GLOBALNA FINANSIJSKA I GRČKA DUŽNIČKA KRIZA
GLOBAL FINANCIAL AND GREECE’S DEBT CRISIS

Summary/Abstract: This paper analyses the current financial crisis of global proportions and Greece’s debt crisis, their generation, causes and effects which these two crises have left on both financial and real sector, primarily of USA and Europe. The global financial crisis originated in the subprime mortgage market as a result of massive approval of mortgage loans even to those clients who were not financially capable to service them within the predicted period. Such very bad mortgage loan approval regulation showed the first signs of weakness at the moment when a significant number of mortgagors were no longer able to pay their loans off. As a result of not being able to repay their debts, real estate which was in the debtor’s property is now handed over to the banks which, in an effort to provide liquidity, are being forced to sell them at significantly lower prices than the ones they had at the time of loan approval. In order to stop the enormous losses which banks have suffered, primarily as a result of bad loans, and in order to provide additional bank liquidity, the resort was converting mortgages into mortgage-backed securities with government guarantees. Rating agencies highly evaluated these securities, for the simple reason that the securities had a state coverage, so that the banks, institutional investors and others bought such high-rated mortgage-backed securities, not suspecting the wrong assessment of the relevant rating agencies. With this “bad assessment” the rating agencies have only deepened the crisis and contributed to its rapid expansion to the rest of the world through financial markets. The losses that are now becoming huge, have reached the great number of participants in the financial market, and a problem that is proven to be the systemic one is gradually spilled over to the real sector. The crisis has caused and provoked other crises that have been “warming up” for decades in America as well as in Europe, such as the debt crises which recently have emerged in EU members. Debt crisis that has engulfed Greece, which is discussed about in the paper, is a result of internal and partly of external factors. The crises of the same character threaten Spain, Portugal, Ireland and Italy.

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