Greece : On Considering The Possibility Of Leaving The Euro

3374 WordsAug 7, 201514 Pages
Greece: On considering the possibility of leaving the euro and reverting back to the drachma. By Mohd Zubir Bin Mohd Muhili @00410202 Table of content Introduction Greece became the focal point of Europe’s debt crisis after the financial collapse in 2008. With global financial markets still reeling, it was announced in 2009 that Greece had been understating its deficit figures for some years, raising soundness about the unassailability of Greek finances. By 2010, Greece was heading towards bankruptcy, which threatened to start out a new financial crisis. There are fears Greece may exit the euro and reverting back to the drachma. This situation dubbed as ‘Grexit’ has been a massive talking point all around the world. The question arises; is it good or bad for Greece to leave the Eurozone? This report will assess the effect on the Balance of Payments of Greece if it decides to leave the Euro. The exports and imports of Greece as well as their receipts from foreign visitors are important data for the analysis. Furthermore, the relevance of exchange rate models to the value of the Drachma following an exit from the Euro. For example, how the exchange rate system affected the value of a currency. Purchasing power parity (PPP) is an important theory in this particular area. Lastly, to analyses the issues that Multinational Corporation (MNC) should reflect on in relation to the potential exit of Greece from the Euro. a. The
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