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  • 7/14/2015 GreecesDebtCrisisExplainedTheNewYorkTimes

    http://www.nytimes.com/interactive/2015/business/international/greecedebtcrisiseuro.html?_r=0 1/6

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    InternationalBusiness

    GreecesDebtCrisisExplained

    ByTHENEWYORKTIMESUPDATEDJuly13,2015

    GreeceanditsEuropeancreditorsannouncedanagreementinBrusselsonMondaythataimstoresolvethecountrysdebtcrisisandkeepitintheeurozone,butthatwillrequirefurtherbudgetarybelttighteningthatPrimeMinisterAlexisTsiprascouldhavetroublesellingbackinAthens.

    TheagreementdoesnotguaranteethatGreecewillreceiveitsthirdbailoutinfiveyears.ButitdoesallowthestartofdetailednegotiationsonanewassistancepackageforGreece.

    AnyeasingofGreecesdebtrepaymentobligationswouldnotincludesomethingGreecehadpreviouslymadeaconditionofanydeal:asocalledhaircut,orreductionoftheoveralldebt,whichismorethan300billion.

    What the latet?

    OneopenquestioniswhetherthedealgivesenoughconfidencetotheEuropeanCentralBanktoletitcontinuechannelingsorelyneededemergencyfundingtoGreekbanks.

    AspartofGreecescommitments,ChancellorAngelaMerkelofGermanysaid,a

    What happen next?

  • 7/14/2015 GreecesDebtCrisisExplainedTheNewYorkTimes

    http://www.nytimes.com/interactive/2015/business/international/greecedebtcrisiseuro.html?_r=0 2/6

    fundwillbecreatedtousetheproceedsfromsellingoffassetsownedbytheGreekgovernmenttohelppaydownthecountrysdebt.Thatfundwouldbetothetuneof50billion,shesaid.

    GreecewillalsoberequiredtoseekassistancefromtheInternationalMonetaryFundandtoagreetolettheorganizationcontinuetomonitorthecountrysadherencetoitsbailoutcommitments.

    TheGreekParliamentwillalsoberequiredtoapprovethetermsoftheagreementwithoutdelay,accordingtothedocumentreleasedonMondaymorning.TheagreementwillcallforGreecetoraisetaxesinsomecasesandparepensionbenefits.

    Despitetheagreement,Greekbanksareexpectedtoremainclosedthisweek.Toreopen,thebankswouldneedmoreemergencyloansfromtheEuropeanCentralBank.

    IntheEuropeanUnion,mostrealdecisionmakingpower,particularlyonmattersinvolvingpoliticallydelicatethingslikemoneyandmigrants,restswith28nationalgovernments,eachonebeholdentoitsvotersandtaxpayers.ThistensionhasgrownonlymoreacutesincetheJanuary1999introductionoftheeuro,whichnowbinds19nationsintoasinglecurrencyzonewatchedoverbytheEuropeanCentralBankbutleavesbudgetandtaxpolicyinthehandsofeachcountry,anarrangementthatsomeeconomistsbelievewasdoomedfromthestart.

    SinceGreecesdebtcrisisbeganin2010,mostinternationalbanksandforeigninvestorshavesoldtheirGreekbondsandotherholdings,sotheyarenolongervulnerabletowhathappensinGreece.(SomeprivateinvestorswhosubsequentlyplowedbackintoGreekbonds,bettingonacomeback,regretthatdecision.)

    Andinthemeantime,theothercrisiscountriesintheeurozone,likePortugal,IrelandandSpain,havetakenstepstooverhaultheireconomiesandaremuchlessvulnerabletomarketcontagionthantheywereafewyearsago.

    Det in the uropean Union

    Gro government det a a percentage of gro dometic product plotted through the fourthquarter of 2014.

    How doe the crii affect the gloal financial tem?

  • 7/14/2015 GreecesDebtCrisisExplainedTheNewYorkTimes

    http://www.nytimes.com/interactive/2015/business/international/greecedebtcrisiseuro.html?_r=0 3/6

    Source: urotat

    Attheheightofthedebtcrisisafewyearsago,manyexpertsworriedthatGreecesproblemswouldspillovertotherestoftheworld.IfGreecedefaultedonitsdebtandexitedtheeurozone,theyargued,itmightcreateglobalfinancialshocksbiggerthanthecollapseofLehmanBrothersdid.

    Now,however,somepeoplebelievethatifGreeceweretoleavethecurrencyunion,inwhatisknownasaGrexit,itwouldntbesuchacatastrophe.Europehasputupsafeguardstolimitthesocalledfinancialcontagion,inanefforttokeeptheproblemsfromspreadingtoothercountries.Greece,justatinypartoftheeurozoneeconomy,couldregainfinancialautonomybyleaving,thesepeoplecontendandtheeurozonewouldactuallybebetteroffwithoutacountrythatseemstoconstantlyneeditsneighborssupport.

