Greece dodges bankruptcy as Eurozone grants bailout extension (Part 4 of 14)
Greece under heavy debt
Greece has been bailed out twice by the Troika, once in 2010 and again in 2011. Greece has a gigantic €240 billion ($269 billion) debt burden with repayments due this year.
The Troika is composed of the European Union (or EU), the European Commission (or ECB), and the International Monetary Fund (or IMF). The Vanguard FTSE Europe ETF (VGK) and the iShares MSCI EMU ETF (EZU) track European equities.
Greece subject to austerity measures pursuant to bailouts
As part of the bailout program, the Troika imposed certain mandatory economic reforms or austerity measures on Greece. These included a cut in public spending and an increase in taxes. The Troika put these measures in place in an attempt to reduce Greece’s debt levels. But the country has only bloated up its liabilities since then.
Greece needs to exercise financial prudence
Even after receiving aid from the bailout, Greece hasn’t used its funds wisely. This has led to the accumulation of large debts. Much of Greece’s bailout cash went toward Greece’s running costs. Public sector wages, which account for about 40% of the total economy, have been a drain on public funds.
The Greek equity-tracking FTSE Greece 20 ETF (GREK) has invested up to 7.5% of its portfolio in equities of the National Bank of Greece (NBG) and 11.5% in Coca-Cola HBC AG (CCHBF), among others. GREK is negatively impacted by deteriorating financial conditions in Greece. CCHBF is partly owned by The Coca-Cola Company (KO). The Coco-Cola Company’s key competitor, PepsiCo, Inc. (PEP), also operates in Greece through its subsidiary Tasty Foods S.A.
So what are some key things Greece needs to focus on in order to improve its financial situation? Let’s take a look.
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