...Introduction The Greek debt crisis in 2009 occurred as a result of an understated financial deficit and extreme spending. The stagnation of the Greek economy and the demotion in their debt rating did not aid their financial situation. Greece was then faced with the possibility of sovereign debt default. The failure of Greece to pay their debts required bailouts from the European Union (EU) and the International Monetary Fund (IMF). While the loan bailouts have eased short term liquidity problems, Greece still remained in financial turmoil which may even deteriorate. This research paper aims to explore the history behind the Greek debt crisis, the implications it has globally and on South Africa as well as the lessons that can be learnt from the crisis. Origins of the Greek debt crisis 2.1 Historical development: 2001-2008/09 In 2001 Greece became the twelfth member to join the Euro zone and was permitted to use the Euro (€) as its currency. Greece joined the Euro zone because of the benefits associated with being part of the Euro area. These benefits were essential to the economy of Greece who had a record of unpredictable inflation (Gibson, Hall & Tavlas, 2012). In addition, after Greece changed to the Euro they had the freedom to borrow money from foreign capital markets. During 2003-2007 government records showed Greece to be growing at 4% a year which gave investors’ confidence and made Greek bonds a popular investment...
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...Greek Financial Crisis 1. Page 501 answer question 1 in the "hit or miss section." Be specific in your answers and give at least two examples. Participating in the global economy has benefits, but it also comes with perils in that economic catastrophes on the other side of the world can have real impacts at home. The European debt crisis and recession affect American exports and the stock market. There are consequences for global trade and possibly for the American Financial system as well. Exports are an important source of the American recovery so if Europe tanks, there will be fewer exports to Europe and that will hurt American manufacturing. Not only does the European debt crisis directly affect American exports it impacts other areas of the global economy which further drags on growth rate here at home. The recent slowdown in China has been attributed to the weakness in Europe. Europe being in a prolonged recession has caused the global economy to slow down. And that has an indirect effect in the United States in terms to the unemployment problems. If worldwide demand were higher, there would be more jobs created for American workers. Europe is not an insignificant part of global demand, Germany’s economy is the fourth largest in the world, followed closely by France, but collectively the economies of all 17- Euro area countries are nearly equal to that of the United States, at about 13 trillion dollars versus 15 trillion of the U.S. 2. Page 501 answer...
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...integrated financial markets, to the potential for a unified European identity, the Euro certainly brings many advantages to Europe. However, the political and economic instability that both caused and was caused by the Euro crisis threatens the further perpetuation of this currency. The onset of the Euro crisis came about when the Greek government admitted to a budget deficit much larger than they had previously divulged. Interest rates skyrocketed and, despite efforts to reduce spending, Greece ultimately fell bankrupt. Concerns over the decline of a state that represents only 2.5% of the EU’s GDP could have been redressed, had it not been for inflexible provisions of the Treaty on European Union. The “no-bailout clause” did not permit the EU or any national governments to undertake the debts of another state, a rational but perhaps detrimental provision in 2010. Moreover, one may argue that the Eurozone was in jeopardy from the start when more than half of its members did not meet the debt limits. The Stability and Growth Pact, an instrument created to monitor these debt limits, was quickly ignored. Even Germany and France, the EU’s most influential members, regularly exceeded deficit allowances and thus smaller states like Greece were able to build debt unchecked (see Appendix A). If the EU had taken more decisive actions in early 2010 to remit significant loans to impose austerity measures on Greece, the world’s confidence may have quickly revived. Instead, Greek bonds were...
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...What is the European Debt Crisis? By Thomas Kenny, About.com Guide See More About: * economics * europe * bonds ------------------------------------------------- Ads LIC Pension 1.45 करोड़छोटा निवेश जो आपको करोड़पति बनाये = PensionPolicyBazaar.com/PureInvestment Mobile Trading On-the-GoTrade Forex, Commodities, CFDs. Low Fixed Spread, Start Now!www.4xp.com/Mobile What is Sensex?You don’t need tuitions to learn. The First Step Kit teaches enough.Sharekhan.Sharekhan-Firststep.com Bonds Ads * Bonds * Debt * European Crisis * Type of Bonds * AAA Corporate Bonds ------------------------------------------------- Ads Investment CalculatorA Free, Safe & Simplified Tool for Managing Your Money. Try It Now!www.perfios.com/managingyourmoney Looking for Major Debt?Find Major Debt on Facebook. Sign Up Free Now!www.Facebook.com The European debt crisis is the shorthand term for the region’s struggle to pay the debts it has built up in recent decades. Five of the region’s countries – Greece, Portugal, Ireland, Italy, and Spain – have, to varying degrees, failed to generate enough economic growth to make their ability to pay back bondholders the guarantee it’s intended to be. Although these five were seen as being the countries in immediate danger of a possible default, the crisis has far-reaching consequences that extend beyond their borders to the world as a whole. In fact, the head of the Bank of England referred to it as “the most serious financial...
