WHY GREECE WAS NEAR COLLAPSE 2010

This is a question I must have heard a number of times within the last couple of weeks but basically the government lied about what the situation was like. Typical when you do business in Greece you need to grease many hands then wait ages to get anywhere. On the other end of the line I would be talking to travel agents or travel professionals trying to decipher news reports and stunning images from Syntagma Square.

How is it possible for a country that only 6 years back showed the world it was able to not only organize the finest Olympic Games but to also support a growth rate of over 3%, to now seem unable to get off a recession spiral? Not only that but to feed cameras all over the world with protesters clashing with the police only a year after similar shots went around the world in December of 2008?

So, what is going on with Greece?

This is a question easier to pose than to address. There is a number of factors that led Greece to the financial issues that need to be addressed today.

• Greece hardly ever invested European Union Funds (EUF), such as Delors’ Community Support Funds (CSF) packages for example, to creating the appropriate infrastructures to support economic growth in the country. Deplorably, such funds were mostly consumed to supporting PR for political parties. Even worse, lack of transparency in handling such funds renders most of such PR activities questionable. One of the outcomes of European Funds handling by the Greek State was that Greece remained a country with no heavy industry and no industrial infrastructure. Worse than that years of abuse of EUFs led to weakening or even lack of any moral code in the Greek political system. This situation in turn, led to devaluation of the political system in Greece.
  
  
• In the years of global growth and up to 2007, Greek economy followed the global trend. However, once trends changed, Greece entered recession, worse than the rest of EU economies.
  
  
• Successfully organizing the 2004 Olympic Games is one way to view how Greece handled the Olympic Games story. What is not usually mentioned is that Greece actually overburdened its economy by billions of Euro that were funneled to infrastructures some of which even today remain undeveloped. No long terms plan were in place for such infrastructures to be productively used after the end of the Olympic Games.

What above is a non-exhaustive list of causes that contributed to a degree in forming the financial and social state of things in Greece today.

Greece, as every other state in the world, borrows money to cover its national debt. Markets seem to estimate that the way Greece currently operates its economy does not guarantee that it will be in a position to pay off interests on its debt accrued over time by May 19, 2010. In market-lingo this translates to higher interest rates when a state asks for a loan. With Greece the situation got so bad that the interest rates requested by the markets to approve loans for Greece got to all-time highs. Moreover, Greece’s economy devaluation by organizations such as Moody’s et al. only led to a vicious circle leading the country to higher and higher loan interest rates.

Whereas some of the market practices in the situation described above may be questionable, the pressing issue was to restore trust to the markets that Greece will be able to pay off its debt. What became apparent, unfortunately not as fast as it should have been, was that Greece was not the only party affected by this crisis. Euro was also affected and exchange rates with USD and other currencies started falling. This in turn affected the economies of core Euro zone countries.

In an effort to avert dissemination of the crisis to the weakest economy links in Euro zone (see PIGS) the European Commission approved a close to 120 billion Euro loan for Greece to be distributed in installments till 2014. As know-how to handle such crisis was not available within the Euro zone, the International Monetary Fund (IMF) was called in to help with setting up the framework that would secure Greece receiving support but at the same time ensuring Greece would be in a position to pay it off as well through a number of changes in its economy and public sector. The latter may be viewed as part of the causes, which led to the demonstrations, protest marches and events in Athens last week.

Even though the press followed the clashes with the police, which certainly provided a first-class attraction for viewers over the world, they did not follow up the reforms that passed as law by the Greek Parliament. Nor did the press follow up the peaceful demonstrations that followed last week’s events. And of course no attempt was made to actually talk to people and get first hand news on who or what they feel is responsible for the dire financial situation they have to face.

Anchormen drafted fast comparisons between Argentina’s situation in 1999 and Greece in 2010. However, such comparisons are probably meaningless in view of the different financial contexts and economic blocks each country is to be considered part of.

So, what is going on with Greece?

No, there are no security concerns. It is a really beautiful spring time in Athens and the city is colorful and vibrant. As the reforming laws have already been voted by the Parliament no further demonstrations are expected.

Certainly a number of structural changes ranging from reforms in labor laws and public health care and insurance laws, to laws attempting to establish transparency in the public and private sector take place as we speak. Greece comes to realize that public servants are not exchangeable with or equivalent to party voters. Greece also comes to realize that in the absence heavy industry, productivity and wealth must be connected to high quality services and innovation.

It is widely accepted that tourism is one of the pillars for Greece reformed economy. Now more than ever what should be expected to happen in Greece regarding tourism related services is that quality level is going to be exceptionally high, rates will become more competitive and value for money is going to increase. The low exchange rate of Euro to the US dollar will also help in rendering vacations in Greece a bargain.

So, to address the question, Greece is doing ok. Even better, Greece seems to have realized that every crisis may well be an opportunity to optimize the way things run in the country. If this works that will be great for all.

