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