Lecture 20 Spring - Lecture 20 Greece Bailout May 2 2010 110 billion Euro($146 billion in bilateral and IMF loans Greece must Cut pensions freeze

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Lecture 20 1 of Greece Bailout – May 2, 2010 110 billion Euro ($146 billion) in bilateral and IMF loans Greece must: Cut pensions, freeze wages, eliminate bonus pay (13 th , 14 th mo. bonuses) and raise retirement age for gov’t workers (60→65 for women Increase excise taxes and VAT (21→23%) Goal is to bring public deficit <3% GDP Causes: 1.High public spending, lack of public reforms 2.Poor gov’t accounting practices that masked problem 3.No capital controls or bank deposit insurance – no way to avoid run on banks (occurring since January) 4.Breach of eurozone rules prohibiting deficit 3+% GDP Professor David Lee AEM-ECON 2300
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Lecture 20 2 of Professor David Lee AEM-ECON 2300 Euro falling vs. U.S. Dollar: - 12+% since December
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Lecture 20 3 of New York Times, Sunday, May 2, 2010 One indicator of deficiencies of Greek tax system … Number of (taxed) swimming pools in northern Athens suburbs self-identified on tax returns: 324 Number identified in satellite photos of same area: 16,974 !! “We need to grow up…we need to learn not to cheat or to let others cheat” . Ioannis Plakopoulous newspaper stand operator Professor David Lee AEM-ECON 2300
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Lecture 20 4 of Professor David Lee AEM-ECON 2300 Illustration of Purchasing Power Parity – “Big Mac” Index ( The Economist ) www.economist.com/markets/ bigmac/ www.youtube.com/ watch?v=6F9xIj1YDxo
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Lecture 20 5 of Professor David Lee AEM-ECON 2300 ―Spending multipliers‖ — measure total response of
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This note was uploaded on 02/25/2011 for the course AEM 2300 taught by Professor Lee,d.r. during the Spring '06 term at Cornell University (Engineering School).

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Lecture 20 Spring - Lecture 20 Greece Bailout May 2 2010 110 billion Euro($146 billion in bilateral and IMF loans Greece must Cut pensions freeze

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