1. Helena Horská Eurozone, Greece, and Sovereign Debt Crisis Sep 19,2016
GREECE: IS THERE ANY HARMLESS SOLUTION?
Helena Horská
Eurozone, Greece, and Sovereign Debt Crisis
Sep 19,2016

2. Most indebted developed countries
WHY ONLY GREECE?
Most indebted developed countries
Rating (S&P)
% GDP
Japan A+
228
Greece B-
171
Italy
BBB-
136
Portugal
BB+
129
Belgium AA
107
Source: Bloomberg
Greek Illness
Unprecedented fiscal indiscipline
Huge Tax Gap
Lost of competitiveness
High presence of the state in the economy
Clientelism, corruption, wide-spread shadow economy
Outdated economic structures …
Source: DG ECFIN AMECO estimate, Macrobond
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3. The current stage of opinions
THE FIRST-BEST SOLUTION EVER:
NO EURO IN GREECE
THE SECOND-BEST SOLUTION:
???
TO PICK UP THE LEAST HARMFUL SOLUTION
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4. Selected Milestones
“Greece: The party is over.” (Charles Wyplosz, December 14, 2009)
2009
1st bailout
2010
“Greece must now begin an orderly default, voluntarily exit the Eurozone and return to the drachma.”(N. Roubini, 2011)
2011
2nd bailout
2012
Snap elections
2015
Greece introduced ATM withdrawal restrictions and capital controls
Greece defaults on the IMF – first developed country on “arrears list” (joins Somalia, Zimbabwe and Sudan)
Greek bailout referendum: NO
3rd bailout
Snap elections
2016
Grexit overshadowed by Brexit
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5. … and how much devaluated?
After Greferendum…
… debate on parallel vs. own currency intensified
Parallel currency
IOU’s?
Own currency
new drachma?
… and how much devaluated?
30% ?
50% ?
Source: Macrobond
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6. The second-best solutions
Deflationary policies
Internal devaluation
Exchange rate devaluation
Fiscal austerity (tax hikes, expenditure cuts)
Huge output losses
Production cost cuts
Improvement in competitiveness
Increase labor and capital productivity
Ensure public finance sustainability
Export boost
Trade balance improvement
…but empirical evidence not very persuasive
Export of goods and services
(% GDP)
Albania
27,1
OECD members
28,4
Greece
30,1
Italy
30,2
Euro Area
44,6
Germany
46,9
Bulgaria
66,5
Czech Republic
84,5
Central Europe and Baltics 61
Source: World Bank, 2015
Source: Macrobond
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7. Politics is a magic key
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8. Thank you for your attention!
Any question?
What’s your opinion?
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9. Disclaimer
All opinions, prognoses and information, including investment recommendations and business ideas, as well as any other information contained in this announcement is only for the purposes of information. It is non-binding and represents the opinion of Raiffeisenbank (RB). This announcement is not an offer for the purchase or sale of any financial assets or other financial instrument. Prior to making any investment decision Raiffeisenbank recommends that you acquire detailed information on the planned investment or transaction. Raiffeisenbank drafted this announcement with all due care and attention and in good faith. However, it does not guarantee the accuracy of its contents, nor its completeness or precision. In general, RBI or RB forbids its analysts and persons reporting to the analysts from acquiring securities or other financial instruments of any enterprise which is covered by the analysts, unless such acquisition is authorised in advance by RB or RBI’s Compliance Department. Raiffeisenbank does not bear any liability for any damage or lost profits caused to any third parties through use of the information and data contained in this announcement. The investment recommendations created by the Economic Research team and its employees, as well as the model portfolios, business ideas, opinions and prognoses are only of a general character and intended for the public. They are not individualised or intended for specific parties in a specific financial situation, and are therefore not deemed to constitute investment consultancy as set forth in Act 256/2004 Coll., on Capital Market Undertakings, as amended. For complete information in accordance with Decree 114/2006 Coll., on the Impartial Presentation of Investment Recommendations, please visit the Raiffeisenbank website and click on The Czech National Bank, seat: Na Příkopě 28, Praha 1 is a supervisor for Raiffeisenbank a.s.
Authors: Helena Horská, Chief Economist Raiffeisenbank a.s.
As of Sep 16, :00
Kapitola
09/12/2018