Download ΠΑΝΕΠΙΣΤΗΜΙΟ ΙΩΑΝΝΙΝΩΝ ΤΜΗΜΑ ΟΙΚΟΝΟΜΙΚΩΝ

ΠΑΝΕΠΙΣΤΗΜΙΟ ΙΩΑΝΝΙΝΩΝ
ΤΜΗΜΑ ΟΙΚΟΝΟΜΙΚΩΝ ΕΠΙΣΤΗΜΩΝ
ΜΑΘΗΜΑ:ΑΓΓΛΙΚΑ ΓΙΑ ΟΙΚΟΝΟΜΟΛΟΓΟΥΣ ΙV
ΘΕΜΑ: GREEK/ WORLD ECONOMIC CRISIS AND PUBLIC
SECTOR
ΔΙΔΑΣΚΩΝ ΚΑΘΗΓΗΤΗΣ:
ΘΕΟΔΩΡΑ ΤΣΕΛΙΓΚΑ
ΟΜΑΔΑ ΦΟΙΤΗΤΡΙΩΝ:
ΠΑΠΠΑ ΔΗΜΗΤΡΑ (ΑΡΧΗΓΟΣ) Α.Μ:2494
ΝΑΚΑ ΧΡΙΣΤΙΝΑ Α.Μ:2475
ΜΑΡΙΑ ΑΠΟΣΤΟΛΟΥ Α.Μ:2339
ΧΡΙΣΤΟΔΟΥΛΟΥ ΠΑΝΑΓΙΩΤΑ Α.Μ:2562
ΕΞΑΜΗΝΟ: Δ ΕΑΡΙΝΟ
Introduction
The financial crisis that erupted in the US in September 2008 “hit” crucial
the economies of many countries around the world. Each country has
experienced or still experiencing the financial crisis differently
depending on the structure of the economies. Soon the financial crisis
transformed into an economic crisis when banks in their effort to
maintain their capital adequacy restricted the credits to businesses and
households.
Greek Economic Crisis
The international financial crisis struck soon the Greek Economy and
emerged the structural weaknesses and the inability to control the
expanded debt. Greece’s reliability on the International Monetary
Fund(IMF),the European Union (EU) and the European Central Bank in
order to avoid problems relating on wages which would have
uncontrolled consequences for the entire euro zone. Regarding the
public debt, the period after 1974 was a large lending period for Greece
that led the debt to its swelling. More specifically, the Public debt
increased during the 1980s and continued to grow the next decades
because of the high public deficits. The debt caused a decrease in
investments and consumption growth.
Decades
1970-1979
Consumption 77,2
as % of GDP
Investments 30,7
as % of GDP
1980-1989
85,1
1990-1999
90,1
2000-2009
88,8
23
20,6
22,6
Additionally the External debt of Greece (the amount which Greece
owes to foreigners) was 82,5 % of GDP in 2009. The negative trade
balance which occurred over the periods 1990-1999, 2000-2009 means
that Greece imported more than it exported.
Decades
Trade balance as % of
GDP
1990-1999
-10,7
2000-2009
-11,4
So, it was considered that the high public deficits, the irrational
management of debt and expenditures, the external debt, the lack of
exports and the low competitiveness were the most important factors of
the Greek Economic Crisis.
Greek/World Economic Crisis
The Greek Crisis is concerned to be a part of the Global Economic Crisis
because they have been caused by the same mechanism, the low rates
of profits. The Global economic downturn of 2008 is the effect caused by
the International financial crisis of 2007. The International financial crisis
caused by the lack of liquidity became apparent in the Stock Market
Indexes of developed countries and then in the whole world with
dramatic effects on the banking system, trading and businesses such as
rising unemployment, currency devaluation, new inflationary pressures
etc. On October, 24, 2008 there were losses $3, 2 trillion in Eurasia,
while foreign investors rushed into massive liquidations in Greece. The
Athens General Stock Index fell below 1800 points despite the actual
profits realized by the Greek banks and businesses. In Greece there were
losses of 24 billion Euros in the second half of 2008, within 24 days
Impacts of Economic Crisis
The impacts of the emergence of an economic crisis can be devastating
for all the countries. More specifically the Greek Economic Crisis has
caused the following: liquidity problems in banks and companies,
reduction in turnover, high unemployment, reduction in production, in
national income, bankruptcy, low public revenues, high debt levels, high
deficits etc.
Greek crisis and public sector
The public sector of Greece consists of various public entities
which are responsible for the governance of the state, to serve and
protection of citizens and the conduct of fiscal policy in Greek economy.
The structure of the public sector differs in every country. Specifically in
Greece consists of general government and public corporations and
organizations, which they will be reported in detail below. Public bodies
that constitute the public sector, usually determined by the Prime
Minister or ministers of Greek government.
The Greek economy for several decades was rising. As the period
from 1950 until 1970, after the deep recession because of the Second
World War, there was economic development in the country which was
named the Greek economic miracle. Also a more rapid growth of the
economy has been since 2000, when gross domestic product (GDP) ,that
is the value of all goods and services produced in the country reached
5.9% in 2003 and 5.5% in 2006 . Namely surpassed the eurozone
average.
