Greece
Greece
Greece
com
Global Research Limited
IMPACT
of
GREECE
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.
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 :
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68.6%
112.6%
Italy
Germany 3.5%
74.3%
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SPECULATION
As Euro was the second best Foreign exchange reserve currency (with approx 25% holdings), there was increased Hedge funds betting against Greece / Euro Numerous negative media reports stating the financial status of the country had pushed it towards the danger zone. Unclear messages by foreign officials / executives have further added fuel to the situation. The 3 biggest rating agencies downgraded Greece, Greeces rating with Moodys stands at A2 and with Fitch and S&P two notches lower at BBB+ The borrowing rates for Greece skyrocketed.
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Wall Street's DOW JONES industrial average fell 3.2 per cent overnight -slumping more than 1,000 points
Greece Crisis Fears the NIFTY closed below 5100 levels for the first time since march 5, 2010.
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European Integration
GREECE'S CRISIS HAS BROUGHT TO LIGHT IMBALANCES WITHIN THE EURO ZONE
Mismatch between the EUs advanced economic and monetary union and an incomplete political union. Even within the economic areas, where the EU is more tightly integrated, the Euro zone has a single monetary policy but 16 separate (if loosely coordinated) national fiscal policies.
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The investors chief problem & even his worst enemy is likely to be himself
Benjamin Graham
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