Remember the Economic Systems !

Capitalism: Is about people owning business with little government involvement. It’s about making profit

Communism: Government controls businesses and there is no private ownership

Socialism: Some Government involvement with the businesses and taxes are high

BUT ECONOMIC SYSTEMS ARE MUCH, MUCH MORE

COMPLICATED…..

The Euro Zone Financial Crisis!!!!

By: VJ MohitGrade:6Home base: Mr. Freeman

FACTS ABOUT GREECE Country: Greece

Capital: Athens

Form of Government: Parliamentary

Republic

Population: 10, 722, 816

Currency : Euro

FACTS ABOUT GREECE…cont.

Greece abolished its monarchy in 1975

Under the Parliamentary republic there is a

Prime Minister and a President

The Prime Minister has the most power

Greece became part of the European Union in

1981

WHAT IS EUROPEAN UNION

The European Union is a political and

economic group of European 27 countries

EU has free movement of people, goods,

services and money.

So what happens in one country’s economic

system affects another country.

HOW DOES MONEY FLOW? Countries and private businesses need money

Government gets some from taxes and borrows some

from other countries and banks

Borrowed part is called principal and the extra cost for

borrowing is called the interest.

Many countries in the EU have borrowed a lot and now

cannot pay back

In Greece it is assumed that almost half of the

money borrowed (called debt) which includes

the principal and the interest can not be repaid

back

WHY DID THIS HAPPEN IN GREECE?

Greece has been living beyond its means in

recent years

Greek government borrowed a lot and then

spent a lot after it adopted the euro €

Public sector (another name for government)

salaries doubled in the past decade.

Government spent a lot but could not collect

enough tax because of widespread tax evasion

IMPORTANT DETAILS ! 

More than 5 million Greeks did not pay income

taxes for 2008

Many Greeks are not reporting their income to

avoid paying taxes

Taxes that people pay is money that goes

towards the Government.

 In the case of Greece the money being spent

was more than the Government was earning

HOW DOES IT AFFECT OTHER COUNTRIES?

Greece owes money to many other European

countries and banks

If it can not pay it back, these countries and banks

loose money

Those countries and banks then have less money

for their own government and private businesses

 Greece is not the only country affected in this

way, other countries are Italy, Portugal, Spain

WHAT DOES IT MEAN FOR YOU AND ME?

As you know many goods are now days made in

Asia because of low costs and skilled people

But these goods and services are also bought by

government and private businesses in the EU

If governments or private businesses do not

have money to buy these goods and services

from Asian producers it means Asian businesses

suffer and people here loose jobs

SO THAT MAKES ME ASK SOME QUESTIONS?

Why were governments allowed to spend so

much?

Who controls the governments

Why didn’t the banks tell the governments to

stop borrowing?

….like I said economic systems are complicated…..but very interesting….!

The Story of

VJ’s NIKE Shoes

US

Govt.

Pays for the soldiers in

Afghanistan

NIKE manager’s

salariesINDIAFor raw

material like leather

Chinese Govt.

Philippines Govt.

Builds roads

Philippines business’ loans

Philippines Shop Owner

$$

Nike

T

To Greece as a Loan

$$

$

$

China Chinese shoe

making factoryChinese

Workers$

T

T

$

Indian Farmer for the cow

skin

Govt.

RESOURCES

CNN Website: A Greek tragedy: How the debt crisis spread like a virus in 'Contagion'http://news.blogs.cnn.com/2011/09/19/a-greek-tragedy-how-the-debt-crisis-spread-like-a-virus-in-contagion/?iref=allsearch 

BBC Website: Eurozone crisis: What turmoil means for youhttp://www.bbc.co.uk/news/business-14418290