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The Global Financial Crisis Chapter 7B


The Global Financial Crisis Chapter 7B. From the US subprime mortgage crisis to European sovereign debt – PowerPoint PPT presentation

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Title: The Global Financial Crisis Chapter 7B

The Global Financial Crisis Chapter 7B
  • From the US subprime mortgage crisis to European
    sovereign debt

Chapter 7B
  • Greece The epicenter of the Eurocrisis

Greek politics fomented the crisis

Prominent Greek political families dominate
  • From the early 1960s three prominent Greek
    families dominated the political scene in Greece.
  • Two recent prime ministers, George Papandreou and
    Kostas Karamanlis, have done significant damage
    to their country.
  • Papandreou exposed Greece to unnecessary negative
  • Karamanlis government bloated the public sector,
    which led Greece to accumulate an unsustainable
    level of public debt.

  • Grexit is a term used to denote the possibility
    of Greece leaving the EMU.
  • The term became popular in some northern EU
    countries, where Grexit became front page news as
    populist politicians and newspapers made it a
    daily topic in news coverage.

  • Such treatment of Greece not only worsened the
    Greek recession, but it also affected the other
    bailout recipient countries.
  • A critical moment of a Grexit took place in
    Cannes, France on November 2, 2011, during a
    pre-G20 summit meeting of EU/IMF officials and
    two EU country leaders.

The cancelled referendum
  • In October 2011 an agreement for a second Greek
    bailout was reached between the Greek delegation
    and the EU and IMF.
  • After he returned from Brussels where the
    agreement for the second bailout was reached,
    Prime Minister Papandreou decided to hold a
    referendum. He wanted to offer Greek voters the
    option to accept or reject the bailout.
  • Rumors about the Greek bailout referendum spread
    quickly, reaching various EU policy circles.

The cancelled referendum
  • Nicholas Sarkozy and Angela Merkel were opposed
    to a Greek referendum.
  • On November 2, 2011 Prime Minister Papandreou,
    along with his finance minister Evangelos
    Venizelos, were invited to a pre-G20 summit
    meeting in Nice, France.
  • In addition to Sarkozy and Merkel, the President
    of the European Council, Herman Van Rompuy the
    President of the Commission, Jose Manuel Barroso
    the President of ECOFIN, Jean Claude Juncker the
    Director of the IMF, Christine Lagarde and the
    President of the United States, Barack Obama
    were all present.

The cancelled referendum
  • This meeting turned out to be very important for
    the future of both Greece and the EU.
  • Everyone at the meeting tried to convince
    Papandreou that a referendum was a very bad idea.
  • It was clear to all participants that a negative
    outcome to the Greek referendum could have meant
    the end of the EMU.

The cancelled referendum
  • It became clear that the intervention of the two
    largest EU country leaders was an unorthodox and
    brutal move that made a few people in the room
    very uncomfortable.
  • How could the leaders of the two largest economic
    powers in Europe dictate policy to an elected
    leader of a small EU country?
  • The same disconnect felt between EU leaders and
    citizens experienced in the pre-G20 summit
    meeting was also revealed in the results of the
    2014 European Parliament elections.
  • EU leaders failed to pay attention to major
    issues, and as a result, major problems
    threatened the course of European integration.

Replacement of elected EU country leaders by
  • Five days after returning to Greece from Cannes,
    Prime Minister Papandreou was forced to resign.
  • He also stepped down as leader of PASOK and was
    replaced by his finance minister, Evangelos
    Venizelos, who was against the referendum.

Austerity brought misery and poverty
  • Much evidence supports the claim that austerity
    caused an unprecedented increase in physical and
    mental diseases in Greece.
  • For most Greeks, health insurance was linked to
    employment, so when citizens lost their jobs they
    also lost their health insurance.
  • Imposed reductions in government health
    expenditures by the Troika negatively impacted
    the health of millions of Greeks.

Austerity brought misery and poverty
  • Various studies undertaken regarding health
    conditions in Greece found substantial
    deterioration in health in several areas,
  • Increase in the number of suicides
  • Increase in heart attacks
  • Reappearance of rare diseases, such as malaria
  • Increase in infant mortality rates
  • Drastic reduction in medical supplies
  • Low morale of hospital employees due to deferred

Austerity brought misery and poverty
  • According to experts from Oxford, Cambridge, and
    the London School of Hygiene and Tropical
    Medicine, Greek hospital budgets were reduced by
    25 between 2009 and 2011, and pharmaceutical
    spending was reduced by 50.
  • The joint report by the three universities
    criticized the Greek government and the Troika
    for continuing to impose austerity without
    realizing the magnitude of the health crisis.

Austerity brought misery and poverty
  • Foreign humanitarian organizations, such as
    Doctors Without Borders and Doctors of the World,
    worked with Greek humanitarian groups to provide
    free health services.
  • Prior to the crisis there were malfunctions in
    the Greek health system, and shortages of medical
    services were very common.
  • During the Eurocrisis a black market formed
    between patients seeking medical care and
    doctors who habitually accepted bribes.

