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The Greece economy post the great recession
The Greece economy post the great recession
The Greece economy post the great recession
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The Risk of Default by PIIGS
National default on countries that make up PIIGS is a topic of interest for many reasons. The Term PIIGS refers to the countries of Portugal, Ireland, Greece, and Spain; as these countries are part of a much large economy, the Eurozone, which is comprised of 18 member states. Of these states, PIIGS remains the weakest members to which their financial status give reason for concern moving forward on both the effects of the Eurozone and other world economies. This paper will discuss briefly the background of these states (primarily Greece) and the management of financial records and policies leading up to the crisis. Furthermore, the discussion pertaining to the impacts that PIIGS has on its international partners as well as its member states of the Eurozone. Continually, these financial mishaps or mismanagement leading up to default, give us insight of how other world economies can use this to strengthen their own currencies and provide a stable environment for future investment by foreign governments and corporations. Conclusion of this paper will outline the importance of proper oversight by governments and banks on a global scale. Information for this paper will be provided by various sources which include those of news publications and scholarly documents produced from different educational intuitions and organizations.
Eurozone and PIIGS Background Information
In the scope of world economies, the Eurozone was created in 1999 with an initial 11 member states; the creation has been crucial to the utilization of a single currency across multiple countries. Further adaptation was introduced in allowing for a greater number of members, and today consists of a total of 18 countries across Europe. The following countries make up the Eurozone: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, The Netherlands, Portugal, Slovenia, Slovakia, and Spain. An additional 10 countries are members of the Eurozone but do not utilize the Euro (ECB, 2014).
Greece
At the end of 2009, global financial markets teetered on the brink of collapse; this instability can be directly related to the faltering U.S. housing market. Continually in 2009, as a product of the transnational economic crisis, Greece encountered an unprecedented failure in its economy, as a result, to this was a steep escalation in its unemployment rate. Moreover, investigation into the Greek government has discovered that officials have consistently and intentionally overstated the country's economic statistics resulting in noncompliance of policies that govern financial health (Atrissi & Mezher, 2010).
In conclusion, the European Union has “merged” the countries of Europe. It has developed a common currency called the Euro’s, and a Parliament located in Belgium, Luxembourg, and France. Also, ALL of the countries of the Union are affected when one country is affected. This is important because the continent of Europe had become very weak after the wars and they needed to strengthen, and the European Union keeps the countries of Europe strong and economically fit.
Sovereign lending, throughout history, has been marked by occurrences of partial default and repudiation by governments of all kind; from medieval princes to dictators to democratic regimes. In the 1970s lending to lesser-developed countries led to the rescheduling and partial defaults in the 1980s. Even the sustainability of the debt of nations such as Belgium, Canada, Italy and even the United States is not free from suspect.
United we stand, divided we fall.After being bombed in various parts, ruined economically, politically, and culturally, and shocked after World War 2, Europe decided to make a union/ supranational organization named the EEC (later known as EU(European Union)) consisting of 28 nations.If you are a citizen in one of these territories, then you have some exclusive rights: you can work, travel, retire, study, etc. in any of these 28 nations, plus all of these countries have the same currency, the euro, so you do not have to switch currencies every time you travel.However, some countries such as Norway did not join, because of the fear of losing their sovereignty or control of own affairs and not give up their unique cultures of cuisine ,
The re-use of an insolvent company is protected by UK insolvency law. It helps to protect the interests of investors and creditors are not damaged by a lack of transparency relating to the director's involvement with an insolvent company, and continued involvement with its phoenix.
The recent global financial crisis that affected not only America but also Europe and other parts of the world resulted in massive unemployment. This is due to the high costs of operation that many corporations faced forcing them to cut on labor costs. There is need for European government interventions to avert this social crisis and prevent the occurrence of such a crisis in future. Unemployment has hit the service sector harder than other sectors with the following being the most affected: automotive, construction, tourism, finance and real estate. The global financial crisis has also increased consumer prices thus pushing inflation. According to McCathie, “the increase in July consumer prices to 1.7 per cent pushed inflation in the currency bloc up towards the European Central Bank’s target of keeping inflation at below, but close to 2 per cent. Eurozone consumer prices had stood at 1.4 per cent in June” (McCathie, 2010).
Historically, financial crises have been followed by a wave of governments defaulting on their debt obligations. The global economic history has experienced sovereign debt crisis such as in Latin America during the 80s, in Russia at the end of the 90s and in Argentina in the beginning of the 00s. The European debt crisis is the most significant of its kind that the economic world was seen started from 2010. Financial crises tend to lead to, or exacerbate, sharp economic downturns, low government revenues, widening government deficits, and high levels of debt, pushing many governments into default. Greece is currently facing such a sovereign debt crisis and Europe’s most indebted country despite its surplus in the early 2000s. Greece accumulated high levels of debt during the decade before the crisis, when the capital markets were highly liquid. As the crisis has unfolded, and capital markets have become more illiquid, Greece may no longer be able to roll over its maturing debt obligations. Investment by both the private and the public sectors has ground to a halt. Public sector debt has increased substantially as the state had to rely on official assistance to payroll expenses, fiscal deficit and fund social payments.
