Greece’s problem is only temporary and its capital will flow again
It can be a source of envy for anyone from ex-communist world with a distant memory to find the frantic efforts underway to save Greece and other vulnerable southern members of the euro zone. It is not unknown to anybody with interest in Europe, what happened to Russia in late 1990s. Russian Federation declared 90 days moratorium on its debt after floating rouble in August 1998. The consequent crisis led to major depreciation of rouble and liquidation of Russian banking system. Russia ended 1998 with a contraction of 4.9 per cent instead of a small growth that was expected.
However, Russia bounced back with a positive trade balance, as the economy grew 8.3 per cent in 2000 and five per cent in 2001. The recovery took place because of import substitution effect after devaluation; the augment of Russian oil and gas prices for exports; monetary policies; and fiscal policies had affected the first federal budget surplus in 2000!
It was the same story with Poland, which successfully adopted elements of bank recapitalisation and government mediation. After the failure of Balcerowisz Plan, the economy of Poland was in shambles, when the restructuring programme was ratified in 1993 — stating the banks can recapitalise only if they carry debtor restructuring plan to the satisfaction of finance ministry. In case of loan recoveries, banks had a greater authority supported by the court, giving debtor further inducement to restructure. Therefore, banks were in much better financial position with improved credit evaluation that led to increased competition in the financial sector. The outcome of such measures was positive as bank reforms and corporate restructuring were tackled together in an integrated and transparent way. Furthermore, government subsidies to banks also enhanced the quality of debt restructuring.
It can be a source of envy for anyone from ex-communist world with a distant memory to find the frantic efforts underway to save Greece and other vulnerable southern members of the euro zone. It is not unknown to anybody with interest in Europe, what happened to Russia in late 1990s. Russian Federation declared 90 days moratorium on its debt after floating rouble in August 1998. The consequent crisis led to major depreciation of rouble and liquidation of Russian banking system. Russia ended 1998 with a contraction of 4.9 per cent instead of a small growth that was expected.
However, Russia bounced back with a positive trade balance, as the economy grew 8.3 per cent in 2000 and five per cent in 2001. The recovery took place because of import substitution effect after devaluation; the augment of Russian oil and gas prices for exports; monetary policies; and fiscal policies had affected the first federal budget surplus in 2000!
It was the same story with Poland, which successfully adopted elements of bank recapitalisation and government mediation. After the failure of Balcerowisz Plan, the economy of Poland was in shambles, when the restructuring programme was ratified in 1993 — stating the banks can recapitalise only if they carry debtor restructuring plan to the satisfaction of finance ministry. In case of loan recoveries, banks had a greater authority supported by the court, giving debtor further inducement to restructure. Therefore, banks were in much better financial position with improved credit evaluation that led to increased competition in the financial sector. The outcome of such measures was positive as bank reforms and corporate restructuring were tackled together in an integrated and transparent way. Furthermore, government subsidies to banks also enhanced the quality of debt restructuring.
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Don't trust the Indian Media!
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