STATE BANK OF VIETNAM BANKING ACADEMY Foreign Language Faculty ---------- GRADUATION THESIS PUBLIC DEBT CRISIS IN GREECE AND LESSONS FOR VIETNAM Lecturer : Mr. Ngo Tung Anh (MA, MBA) Name : Pham Thieu Ngoc Anh Class : K14 ATCA Hanoi – 20th May 2015 ABSTRACT The Greek public debt crisis that erupted in 2009 represents a serious threat to the stability of the global economy. Heads of States of the European Monetary Union, as well as European and international institutions have tried and are still trying to find a workable solution which would limit the losses and prevent crisis contagion to other countries in the world. The purpose of this study is to shed light on the impact of the Greek crisis on the European monetary union and Vietnam.
It explores the real situation of Greece government debt as well as the antecedents which have led to the rising of the public debt. Finally, the paper will develop a framework through which the lessons from the crisis can be drawn for Vietnam and through which it is possible to identify the available solutions to tackle the issue in this country. ACKNOWLEDGEMENT I would like to thank my honorable supervisor, Mr. Ngo Tung Anh (MA, MBA).
Words cannot describe how indebted I am to you, for your devotion of countless hours of guiding, encouraging, and editing. You were the driving force behind the completion of this paper. Your collective efforts kept me believing there was a light at the end of the tunnel. I am also grateful to all lecturers in the Foreign Language Faculty.
I am extremely thankful and indebted to them for sharing expertise about English and Banking, and sincere and valuable guidance and encouragement extended to me. I also thank my parents for the unceasing encouragement, support and attention. Finally, I place on record my sense of gratitude to one and all, who directly or indirectly have lent their hand in this venture. Table of Contents PART A: INTRODUCTION.
Rationale of the research. Aim of the study. Scope of the study. Methodology of the study.
Significance of the study. Sources of information. Structural organization of the thesis. 4 CHAPTER 1 THEORETICAL FRAMEWORK OF PUBLIC DEBT .1 Review of previous works and books (in relation to the current matters) .2 General definition about public debt .1 World Bank’s definition .2 Vietnamese law’s definition.1 Classification by subject .2 Classification by territory.4 Manifestations of public debt problems .1 Scale of public debts .2 The structure of public debts .3 Effectiveness of using public debts .5 Causes of public debt .2 Weak control in spending and Bad debt management .3 Over-spending to stimulus economy after crisis .6 The impact of public debt: .1 The positive impacts of public debt .2 The negative impacts of public debt.
12 CHAPTER 2 REAL SITUATION OF GREEK PUBLIC DEBT CRISIS. Evolution of the debt crisis in Greece .2 The situation of public debt in Greece .1 Scale of debt. The structure of public debts .3 Effectiveness of using public debts .3 Reasons for public debt crisis in Greek .4 Impacts of public debt in Greece. 31 CHAPTER 3 THE PUBLIC DEBT SITUATION IN VIETNAM AND SUGGESTIONS FOR VIETNAM .1 Current situation of public debt in Vietnam.1 The situation of public debt in Vietnam.2 The scale of public debt .3 Structure of public debt .4 The use of public debt .2 Lessons of the public debt of Greece to Vietnam .1 The first lesson .2 The second lesson .3 The third lesson .4 The fourth lesson .3 Suggestions to prevent public debt crisis in Vietnam .1 Improving fiscal policy and public debt management .2 Ensuring the sustainability of the scale and growth of the public debt .3 Controlling loans strictly and improving efficiency and management in the use of loans .4 Transparently disclosing information and policies of public debt management.
Limitations of thesis. 49 LIST OF TABLES Table 1: Public debt of Greece from 2004 to 2011. 16 Table 2: Distribution of Greek exports by product category 2001-2005. 21 Table 3: Percentages of public debt / export of some European countries.
23 Table 4: The status of public debt and budget deficit of the EU in 2009. 24 Table 5: Information about the budget deficit and foreign debt of the country in 2010. 26 Table 6: Structure of public debt in Vietnam in the period 2006-2010. 39 LIST OF FIGURES Figure 1: Percentages of budget deficit to GDP.
17 Figure 2: Percentages of public debt / export of some European countries. 22 Figure 3: Public debt to GDP ratio of Vietnam in the period 2010-2012. 36 Figure 4: Public debts and government debts of Vietnam from 2001 – 2020. 42 ABBREVIATIONS ASEAN: Association of Southeast Asian Nations CIA: Central Intelligence Agency FDI: Foreign Direct Investment ECB: European Central Bank EMU: European Monetary Union EU: European Union EURO: European currency Eurozone: Region using the European currency GDC: Global Dept Clock GDP: Gross domestic product ICOR: Incremental Capital Output Ratio IMF: International Monetary Fund OECD: Economic Cooperation and Development JEDH: Joint External Debt Hub ODA: Official Development Assistance MOF: Ministry of Finance UNCTAD: United Nations Conference on Trade and Development WB: World Bank PART A: INTRODUCTION 1.