The Greek economy has seen a large collapse following the recent worldwide recession. The European Union has expressed concerns for the impact that Greece’s economic collapse will negatively affect other member nations. Greece and the European Union are working to reduce the Greek deficit and to contain the economic crisis to Greece.
The EU will grow by the decades end to at least 27 member states comprising the largest economic bloc in the world, accounting for 25% of global GDP and incorporating 500 million people within its borders. Of these 500 million people, approximately 3.4 million of them will hold a passport stamped with the word Éire.
The article Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy was written in 1968 by Edward I. Altman. The purpose of the article is to address the quality of ratio analysis as an analytical technique. At the time some academicians were moving away from ratio analysis and moving toward statistical analysis. The article attempted to determine if ratio analysis should be continued, eliminated and replaced by statistical analysis or serve together with statistical analysis as cofactors in financial analysis. The example case used by the article was the prediction of corporate bankruptcy.
Eurozone crisis can be seen as the most important economic problem of the European Union in the history. Because of that crisis the currency union have faced the possibility of separation which is an extremely critical issue not only economically but also politically. Until the subprime crisis which became prominent by the bankruptcy of Lehman Brothers in 2008, the economic level of the EU members were similar. When the bankruptcy occurred those countries started to differentiate in a very significant way. Total government debt and also problems of banking sector lead many countries to negative GDP growth, high unemployment rates and more importantly social unrest.
Since the turn of the millennium Ireland witnessed unprecedented growth, in stark contrast to the economic hardship of the 1900’s. Ireland became one of the most prosperous countries in Europe during the 2000’s. Times were good for Ireland as unemployment was low, growth and GDP was growing year on year and inflation was constant. In 2008, all this was to change and Ireland witnessed the worst recession in its history. The banking crisis, the construction sector and poor regulation were the major contributors in the Irish recession. A fiscal crisis erupted, NAMA (National Assets Management Agency) was established to secure bad loans in banks, and a EU/IMF bailout was agreed which burdened Irish taxpayers. I will explore the causes and consequences of the crisis in this essay.
Firstly, the main reason for the systematic failure, according to the report was the expansion of the property bubble financed by the banks. Between 2002 and 2008 bankers demonstrated high levels of greed combined with disregard for the risks and gross misjudgement which few bankers’ could disagree with. This was evident from the surge in lending between sectors which was very uneven. Residential mortgage lending and lending to the construction and property sector considerably out-paced growth in all the other sectors combined (see Fig1 15). For instance, lending to this sector increased at an annual rate of almost 45%. This effectively created a property bubble and like all bubbles, they burst, and this heavily influenced Irelands’ financial crisis. This tied with the world- wide economic crisis heavily increased the rate of the crisis.
Debt crisis is becoming common and faced by most citizens in Malaysia. Between June 1997 and January 1998 a financial crisis swept like a brush fire through the "tiger economies" of SE Asian. Over the previous decade the SE Asian states of Thailand, Malaysia, Singapore, Indonesia, Hong Kong, and South Korea, had registered some of the most impressive economic growth rates in the world. Their economies had expanded by 6% to 9% per annum compounded, as measured by Gross Domestic Product. This Asian miracle, however, appeared to come to an sudden end in late 1997 when in one country after another, local stock markets and currency markets imploded. When the dust started to settle in January 1998 the stock markets in many of these states had lost over 70% of their value, their currencies had depreciated against the US dollar by a similar amount, and the once proud leaders of these nations had been forced to go cap in hand to the International Monetary Fund (IMF) to beg for a massive financial assistance. (W.L.Hill, n.d.)
In 2008, the world experienced a tremendous financial crisis which is rooted from the U.S housing market. Moreover, it is considered by many economists as one of the worst recessions since the Great Depression in 1930s. After bringing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It ruined economies, crumble financial corporations and impoverished individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brothers and AIG. These collapses not only influenced own countries but also international scale. Hence, the intervention of governments by changing and expanding the monetary and fiscal policy or giving bailout is needed in order to eliminate and control enormous effects of the financial crisis.
The study defines “default” is a risk to the repayment history of borrowers where the borrowers are missed at least three installments in 24 months. This showed a symbol and indication of borrower behavior will actually default to cease all repayments. This definition does not mean that the borrower had entirely stopped paying the loan and therefore been referred to collection or legal processes; or from an accounting perspective that the loan had been classified as bad or doubtful, or actually written-off (Pearson & Greeff, 2006).