Greece Bankruptcy Implications

Greece government debt to GDP was 177.1 per cent in 2014 with its all time high and quite higher than Eurozone average was at 92 per cent during the same year. Total debt burden of the country stands at Euro 315.5 billion which lead to bankruptcy like situation. It has 44.94 per cent of loans from European Financial Stability Facility, 21.39 per cent in terms of bonds, 16.77 per cent in terms of bilateral loans, 8.56 per cent from European Central Bank (ECB), 7.92 per cent from IMF and remaining from others.

After global economic slowdown in 2009, Greece has not come out from severe effect. The country's unemployment rate stood over an above 25 per cent in 2014. Greek savers withdrew about 2 billion euros in last three days which is more than double that ECB granted to Greek banks for extra emergency liquidity assistance. This country's liquidity is in danger as 1.5 per cent of total deposits from the Greek banks are pulled out. The country's revenue fall by 24.6 per cent in month of May which contributes 50 per cent reduction in tax returns.

If Greece exit from Eurozone then heavy debt countries like Italy,Spain,Portugal may exit from the euro as cumulative effect. Euro is depreciated against US dollar on its nine year low. Indian rupee is also under pressure. If debt crisis spread across Europe then European entities will withdraw money from Indian stock markets on short term basis. Because of hilarious situation, Eurozone will be less attractive from global investors and will move towards emerging economies like India and China.

India's export to Greece was at Rs 2204 crore in FY15 which is 0.15 per cent of total export. This signifies that there will not be large impact on trade perspective.Though direct effect is not visible but neighbouring nations of Greece will suffer from subsequent crisis. India has three trading partners from Eurozone from top ten trading nations. Economic disturbance in Europe will have macro economic impact on India in long term.

Greece needs a deal to keep paying its creditors and to finance government operations. However, creditors are not taking risks to give further loans to the country due to threat of default or euro exit. If greece deafults then eurozone crisis will be a major economic crisis after US subprime crisis. It may lead to uncertainty over global economy.