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...Week 3 Discussion 1 From the e-Activity, develop a regression equation using the data you collected from your research. Use the regression equation to focus the demand for the product you chose for the next three periods. Assess what the results of the regression equation tells managers and how it is likely to impact decisions made related to maximizing profitability. I decided to take a brief look into Buffalo Wild Wings Chain future expansion near college campuses. The restaurant chain's management wants to determine the best locations in which to expand their restaurant business. So far the most successful locations have been near college campuses. This opinion is based on the positive numbers that quarterly sales (y) reflect and the size of the student population (x). Management's mindset is that over all, the restaurants that are within close proximity to college campuses with large student bodies generate more sales than restaurants located near campuses with small student bodies. Imagine you are a manager for the good or service used above. From the results of the regression equation, suggest strategies to either maintain demand (if an increase over three periods occurs) or improve demand (if a decrease over three periods occurs). Provide support for your recommendations. The regression analysis of the demand patron assures that managers are able to forecast the future sales. For profitability perspective, the demand for the future should show an increasing trend...
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...short term IR) The literature has identified a number of channels through which monetary policy might have contributed to the build-up in financial imbalances. Most of these are thought to have worked through policy rates that were kept low for too long.8 Loose monetary policy (a low short-term rate) may have i) reduced the cost of wholesale funding for intermediaries, leading those intermediaries to build-up leverage ii) may more generally have caused banks to take more risks, including credit and liquidity risks (iii) may have increased the supply of and demand for credit (mortgages), causing asset (house) prices to rise 2. Global imbalances ( low long term IR) Rising global imbalances are associated with a greater spread of current account positions across countries and larger net flows of capital between countries. global excess of desired savings relative to desired investment—a “savings glut(과잉)”— had reduced long term rates globally, including in the United States.(significant increase of supply of saving cause a low ir), it argued that high capital inflows were an important reason of low IR from 2003- 2007 High capital inflows in turn (i) can reduce the cost of wholesale funding for domestic banks in international markets (ii) may reduce long–term interest rates (and thus compress spreads), causing financial institutions to lever up and investors to “search for yield” and (iii) may increase the total supply of credit to the domestic economy, causing...
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...of independency and the shifting to market economy. The country growth was very fast until 2008. In December 2008, facing the possibility of financial collapse and a currency crisis, they asked for a rescue and they received a $10.5 billion package funded by the International Monetary Fund (IMF), World Bank, EU, and several countries in the region. After that, it talks about the possibility that could help Latvia to restore a sustainable growth. Which are either Devalue the national currency or maintain the peg and attempt an “internal devaluation”. Executive Summary 1. To study economic adjustment under a fixed exchange rate system 1. Explore the meaning of a "sudden stop" in capital flows and causes of Latvia's economic boom and busts. 2. Assess the tradeoffs involved in internal and external devaluation in the Eurozone. 3. Consider historical, political, economic, and other factors that influenced Latvia's policy decisions and their outcomes. 4. Predict the long-term impact of Latvia's policy decisions during the crisis. Contents Introduction 1 Executive Summary 2 Analysis 4 Analysis 1) Historical, political, economic, and other factors that influenced Latvia's policy decisions and their outcomes (Learning objective# 5) | 2) Problems and the crisis and its causes (Learning objective #1, #2) | 3) Possible Salutations (Learning objective #3) | 4) Suggestion of a solution and explanation of the solution in the short run...