    Greece G.D.P. and Unemploment Rate in urope

    Firt quarter 2015 average; *ritain i the threemonth average through Feruar.

    Source: urotat

    Otherssaythatstoosimplisticaview.Despitethefrustrationofendlessnegotiations,EuropeanpoliticalleadersseeaunitedEuropeasanimperative.Atthesametime,theystillhaventfixedsomeofthebiggestshortcomingsoftheeurozonesstructurebycreatingamorefederalstylesystemoftransferringmoney

    What if Greece left the eurozone?

  • 7/14/2015 GreecesDebtCrisisExplainedTheNewYorkTimes

    http://www.nytimes.com/interactive/2015/business/international/greecedebtcrisiseuro.html?_r=0 4/6

    asneededamongmembersthewaytheUnitedStatesdoesamongitsvariousstates.

    ExitingtheeurocurrencyunionandtheEuropeanUnionwouldalsoinvolvealegalminefieldthatnocountryhasyetventuredtocross.Therearealsonoprovisionsfordeparture,voluntaryorforced,fromtheeurocurrencyunion.

    A2013videoonhowGreekswereturningtodirtyandenvironmentallydamagingsolutionsforheatafterthegovernmentraisedtaxesonheatingoilby450percent.CreditVideobyNikoliaApostolouonPublishDateFebruary03,2013

    GreecebecametheepicenterofEuropesdebtcrisisafterWallStreetimplodedin2008.Withglobalfinancialmarketsstillreeling,GreeceannouncedinOctober2009thatithadbeenunderstatingitsdeficitfiguresforyears,raisingalarmsaboutthesoundnessofGreekfinances.

    Suddenly,Greecewasshutoutfromborrowinginthefinancialmarkets.Bythespringof2010,itwasveeringtowardbankruptcy,whichthreatenedtosetoffanewfinancialcrisis.

    Toavertcalamity,thesocalledtroikatheInternationalMonetaryFund,theEuropeanCentralBankandtheEuropeanCommissionissuedthefirstoftwointernationalbailoutsforGreece,whichwouldeventuallytotalmorethan240billioneuros,orabout$264billionattodaysexchangerates.

    Thebailoutscamewithconditions.Lendersimposedharshausterityterms,requiringdeepbudgetcutsandsteeptaxincreases.TheyalsorequiredGreecetooverhaulitseconomybystreamliningthegovernment,endingtaxevasionandmakingGreeceaneasierplacetodobusiness.

    How did Greece get to thi point?

    Photo

    AfatheranddaughteratademonstrationinAthensinlateJune.CreditEiriniVourloumisforTheNewYorkTimes

    ThemoneywassupposedtobuyGreecetimetostabilizeitsfinancesandquellmarketfearsthattheeurounionitselfcouldbreakup.Whileithashelped,Greeceseconomicproblemshaventgoneaway.Theeconomyhasshrunkbyaquarterinfiveyears,andunemploymentisabove25percent.

    ThebailoutmoneymainlygoestowardpayingoffGreecesinternationalloans,ratherthanmakingitswayintotheeconomy.Andthegovernmentstillhasastaggeringdebtloadthatitcannotbegintopaydownunlessarecoverytakeshold.

    If Greece ha received illion in ailout, wh i theretill a crii?

  • 7/14/2015 GreecesDebtCrisisExplainedTheNewYorkTimes

    http://www.nytimes.com/interactive/2015/business/international/greecedebtcrisiseuro.html?_r=0 5/6

    LizAlderman,JamesKanter,JimYardley,JackEwing,NikiKitsantonis,SuzanneDaley,KarlRussell,AndrewHigginsandPeterEaviscontributedreporting.

    MoreonNYTimes.com

    Manyeconomists,andmanyGreeks,blametheausteritymeasuresformuchofthecountryscontinuingproblems.TheleftistSyrizapartyrodetopowerthisyearpromisingtorenegotiatethebailoutMr.TsiprassaidthatausterityhadcreatedahumanitariancrisisinGreece.

    Butthecountrysexasperatedcreditors,especiallyGermany,blameAthensforfailingtoconducttheeconomicoverhaulsrequiredunderitsbailoutagreement.TheydontwanttochangetherulesforGreece.

    Greece Creditor

  • 7/14/2015 GreecesDebtCrisisExplainedTheNewYorkTimes

    http://www.nytimes.com/interactive/2015/business/international/greecedebtcrisiseuro.html?_r=0 6/6

    WhytheGreeceDealMatters

    JULY12,2015

    IsGreeceWorseOffThantheU.S.DuringtheGreatDepression?

    JULY9,2015

    GreekCashCrunchGoestoMarket

    JULY9,2015

    PortraitsFromGreeceasItEnduresaCrisis

    JUNE23,2015

    2015TheNewYorkTimesCompanyHomeSearchContactUsWorkWithUsAdvertiseYourAdChoicesPrivacyTermsofServiceTermsofSale

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