But the economy sank again into deep and sharp recession in
2008 due to the global economic crisis struck the eurozone and Greece
as a member state. Percentages of GDP was -0.2% in 2008, -3.1% in
2009, -4.9% in 2010, -7.1% in 2011, -7.0% in 2012 and -3.9% in 2013. The
negative rates of GDP means that the economy is growing at a negative
rate. Consequently, the economy shrinks. Also, the public debt of the
country increased, as indicative in 2011 was 170.3% of the nominal GDP
of the country. (€ 335.141.000.000)
Nevertheless, there are still hopes for quick recovery in Greek
economy. The country by borrowing from the International Monetary
Fund and the government accomplishing Reform succeeded in reach the
public debt at 136.5% of GDP in early 2012. (€ 280.400.000.000)
geo\time 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
EU (27
countries) 60,9 60,3 61,9 62,2 62,7 61,5 58,9 62,2 74,5
80 82,4 85,2
Greece
103,7 101,7 97,4 98,6 100 106,1 107,4 112,9 129,7 148,3 170,3 156,9
The table presents the annual data of general government gross
dept as a percentage of GDP for the European Union and Greece such as
mentioned on the website "eurostat" during the period 2001 to 2012.
The numerical difference between Greece and the European Union
starts from 48.8% in 2001 and decline until 2003 reaching the smallest
difference of 35.5%. Moreover, the difference grows increasingly until
2011 where we have the maximum difference of 87.9%. Finally, the
difference is reduced to 71.7% in 2012.
General goverment gross dept - annual
data (percentage of GDP)
300
250
200
150
Greece
100
EU (27
countries)
50
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Diagrammatically, the above annual data presents the way the
gross debt of the general government from 2001 until 2012. From the
beginning to 2008 course is firm and for Greece and the EU. But in 2009
distinguished a increase in debt and both of them. The increase in the
Greek debt is sharp and peaks in 2011. Since then has been declining. On
the other hand, the EU debt has a slight rising.
The public sector in Greek economy
This section focuses on the public sector of Greece, consisting of
the general government and public corporations and organizations, as
mentioned in the "Introduction to Macroeconomics" Mr. Dimitris
Hatzinikolaou. As seen from the chart below, the general government
consists of the central government, local government and social security.
On the other hand we have the public companies and organizations
owned or controlled by the Hellenic state.
Specifically the chart describes that the public sector concludes
the general government consists of three areas which are listed below.
Central government of Greece: Greece's government consists of
an elected throughout the state which is responsible for any of the
conduct of General Policy following the Constitution and Laws of the
State. It consists of ministries which are determined by the prime
minister.
Local government: It is a management style that effectively serves
the needs of each local society as well as they represent.
Social Security: Is the system of state that protects every citizen
against any threats to reduce the standard of living.
The Public Enterprises and organizations are belonging to the
Greek state and controlled by it.
All these contribute to the emergence of the welfare state, which
provides social services such as providing health and education to
provide social rights to citizens.
Impacts of Greek crisis in public sector
In this section , it is very important to mention that the Greek crisis
has affected the public sector in negative level . This outlook is
supported by multiple arguments .
Initially since crisis expanded in Greece it is remarkable that the
wages of many public employees have decreased in half . However it is
noticeable the fact that other public employees have been fired the last
period because government cannot ensure them salaries of a
satisfactory .
Even more , central government every year measures revenues and
expenditure of state . From 2009 and after the budget is deficit . Thus
government have decided to reduce public expenditure and increase
taxation to the public .In this way the budget cuts some important
programs such as subsidisation of the unemployed or funding for
establishing hospitals and other public projects . Hence because
government seeks to prevent bankruptcy borrows from external banks .
However the money that are intented to reduce deficit are abused by
public officers . It is also worth mentioning that government in order to
overcome Greek crisis negotiate the selling off of public property .
Moreover , Greece is a country that has proved that can exceed the
difficults . Similarly , Greece can get out of the crisis one day . However
it is necessary to examine some basic points about the crisis .
Firstly , the Greek fiscal crisis erupted in the autumn of 2008 so it would
be essential a short report to deficit in Greece these years . According to
data the deficit as a percentage of GDP is 15,6 in 2009 . However in 2013
deficit drops to 5,5 and today is about 4,6 so it is obvious that there is a
reduction during these periods . Even more government managed to
balance the budget , create primary balance of surplus and remained in
euros .
Conclusion
The economic policies of the last three decate have brought
Greece to the brink of bankruptcy. Reforms implemented in other
countries earlier postponed continuously in Greece . This had as a result
the Greece be found with a non – productive public sector and a low
competitiveness . However the positive point is that there are bands for
furthermore development and progress . Thus Greece is managed to
overcome the crisis , to consolidate the public sector and get out again
on international markets if there is a consent of all both governments
and citizens.