Austerity brought misery and poverty
  • Many believed structural changes implemented by
    the Troika were a great opportunity to overhaul
    the healthcare system, so that it could become
    more efficient and better serve the citizens.
  • According to many studies, however, healthcare in
    Greece has gravely deteriorated since the outset
    of the crisis.

Hungry and homeless
  • The crisis did not spare anyone in Greece.
  • Children were malnourished, and some young pupils
    were forced to search in trash cans and ask other
    students for leftovers.
  • Several international and Greek humanitarian
    groups began offering free meals to thousands of

Hungry and homeless
  • The search for free food increased substantially
    throughout the crisis.
  • At one point over 700 soup kitchens were open in
  • Along with Greek churches and humanitarian
    organizations, Greek municipalities began
    offering free meals as well.

Hungry and homeless
  • According to journalist Julianne Mendelsohn, the
    problem in Greece is not that Greeks are lazy, an
    idea that was publicized by the German newspaper
    Bild, but simply that there were no jobs
  • Ms. Mendelsohn met many hungry and homeless
    Greeks, and was struck by the sadness and pain in
    peoples eyes At the moment they thought nobody
    was watching them.

Hungry and homeless
  • Since 2010, Greece has been transformed into a
    different country.
  • By 2015 Greece had developed a multitude of
    social and economic problems.
  • Austerity programs increased unemployment in
    every country, especially in Spain and Greece
    where a quarter of the labor force became
  • The prolonged recession triggered many protests.

The un-repaid, forced World War II loan to Germany
  • One of the fiercest protestors was Manolis
    Glezos, a left-wing politician who was admired by
    many Greeks.
  • Glezos gained the respect of Greeks on May 20,
    1941 while the country was under German
  • Glezos was 18 years old at the time and together
    with his friend Apostolos Santas climbed the
    Acropolis rock, brought down the swastika, and
    replaced it with the blue and white Greek flag.
  • Such a courageous act brought hope to Greeks and
    other Europeans being oppressed by the Nazis.

The un-repaid, forced World War II loan to Germany
  • Manolis Glezos was elected to the European
    Parliament (EP) in May 2014 with about 500,000
    votes, more than any other EP candidate.
  • Glezos believes Germany is obligated to assist
    Greece not only as a gesture of European
    solidarity, but as partial repayment for the
    famine and looting of the country which occurred
    during the German occupation.
  • Greece lost a substantial portion of its
    population in mass executions, as reprisals for
    the guerilla attacks against the occupying Nazi

The un-repaid, forced World War II loan to Germany
  • Chancellor Merkel was critical of over-indebted
    countries for being reckless prior to and during
    the crisis therefore according to Merkel, those
    countries should be responsible for their public
  • The Guardian, a British newspaper, was critical
    of Chancellor Merkel for not repaying two loans
    that the occupying German regime extracted from
    the central bank of Greece during World War II.

The un-repaid, forced World War II loan to Germany
  • During a historic visit to Greece by German
    President Joachim Gauch in 2013, the question of
    forced war loans from Greece and the war
    reparations resurfaced.
  • In a joint appearance with Greek President
    Karolos Papulias, Mr. Gauch stated that after
    Germany paid 115 million deutschmarks in 1960,
    the issue was closed.
  • Karolos Papulias disagreed and said the two
    countries should start discussing a settlement as
    soon as possible.

The un-repaid, forced World War II loan to Germany
  • President Cauch stated that Germany bore a moral
    debt for the dozens of massacres committed by
    the Nazis, and as a reminder to future
    generations, Germany would put money into a fund
    to assist the families of murdered Greeks.
  • The gesture of the German president revealed good
    intentions but many Greeks felt this would not
    address the issue of economic reparations, which
    were of a much greater magnitude.

The un-repaid, forced World War II loan to Germany
  • There are not many official war monuments, such
    as the one in Kalavrita in the Peloponnese where
    the Nazis massacred the entire male population,
    or the one in Dystomo in Central Greece where the
    Nazis killed almost the entire population.
  • Despite the lack of monuments, mass execution
    sites are all over Greece and the elderly
    remember precisely the locations and the victims.
  • Many villages were burned to ashes, and a large
    number of Greeks were sent to Germany to work and
    to be humiliated in concentration camps.

The un-repaid, forced World War II loan to Germany
  • Many Greeks are now convinced that a large
    percentage of Germans wish to dominate other
    countries economically.

The un-repaid, forced World War II loan to Germany
  • In April 2013 the Greek newspaper To Vima
    published an 80-page report by a commission of
    experts within the finance department of the
    Greek government suggesting an investigation into
    the status and value of the two World War II
    forced loans.
  • The commission estimated the value of the unpaid
    reparations to be 162 billion 108 billion for
    the destruction of infrastructure and looting of
    the country, and 54 billion for the forced loan
    from the Central Bank of Greece.

