Kokkoris, Loannis; Olivares-Caminal, Rodrigo; Papadaki, Kiriakos --- "The Greek Tragedy: Is There a Deus ex Machina?" [2011] ELECD 494; in LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder (eds), "Managing Risk in the Financial System" (Edward Elgar Publishing, 2011)

Book Title: Managing Risk in the Financial System

Editor(s): LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9780857933812

Section: Chapter 9

Section Title: The Greek Tragedy: Is There a Deus ex Machina?

Author(s): Kokkoris, Loannis; Olivares-Caminal, Rodrigo; Papadaki, Kiriakos

Number of pages: 13

Extract:

9. The Greek tragedy: is there a Deus
ex Machina?1
Ioannis Kokkoris, Rodrigo Olivares-Caminal
and Kiriakos Papadakis2

9.1. INTRODUCTION

The purpose of this chapter is twofold: firstly, to discuss the difficulties
that being a member of the European Monetary Union (EMU) entail,
with particular focus on Greece and on the implications of an internal
devaluation. Secondly, how debt re-profiling can help to support the
mechanisms of fiscal rehabilitation and external financing at the sovereign
and corporate level. Among other issues, we clarify the situation confront-
ing the Greek authorities and provide a description of the different mecha-
nisms to restructure/re-profile sovereign debt.


9.2. THE GLOBAL FINANCIAL CRISIS AND ITS
IMPACT ON SOVEREIGN DEBT

The global financial crisis of 2007 has resulted in an overall increase of
sovereign debt levels. Fiscal balances (as a ratio of gross domestic product
(GDP)) have deteriorated. This deterioration is mainly because of falling
revenues resulting from decreased real and financial activity. According
to IMF's data3 in 2010 advanced countries will average a budget deficit
of (-8.3 per cent) while emerging economies one of (-3.3 per cent). In
advanced economies public debt to GDP ratio will reach in 2010 the level
of 97 per cent (rising from below 75 per cent in 2006) while in emerging
economies will be 37 per cent (almost equal to 2006 level). This is the result
of a shift in risk allocation in advanced economies. In other words, the
turmoil of ...