GREECE DEBT CRISIS. Dareen Atef Dina Wahba Safiya Galal Sarah Hani Dr. Amir Nasry. Introduction .
Dr. Amir Nasry
Greece during Financial Crisis
and Y= S+I+T
then (S-I) (T-G) = (X-M)
Greece’s foreign policy focus on the region and growing trade volumes between the countries, neighboring Serbia, Albania, Macedonia, Romania, Bulgaria and Turkey cannot remain indifferent to the magnitude of the crisis next door.
Some spillover effects have already started to manifest themselves. As Greek 10-year bonds fall and yields continue to remain above 6%, sovereign debt issuance and the risk premium investors demand to hold securities emitted by Romania, Serbia, Bulgaria and Turkey have been adversely affected.
Greece is already in major breach of Euro-zone rules on deficit management and with the financial markets betting the country will default on its debts, this reflects badly on the credibility of the euro.
The most obvious way would be through tax bills, as Europe agrees to ride to the rescue and help Greece deal with its mounting public and foreign debts.
Any assistance to Greece will come at a cost that will ultimately have to be borne by taxpayers in the nations that contribute.
Greek crisis has made investors nervous about lending money to governments through buying government bonds.
Everybody's interest rates are heading higher as governments are having to pay a greater risk premium to borrow money.
Take-home pay is likely to fall as it is eroded by rising taxes and everyone will have to work longer before they retire - by which time they are likely to find that their pensions have shrunk.
The crisis is also set to slow down the embryonic economic recovery.
European governments and the International Monetary Fund (IMF) have stunned global stock markets with a 750bn-euro ($975bn; £650bn) package of standby funds designed to see off financial meltdown.
The 27 countries of the European Union (EU) will contribute 500bn Euros towards the financial safety net. They have been joined by the International Monetary Fund (IMF), which is providing other 250bn Euros.
The vast bulk of Europe's contribution comes from the 16-nation Euro-zone bloc, which is promising 440bn in loan guarantees. The European Commission is providing 60bn Euros immediately.
Greece has outlined plans to cut its budget deficit, or the amount its public spending exceeds taxation, to 8.7% of its GDP in 2010, and to less than 3% by 2012.