The un-repaid, forced World War II loan to Germany
  • The issue of World War II reparations to Greece
    resurfaced again in the summer of 2015 when the
    third Greek bailout was being negotiated.
  • This time the challenge came from inside the
    German government, from two politicians in
    Chancellor Merkels party and one from the Green

The un-repaid, forced World War II loan to Germany
  • Ms. Cesine Schawn accused the German government
    of not wanting to face its responsibilities.
  • A German historian, Eberhard Roydholz,
    investigated Germanys claim that it had fully
    repaid its debts to Greece.
  • He concluded that the case of the German war
    reparations to Greece was not closed as the
    German government had announced.

The un-repaid, forced World War II loan to Germany
  • Although many agree that the timing of the Greek
    government is wrong, it is still an issue that
    should be addressed.
  • Germany must be responsible for all its public
    debts, past and present, including the debts
    incurred during World War II.

A moral lesson to the world by a German couple
  • Help for Greece can come from where it is least
    expected. A German couple who came to Greece in
    March 2015 visited the mayor of the picturesque
    city of Nafplio in the eastern Peloponnese.
  • Ludwig Zacaro and Nina Lahge offered the mayor a
    check for 875. In an interview, Ms. Lahge
    stated, We are guests in this beautiful country,
    and we want to give something back. Not charity,
    but something that belongs to you.

A moral lesson to the world by a German couple
  • Such behavior is moving and unites European
    people, unlike the Greek bashing by the German
    news media that unearthed old wounds and divided

A neo-Nazi party on the rise
  • One of the most undesirable side effects of the
    Greek debt crisis was the rise in popularity of
    the extreme right-wing political party, Golden
  • Golden Dawn gained popularity when it began
    providing many missing services for the disabled
    Greek state.
  • It protected people and businesses and provided
    food and jobs for the impoverished.

A neo-Nazi party on the rise
  • Golden Dawn discriminates against immigrants, and
    did not support the bailouts because its members
    feel the international lenders are exploiting
  • It gained popularity as a result of its strong
    views against austerity and the bailouts.

A neo-Nazi party on the rise
  • In 1990, Golden Dawn received 0.29 of 1 of the
    popular vote in the national elections. In 2012,
    the party received 6 of the vote and sent 18
    members to the Greek parliament.
  • Political analysts interpreted this startling
    outcome to be the result of a protest vote
    against the two major political parties that
    shamelessly led Greece into bankruptcy.

A neo-Nazi party on the rise
  • Golden Dawn has been known to use the Nazi
    salute, and there is blind obedience to its
    leader Nikolaos Mihaloliakos, who prefers to be
    called Führer.
  • It is surprising that Golden Dawn has gained so
    much popularity in a place that suffered so much
    under Nazi rule during World War II.
  • Golden Dawn has committed crimes against
    immigrants, yet approximately half of the Greek
    population are immigrants in other countries.

A change in the wind for Golden Dawn
  • On September 17, 2013 a left-wing musician,
    Pavlos Fyssas, was murdered outside a café in the
    Keratsini district of west Athens. Fyssas was
    stabbed to death by a man who admitted to being a
    member of Golden Dawn.
  • The assassination could signal the ending of
    Golden Dawn by the Greek judiciary.
  • According to Helena Smith, a writer for the
    Guardian, three women were destined to play a
    role in the punishment of the violent
    male-dominated party.

A change in the wind for Golden Dawn
  • A gutsy female prosecutor appointed two female
    judges to investigate Golden Dawn.
  • The two judges have a reputation for being
    fearless, non-partisan, diligent, and
  • They have gathered evidence that includes up to
    15,000 pages of speeches, confiscated hard
    drives, videos, and other documents.
  • They were provided 24-hour protection and were
    given 18 months to bring members of Golden Dawn
    to trial.

A change in the wind for Golden Dawn
  • According to Pavlos Tsimas, a respected Greek
    journalist, Golden Dawn is different from every
    other political party in Europe because it aims
    to destroy democracy.
  • Golden Dawns ideology is influenced by the
    three-year civil war that broke out at the
    conclusion of World War II.
  • The right-wing government won, and thus there are
    still many supporters of Golden Dawn within the
    deep Greek state of the police and the military.

Golden Dawn to stand trial
  • In a 697-page report the Greek public prosecutor,
    Isidoros Dogiakos, accused 69 members of Golden
    Dawn of a variety of criminal offenses ranging
    from murder to violent hate crimes.
  • Among the accused are all 16 Golden Dawn members
    of the Greek Parliament.
  • Helena Smith explained that the strength of
    Golden Dawn lies in the gruelling austerity
    imposed on Greece.