An MBA aspirant is expected to be aware of all the happenings around the world, so as to tackle interviews and GDs as part of the admission process of top MBA colleges. The ongoing crisis in world economy especially the one in Greece is one of the hottest topic which is explained below.
Greece Crisis explained in 10 points:
- Greece borrowed heavily in the past 10 years, to support its various public expenditure programs, and social security programs
- Lot of these lenders (bondholders) were foreign - pension funds, banks of Euro region, American banks, investors etc.
- As Greece's economy was hit hard by the 2008-09 recession, the government's capability to pay back the interest and principals due, fell dramatically (as its own earnings fell)
- So Greece would default on its mandatory loan repayments
- This is just like an individual not being able to pay back his/her dues to someone else - only that this time it's a nation
- Greece is a member of the Eurozone, and its health affects everyone else's too as there is a common currency, and many banks of Eurozone are invested in Greek bonds
- So a default is a dangerous thing for all markets involved, and hence the Eurozone authorities, the ECB and the big ones - Germany and France - bailed Greece out last year
- But again it slipped, and a fresh bailout was planned nowIt was all decided - bondholders will take a cut in what's due to them, and Greece will promise a long period of expenditure cuts (very logical, and perhaps the only solution possible)
- But Greek voters violently reacted to this plan (beggars becoming choosers) and the PM sensed an opportunity to prolong his political life, and hence proposed a national referendum in Jan 2012 on this issue!
- This is perhaps the worst that can happen - a period of uncertainty, and a nation (and citizens) unwilling to agree to reality.
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