Euro Crisis
European CRISIS: An Overview of Facts
EU rules state that no nation in the euro bloc should have an annual budget deficit which is higher than 3% of its gross domestic product. The Greek government aims to shrink it to 9.1% of overall economic output this year, down from 12.7% last year.
Meanwhile Greece’s national debt stands at about 300bn euros ($419bn, £259bn).
Following downgrading by Fitch, Moody's and S&P, Greek bond yields rose in 2010, both in absolute terms and relative to German government bonds. Although all Greek government bond auctions held in 2010 have been massively over subscribed, yields have risen, particularly in the wake of successive ratings downgrading.
On 27 April 2010, the Greek debt rating was decreased to 'junk' status by Standard &
Poor's amidst fears of default by the Greek government. Yields on Greek government rose to
15.3% on two-year government bonds following the downgrading. Some analysts question
Greece's ability to refinance its debt, which equates to 115% of its gross domestic product, which is higher than the accumulated government debt of Belgium and considerably less than that of Japan. Standard & Poor's estimates that in the event of default investors would lose 30–
50% of their money.
Downgrade of credit ratings for Euro zone countries:: Standard and Poor's has downgraded
Spain's credit rating from "AA+" to "AA" with a negative outlook.. S&P lowered
Portugal's credit rating from "A+" to "A-."
The main options available with Greece are:
Enormous Cut in Government spending
High tax revenue ousting the government expenditure.
High Imports as compared to small imports: The Imports by the country are 18% of the
GDP whereas the exports are 6% of GDP. This huge difference is adding to the country woes.
To improve the conditions the country has to start decreasing the imports and promoting its exports in one way or other. The biggest challenge here with Greece is that it does not have its own currency. Therefore it cannot print
EU rules state that no nation in the euro bloc should have an annual budget deficit which is higher than 3% of its gross domestic product. The Greek government aims to shrink it to 9.1% of overall economic output this year, down from 12.7% last year.
Meanwhile Greece’s national debt stands at about 300bn euros ($419bn, £259bn).
Following downgrading by Fitch, Moody's and S&P, Greek bond yields rose in 2010, both in absolute terms and relative to German government bonds. Although all Greek government bond auctions held in 2010 have been massively over subscribed, yields have risen, particularly in the wake of successive ratings downgrading.
On 27 April 2010, the Greek debt rating was decreased to 'junk' status by Standard &
Poor's amidst fears of default by the Greek government. Yields on Greek government rose to
15.3% on two-year government bonds following the downgrading. Some analysts question
Greece's ability to refinance its debt, which equates to 115% of its gross domestic product, which is higher than the accumulated government debt of Belgium and considerably less than that of Japan. Standard & Poor's estimates that in the event of default investors would lose 30–
50% of their money.
Downgrade of credit ratings for Euro zone countries:: Standard and Poor's has downgraded
Spain's credit rating from "AA+" to "AA" with a negative outlook.. S&P lowered
Portugal's credit rating from "A+" to "A-."
The main options available with Greece are:
Enormous Cut in Government spending
High tax revenue ousting the government expenditure.
High Imports as compared to small imports: The Imports by the country are 18% of the
GDP whereas the exports are 6% of GDP. This huge difference is adding to the country woes.
To improve the conditions the country has to start decreasing the imports and promoting its exports in one way or other. The biggest challenge here with Greece is that it does not have its own currency. Therefore it cannot print