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...D December 1, 2012 International Crisis in Lending Lessons to be learned Group V Samantha Jeffrey Gabriella Stankovic Na-taisha Williams The debt crisis played a huge role in international lending. This report will discuss how economic crisis can result from many different factors such as changes in government policies which result in failure, and the cost of bank bailouts. Least developing countries also learned a lesson about how interest rates and low exports and imports played a major role in the financial crisis. These countries also tried to stabile their country's currency by fixing its exchange rate to that of the United States, which also resulted in failure. European countries also integrated their currency to Euro that caused a major crisis in lending. All are major factors that contributed to a crisis in international lending. Countries need to know what they are doing wrong before they can solve their problems. The historical events discuss will help serve as answer of how it can be resolved. Sovereign risk is the risk of lending money to the government with the risk of not being able to repay the obligation. There is always a risk in lending but the previous debt crisis and the crisis that is occurring in Europe plays a role in whether financial institutes want to lend to governments. The sovereign risk is important in international lending because many countries borrow money...
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...and the Global Economy The financial headlines of 2012 were prevalent with the tribulations of the Greek economy. Its problems, in the eyes of many of the other nations of the euro zone, were not only negatively impacting the prosperity of the Greeks, but also the viability of the European Union. The country as a whole requires a major restructuring. Not only are drastic changes needed in financial and economic policies, but the Greeks need to understand their attitude of government entitlements cannot be sustained. The mismanagement of the Greek economy is also evident in its place in the global market community. It has not found the path that a county needs to follow to become an active member of the vibrant, high growth world of globalization. Over the past ten years, Greece had been on a debt spree that came to an abrupt halt in late 2009. This unsustainable expenditure in social entitlements provoked an economic crisis that had destroyed the country’s economy, brought down its governing body, unleashed increasing unrest in the populace and greatly endangered the future of the euro. Greece’s debt issues can be traced back to years of spending that the government did not recuperate in taxes. Greece was borrowing from banks worldwide and had no way of repaying the billions of dollars owed. One might even trace the issues further back to 2001 when Greece joined the euro zone. The policy-makers misreported the real level of public borrowing so that Greece could meet the...
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...different times and different countries financial history (about bank crisis, currency crashes and so on) and how these countries survived in different times. Furthermore, before I bought this book, I read the brief of the book it sounded interesting, than I wanted to read and to know more about it. Author’s credentials Carmen M. Reinhart is the Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics. Previously she was professor of economics at the University of Maryland. She has held a positions in IMF. Kenneth S. Rogoff is the Thomas D. Cabot Professor of Public Policy and professor of economics at Harvard University. He received his PhD in Economics from MIT. He is a commentator for NPR, the Wall Street Journal. And the Financial Times. Carmen M. Reinhart and Kenneth S. Rogoff made a big contribution to financial history, collected data which covered sixty-six countries and different time periods and wrote about financial crisis, inflation,international debt currency crashes and debasements. They are first researches in the history about the financial crisis over many years. The author’s were trying to explain in the book, that ‘This Time is Different’ syndrome is wrong that financial crisis is happening to other countries not to us, because we are doing better as we learn from the past. Summary At the beginning of the book authors is introducing with various crisis and their dates. In the first chapter there are explanations, and definitions...
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...The crisis are the European Monetary System that occurred in 1992-1993, The Mexican crisis 1994-1995, the Asian crisis 1997-1998 and the recent global financial crisis 2007-2009. The recent financial crisis has affected the international trade. The financial crisis began in the United States in 2007 in the housing market resulting in foreclosures. The crisis continued to grow and eventually turned into a global financial crisis as well as an economic crisis. As a result, some major banks, insurance companies and investment houses faced bankruptcy while others needed financial aid to continue operating. Many businesses involved in the international trade have been struggling in their financial management during the credit crunch because a business is supposed to remain successfully even during crisis times. The managers in businesses involved in the international trade have had to make decisions to help their organizations stay afloat during the financial crisis. Economists are of the opinion that a financial crisis results from feeble economic fundamentals for instance, fiscal deficit, reduced foreign reserve and increased foreign debt among others. The financial crisis eased in 2009 but its effects were felt globally. The effects on the international trade occur because of the trade links among countries at the global market through a contagious effect (Glick & Rose, 1999). The contagious effect means that when a financial crisis occurs in a country it creates a crisis in another...
