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BGM 2054-ASSIGNMENT 1

A Day In European Business & The Greek Tragedy
by

Kaeka Mohamed

on 17 April 2013

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Transcript of BGM 2054-ASSIGNMENT 1

Opening Case Closing Case THE.GREEK.TRAGEDY GLOBAL MANAGEMENT 1) What are the benefits and costs of using common currency for Greece, Germany & EU? 4) ON ETHICS:
For the £750 billion European Stability Mechanism, even Sweden and Poland (EU members that do not use the euro) felt they had enough contribute. But Britain (another EU member that does not use euro) decided not to contribute any funds. As a British official, how do you defend this decision? ESM stands for European Stability Mechanism, which provide financial assistance to eurozone countries in difficulty THANK YOU :) 2) How do the austerity imposed by the bailouts help a Greek firm that exports olive oil? THANK YOU :) 3) ON ETHICS:
-While Greece needs help, the German economy has also suffered a major recession itself and a budget deficit. How would you advise the chancellor: to bail out or not to bail out Greece?

- As a German taxpayer, are you willing to pay higher taxes to help Greece?

(Bear in mind, after Greece, there will be Ireland, Portugal and possibly Italy and Spain) Presenters:
Nuratika | Lina Athirah | Shafiah | Mohammad Ahsan A DAY
IN
EUROPEAN BUSINESS ADOPTION OF EURO * Process for belonging countries of European Union (EU) to replace their national currencies with Euro, started with signing of the Threaty
of Maastricht 1992 2001 * 11 EU member states OFFICIALLY started using the Euro *Greece OFFICIALLY joined EU 1999 Reduce currency conversion costs Facilitate direct
price comparison Impose
monetary
discipline on
governments BENEFITS Unable to implement
independent
monetary policy Limit the flexibility in
fiscal policy
(in areas such as deficit) COSTS Greece is the 3rd largest olive oil producer worldwide. Olive farming in Greece generates $1.3billion of income in rural areas and has effect on 350,000 farming households. Therefore, if austerity measures imposed, Greek firm had to find alternative by lower the price of olive oil. Hence, there will be higher demand from consumers and increase Greek firm's profit However, Britain does not contribute to ESM as it already contributes to existing bailouts through International Monetary System (IMF) It also made a bilateral contribution in the case for the republic of Ireland Save the German's export competitiveness Long-term rise in moral hazard advantages disadvantages To build up confidence for the Eurozone Stabilizing the Euro currency BAIL OUT ! Uncertainties of Greece's financial situation Inconsistency of bail out mechanism to other EU countries Can use the money for German's welfare Damage of Europe banking system NOT TO BAIL OUT ! advantages disavantages Improve German economic status Domino effect As an ordinary citizen, not willing to pay higher tax, just to help some other countries,

But, WHAT ARE THERE FOR ME?
Build up investors confidence
Stabilize the euro currency 2011 GDP had its worst decline
111,000 firms went bankrupt (27% higher than 2010)
Unemployment has a highest record by 20%
Youth unemployment rose from 22% to 48% EU leaders provide a 2nd bail out with conditions:
New austerity package
Private creditors agree to write off 50% of GOV. debt that equivalent to 100 billion euro (debt swap) 2012 why it happens? 2010 CHRONOLOGY OF GREEK TRAGEDY Government announces 2nd round of tough austerity measure;
Public sector pensions & wages cuts 15% to 20%
Value-added & excise taxes raised twice PM George Papandreou likens budget crisis to "wartime situation", announces 3rd round of tax rises & spending cuts total $6.5 billion Fears of a possible default on Greece's debts prompt EU & IMF to approve a $145 billion (£110 billion euros) rescues package for the country PM George Papandreou announcing a referendum on the rescue package but withdraws it & announces his resignation Lucas Papademos, a former head of the Bank of Greece, becomes interim prime minister with the task of getting the country back on track EXCESSIVE BORROWING SUPPORTED BY LOW INTEREST RATES WIDESPREAD CORRUPTION TAX EVASION LOW PRODUCTIVITY GROWTH SKYROCKETING GOVERNMENT DEFICIT
-The interest of bonds rose sharply from 7% to 18% just within one month Marcus
-Vise President Northern Europe of entrepreneurial software company that provides;
Computer aided design (CAD) software

CAD use in busineses:
Large architectural firms
Automotive suppliers
Aerospace manufacturers
Media & entertainment designers Travelling & engaging with other cultures is part of Marcus' daily job One day, Marcus arrived at Warsaw airport, he found:
There is less border security than in the past (no longer pasport controls) Why there is no passport controls? Business travelers try to avoid checking luggage to save time Unfortunately Marcus cannot take advantage and still had to use 5 different wallets: 1) "Euro wallet"-Germany and other countries that use euro
2) Swedish krones
3) Romanian Ieu
4) British pounds
5) Polish zloty Since Poland joined EU, the level of profesionalism has significantly increased at levels of management. why Marcus busy travelling around Europe
Is there no passport control
Marcus have to maintain 5 wallets stuffed with different European currencies ? ECONOMIC INTEGRATION Regional Economic Integration refers to efforts to reduce trade and investments barriers within one region, such as European Union (EU). Global Economic Integration refers to efforts to reduce trade and investment barriers around the globe -Travelers and businesses no longer need to pay procesing fees to convert currencies -Channelling more resources toward more competitve firms
Full transcript