y Wo r l d Wa r I I b u t t h e h i g h l e v e l s
o f e c o n o m i c g ro w t h t h a t f o l l o w e d f ro m 1 9 5 0 t o 1 9 8 0 we re d u b b e d t h e
G re e k e c o n o m i c m i r a c l e
 • G re e c e , l i k e o t h e r E u ro p e a n c o u n t r i e s , h a d e x p e r i e n c e d d e b t c r i s e s i n t h e
n i n e t e e n t h c e n t u r y, a s w e l l a s a s i m i l a r c r i s i s d u r i n g t h e G re a t
D e p re s s i o n i n 1 9 3 2 .

• T h e   G r e e k g o v e r n m e n t - d e b t c r i s i s i s t h e   s o v e r e i g n d e b t c r i s i s  f a c e d b y
G r e e c e i n t h e a f t e r m a t h o f t h e   f i n a n c i a l c r i s i s o f 2 0 0 7 – 0 8. Wi d e l y k n o w n i n
t h e c o u n t r y a s  T h e C r i s i s  

Factors for • I n G re e c e ' s c a s e , a h i g h b u d g e t d e f i c i t w a s c o m b i n e d w i t h a h i g h p u b l i c

d e b t - t o - G D P r a t i o . A s a re s u l t , i t a p p e a re d t h a t t h e n a t i o n h a d l o s t
c o n t ro l o f i t s p u b l i c d e b t - t o - G D P r a t i o , w h i c h h a d a l re a d y s u r p a s s e d 1 2 7

Greece's p e rc e n t o f G D P i n 2 0 0 9 .

• The Greek crisis started in late 2009, triggered by the turmoil of the 

Debt Crisis
G r e a t R e c e s s i o n, s t r u c t u r a l w e a k n e s s e s i n t h e   G r e e k e c o n o m y,  
m o n e t a r y p o l i c y i n f l e x i b i l i t y.

• Main reasons for crisis being excessive expenditure, Mismanagement, ECB

o n l y m a d e m o n e t a r y p o l i c i e s , m e m b e r s t a t e s m a d e t h e f i s c a l p o l i c y, i n t e r e s t
r a t e s d r o p p i n g d r a s t i c a l l y, r e c k l e s s b o r r o wi n g s , i n c r e a s e d e b t a n d p a y i n g i t
with even more debt.

• Problems faced because of it were govt expenditure increased by 87%

&revenue only by 31%, rising unemployment, tax evasion & corruption.
WHAT MADE GREECE
TO DEFAULT LOANS
Greece's social and economic They were both a part of its
In 1974, the Greek economy's
growth resumed at a later own debt crisis and a part of
priority rate of growth came to
point, though there was a the general European debt
an end.
slight decline in the 1980s. crisis (Figure 1).

Greece was unable to meet its

In order to cover the budget
Greece changed its financial debt obligations at the time,
deficit on a consistent basis,
and credit policies in order to owing in part to the global
the Greek government
join the EU economy's entry into a
increased debt loading.
systemic crisis
 Greek syndrome is primarily a political, rather than an economic,
issue.

The debt crisis in Greece has "superficial" causes related to labour

CRISES THAT inefficiency and citizens' profit levels.

When Greece joined the EU, it gave up some of its sovereignty.

EMERGED IN
GREECE The main challenge - May not only be the economic component,
but also the loss of potential economic and geo-economic profit.

Unpredictability of the situation's evolution and, as a result, the

EU's economy's probable collapse.
Current Economic situation of Greece

• Pandemic relief measures have further risen in the country’s debt

• Inflow of financing by EU's new Recovery and Resilience Facility

• The current recession due to heavy reliance on tourism and the hospitality
industry

• Greece is a developed country with an economy based on the service (80%)

• Current GDP is 209.8 Billion USD

Evolution of debt as a percentage of GDP
Greece Sales
Tax Rate - VAT

• The value added tax was

increased to 24%

• Increased taxes is
Greece's bailout
programmed

• Impacted small and

medium-sized enterprises
Greece
Unemployment rate
from 1999 to 2020

• U n e m p l oy m e n t ra t e f e l l t o
1 5 . 8 p e r ce n t

• A ff e c t e d a g e g r o u p 1 5 - 2 4
Ye a r s

• D u e t o c o s t s av i n g s b y fi r m s
Debt portfolio

Sources of Greece Debt (2020)

European Financial European Stability
Stability Fcility(EFSF) Mechanism(ESM)
Bonds Greek Loan
3.56% 2.13% 1.45% 0.64% Facility(GLF)
35.8
8.11
8% REPO TBILLS
%
European Investment International Monetary
14.3
Bank Loans Fund(IMF)
8%
16.1 European Central Bank
16.14% Bonds(SMP)
4%

Fig 1.Debt portfolio of Greece during Fig.2 sources of Greece Debt

2015
Imports and exports of Greece(2008) Comparison of Greece Debt with
USA and Japan

Debt of Greek,USA,Japan(2021)
27900

13593

431.19
Greek Debt U.S. Debt Japan Debt
 Unified Tax System

Should Control Investing which doesn’t

Precautionary yield returns

Measures
Non-Performing Assets

Investments and Employment

 The Greek debt crisis is due to the government's fiscal
policies

Its financial situation was sound when it entered the EU

Higher spending and mounting debt loads accompanied the

growth.

Lessons Greeks still have an economy 25 percent smaller than it was

before the crisis began.

Its unemployment rate is the highest in the Eurozone.

Every decision will make a huge impact on ours as well as

the Global Economy.
THANK YOU