Dr. Zack Protogeros
Marketing & Technology Directro
Destination Greece

Worries over Greece's ability to finance its debts have been weighing for weeks on the euro, which has fallen more than 10% from its November high. Now in April the IMF has a bailout plan--- International Monetary Fund NOW in April 2010 injected £45 billion bill to prop up Greece in the money markets but it hasn't worked as at April 28th. Now markets are tumbling and in July 2010 theres not much change. Greece is now entering what looks to be the next step in its crisis as insurance against the country defaulting reached a two-year high. Even though it is one of the smaller countries in the Euro-Zone, a default by Greece may lead France and Germany (two of the larger countries in the bloc) to enter a new recession as their banks have the largest exposure to the indebted nation.

But for a weak euro means this would make exports more competitive against China -- which keeps the yuan undervalued and tips favoring Chinese exporters. It may be exactly what Europes ailing economy needs. But of course China has no intentions of appreciating the yuan and the USA is suffering as more companies close succumbed by China's intense competition and its piggy bank money box gets added to each day.

George Soros, our great stock market legend and 29th richest man in the world, expects the global economic “recovery” to “run out of steam.” In fact, he thinks it’s likely that another recession will happen again in 2011 and we think so as well!

Soros warned that growing political resistance to fresh state borrowing risks pushing the global economy into a double-dip recession next year. He also said the recovery from the worst recession since the second world war was incomplete, but that fears about a sovereign country debt was a barrier to spending designed to boost growth.

There is a general concern with sovereign debt, Soros said. “It is coming under suspicion and it has a political momentum because there is increasing political resistance to allowing national debt to rise. Some countries such as Greece do have deficits of 12.5% of GDP, which is intolerable and has to be reduced. Other countries such as the US and the main European nations have plenty of room to increase their deficits.”

Governments around the world have allowed their budget deficits to balloon since the financial crisis broke in 2007, but Soros said more spending was needed. “I think that since the adjustment process to the recession is incomplete, there is a need for additional stimulus. The political resistance to it increases the chances of a double dip in the economy in 2011 and after that.”

GREECE: ($413.6 billion DEBT ), is bigger than the country's economy, with some estimates predicting it will reach 120 % of GDP in 2010. The country's deficit was caused by cheap loans & no financial restraints plus indiscriminate spending -- how much more it spends than it takes in -- is 12.7% & its in the pits looking for bailout funds to reduce the deficit by more than €10 billion ($13.7 billion). It has hiked taxes on fuel, tobacco and alcohol, raised the retirement age by two years, imposed public sector pay cuts and applied tough new tax evasion regulations. Drastic cost cutting include taxes on fuel, tobacco and alcohol, retirement age up by two years, imposed public sector pay cuts and applied tough new tax evasion regulations but bailout by other EU country is not an option due to they having problems of their own. Oil prices rose above US$86 a barrel on Monday 3rd May 2010 as a record bailout for debt-stricken Greece of €110 billion ( NZ$201 billion ) was made

COUNTRIES WHO CRASHED In the last 20 odd years:

• 1989 ARGENTINIAN

• 1997 THAILAND

• 1998 RUSSIA

• 1999 ECUADOR

• 2001 ARGENTINIAN

• 2008 Iceland whose next!!!!!!!!!!!!!!!!!!!!!!!!! &

• 2009 North Korea & Greece??

• 2011 Spain & Portugal, Greece & Ireland

• 2011 Poland coming

CHINA SITUATION:

China in June 2010 & 2011 have revalued their yuan which is good but the country is slowing down. As at May 2010 China is starting to spread inflation to other Western countries. China has borrowed $8 for every dollar of GDP growth so have a credit problem. We loved the cheap goods but now China is flooding the markets via exports to the rest of the world. NZs Reserve Bank cannot stop this. Remember the US was borrowing $6 for every dollar before the subprime crash & Kiwis are borrowing still well beyond there means. Kiwi Banks keep pampering depsoitors with small loans and credit and debit cards to try to indebt you.

Some of the world's largest hedge funds are even saying that the Euro currency will sink to trade at an even level with the U.S. dollar.

The most terrifying prediction for 2010 involves Nostradamus "Satan's arch of fury". Although the precise nature of this prediction is left open to interpretation -could it be a comet, a war but definitely a disaster???

Are we heading back to recession with $$$ dropping & foreign currencies starting to fall as at 2011 [ Poland situation Aug 2011 ] [ World Population exploding ] [ World Currency ] [ China Vs USA finance situation 2010 ] WHY ARE MANUFACTURERS & BUSINESSES LEAVING NZ: [ Read the story ] [ Compare to Thailand ] [ Check WHY THAILAND ] is better for Manufacturers & any Kiwi Company. Why NZ is lost [ NZ Deficit increases ] Yes we owe money????? [ Government $250m a week borrowing ] [ NZders lose out ]

"You believe me now that the world population needs to be addressed.

Don't tell anyone as most think its untrue & don't give a meow "

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