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... Research design………………………………………………………..17 3.1 Study population……………………………………………………….17 3.2 Scope of the study……………………...………………………………17 3.3 Sample and sampling techniques……….………………………………17 3.4 Methods of data collection……………………………………………...18 3.5 Methods of data analysis………………………………………………..18 3.6 Time schedule…………...………………………………………………19 3.7 Financial budget………...……………………………………………….20 3.8 Bibliography…………..…………………………………………………21 Chapter 1 1.0 Introduction. The value of money depends upon price level of commodities. When the price level rises, the value of money decreases and this may also be opposite. The changes in the value of money can affect different sections of the community. For instant, when the price level goes up, businessmen, industrialists and peasants gain, but fixed income earners and consumers lose, the opposite of this is also true (Saleemi, 1987). When prices rise, production of commodities increases, employment level rise, but on the other hand income distribution in the case of those who earn high, those who earn low as well as those who earn nothing is completely unfair. In addition, when price has a falling trend, the level of production...
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...country sank the banks. Discuss this view. Which are the main differences between the Greek crisis and the crisis of Ireland and Portugal? The main cause of the Greek crisis is the ongoing disclosure of statistics that were well hidden from the eyes of the public, leaving people in ignorance about their own country and the future. When the figures started to become revealed, breaking up the shocking news about the forgery that lasted for over 30 years, it left the world in wonder – how is it possible to disclose such a thing for so long, and how is it possible that such action remains unpunished? The problems caused by the global recession were compounded by revelations that national statistics had been altered in order to cover the fact that Greece, in terms of debt levels, exceeded limits set down by the EU. The country's debt is already well over 100 percent of GDP and is still rising. According to euro zone rules, total government debt should not exceed 60 percent of GDP. The country's budget deficit in 2009 was almost 13 percent of GDP, more than four times the 3 percent limit allowed in the euro zone. But beyond the debt there is more deficit. What Greeks did when they got all this borrowed money, they gave away incredible sums to citizens, raised the wages to such an extent that it created a serious budget deficit. Inefficient Government? Corrupted mentality? Call it as you like, but it caused consequences that citizens, and not only them but the entire Europe, will...
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...Banking Industry and the Economy Ja’Net McQueen Slater Strayer University Birmingham, AL Instructor: Dr. Lisa Kincaid Research and Communication- RES 531 April 18th, 2010 Context of the Problem Today the economy is at its worst than it’s ever been before since the 1940s. Unemployment is at a record high as well as companies that are continuing to close down due to financial issues. The housing markets, auto industry, banking industry, & loss of jobs are all major things that are being affected by the way the US is spending money. The housing market and banking industry are both some of the main things that are having a major affect on the U.S. and to how this affects all other aspects of daily living. Some people may ask, “How did we get this way”? Over the past 180 years the United States grew to a huge, integrated, industrialized economy that makes up over a quarter of the world economy. The main causes were a large unified market, a supportive political-legal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and oil), an entrepreneurial spirit, a commitment to investing in material and human capital, and at times a willingness to exploit labor. In addition, the U.S. was able to utilize these resources due to a unique set of institutions designed to encourage utilization and extraction. The economy has maintained high wages, attracting immigrants by the millions from all over...
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...www.capitalvia.com Global Research Limited IMPACT of GREECE White Paper - Impact of Greece Crisis Global Research Limited Introduction Historically, financial crisis tend to lead to sharp economic downturns, low government revenues, widening government deficits, high levels of debt, pushing many governments into defaults. This is called SOVEREGIN DEBT CRISIS. GREECE is currently facing this, it accumulated high levels of debt during the decade before the crisis, when capital markets were highly liquid. As the crisis has unfolded and there was liquidity crunch in world economy, Greece may no longer be able to rol over its maturing debt obligations. Build – Up To The Current Crisis Between 2001-2008, Greece reported budget deficits averaged 5% per year, compared to Eurozone average of 2%. Also, its current account deficits averaged to 9% per year compared to Eurozone average of 1% Greece funded these twin deficits by borrowing in international capital markets, leaving it with chronically high external debt (115% of GDP in 2009) Some of the facts which can be depicted from following charts : www.capitalvia.com 2 White Paper - Impact of Greece Crisis Global Research Limited How Country Debts And Budget Deficits Compare? Projected budget deficit for 2009 Budget deficit figs as % of GDP Debt as % of GDP UK 13% Greece 12.5% Spain 11.25% Ireland 54.3% 68.6% 112.6% 65.8% 10.75% 114.6% 5.3% Italy Germany 3.5% 74.3% Source:...
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