Company Response to Debt

Company Response to Debt Crisis

Andrew Demers

INB-601-2167

January 4, 2016

Zelihic, Maja

This paper will summarize the key factors that lead to the debt crisis in Greece. What measures were taken by the European Union, IMF, and other European neighbors, and the current status of the crisis? Some brief information about Mikels, a Greek coffee company that is competing with Starbucks and thriving during the debt crisis. There will also be included general safety measures investors can take to protect assets and minimize loss.

What are the primary factors that created the crisis?

In the 1990’s, as Greece was preparing to switch to the euro, borrowing costs dropped significantly for the country. Greece took advantage of this fall and between 1990 and 2006 raised its government debt from 68% of its GDP to over 100% its GDP (Belkin et. al, 2015). The borrowed funds paid for public spending and to balance small tax revenue (Belkin et. al, 2015). Government spending and over borrowing lead to budget deficits.

What triggered the actual debt crisis occurred in 2009 when a new Greek government announced that the former government failed to report the full extent of the government’s budget deficits (Belkin et. al, 2015). This revelation eroded all investor confidence and isolated Greece from financial markets (Belkin et. al, 2015).

What steps have been taken thus far?

The Eurozone and the IMF implemented two assistance packages to Greece in fears that the Greek debt crisis would have an impact on surrounding economies (Belkin et. al, 2015). These packages did come with demands of fiscal and structural reform and privatization (Belkin et. al, 2015).

What steps did the company take to protect its investments in the country?

Mikel is not a publicly traded company like it’s biggest competitor Starbucks which makes ascertaining precise information difficult (Mourdoukoutas, 2014). As a Greek owned and operated company, all of its ties lie in Greece. Instead...