Rationale of the research Almost all of sustainable developments must be set on the basis of stability. This is the fundamental principle of the mankind’s activities and also of all the developments in general. As a matter of fact, many countries establish rules and policies to regulate the economy. The main purpose of these policies is the macroeconomic stability, creating conditions for the growth and development of a sustainable economy.
Recently, the world has to cope with large fluctuations in the socio-economic development history. Multiple crises in the international scale continue to occur, resulting in adverse impacts on the world economy. While the influence of the currency crisis has not passed, the world has to face the risk of a new crisis. The focus is on Europe's debt crisis, wherein Greece is a typical country.
Europe has endeavoured to save the economy of the continent in particular and the world in general from the risk of crisis. However, it seems all efforts to this point have many conundrums. As a developing country with fledgling and weak economy compared with other powerful nations, Vietnam extremely concerns about the crisis development emerging in Europe. Since the 2008 financial crisis, despite the prosperity of the economy, Vietnam is still not ready to deal with a new crisis.
Moreover, we are also a country with relatively high public debt ratio, therefore it is necessary to find some measures that can help Vietnam to avoid a debt crisis in the future. This is also a reason for me to study the topic "The public debt crisis in Greece and lessons for Vietnam" 1 2. Aim of the study The purpose of this thesis is systematically studying the real situation in Greece to produce pragmatic solutions to Greek circumstance. Also, the thesis will offer recommendations for Vietnam in short term and long term to prevent the public debt problem from becoming a crisis.
Scope of the study The thesis focuses on the happening of debt crisis in Greece, as well as its causes and impacts on the world economy. Besides, the thesis also analyses the real situation of public debt in Vietnam and provide some suggestions and solutions to overcome the high public debt problem of Vietnam. Public debt crisis in Greece has long history but the thesis only discusses some typical features of this crisis from 2009 up to present. Methodology of the study In this topic, research methodology is a combination of the historical dialectical method, based on theoretical and practical statistics, comparison, analysis and forecast.
As a result, the thesis can deduct optimal solutions for the status of Vietnam's foreign debt in recent years. Significance of the study This thesis provides the general look about public debt crisis in Europe and in Greece, and contributes to the prevention of debt crisis in Vietnam, helping companies and the government be aware of the problems and avoid them. Sources of information The information and data in the thesis are consulted from a variety of sources. The majority of them are media outlets such as Internet and newspaper.
Also, many reports related to public debts provide comprehensive knowledge for the thesis. Structural organization of the thesis Apart from the introduction and the conclusion, the thesis is divided into three chapters as follows: Chapter 1 provides Theoretical Framework of public debt Chapter 2 offers Real situation of Greek public debt Chapter 3 is The debt situation in Vietnam and suggestions for Vietnam 3 PART B: DEVELOPMENT CHAPTER 1 THEORETICAL FRAMEWORK OF PUBLIC DEBT This chapter provides theoretical knowledge about public debt. It includes the definition, the classification, the manifestations, the causes and effects of public debts.1 Review of previous works and books (in relation to the current matters) Public debt is a problem attracting great attention globally, especially when it became a crisis in Eurozone. Therefore, there are many articles and researches about this.
In other words, this topic has been studied by many students, lecturers and economists. The majority of the reports have covered comprehensively the issue of public debt. To be more specific, they has given many definitions of public debt as well as describing detail the real situation of European public debt in general and of Greek debt crisis in particular. However, those the definitions of those articles and researches just defined in a certain area, while in other countries, the term “public debt” connotes other traits of meaning.
Also, the aforementioned works have just analysed and gave solutions to only the European and Greece crisis as well as its influence on global, Eurozone and Greek economies. Very few of the reports mentioned about how to address public debt problem in an external country, for example Vietnam. My thesis would not only identify the situation of Greece crisis but also research its influence in Vietnam. From that, lessons for a developing country like Vietnam can be drawn and solutions to prevent debt crisis can be produced.2 General definition about public debt 1.1 World Bank’s definition According to the World Bank, public debt is the debt obligation of four groups including (1) the debt of the Government, ministries, departments and central agencies, (2) the debt of local authorities, (3) the debt of the central bank, and (4) the debt of the independent institutions that the government owns more than 50%, or the government is responsible for repayment in case of default.
This definition is similar to the concept of Debt management and Financial Analysis System of the United Nations Conference on Trade and Development (UNCTAD).2 Vietnamese law’s definition Under the provisions of the Vietnam’s law, public debt includes three groups which are Government debt, Government-guaranteed debt and local authorities’ debt. Thus, the concept of public debt under the provisions of the Vietnam’s law is considered narrower than the international practice. This observation is also recognized by many experts in the field of public policy.3 Classification There are many criteria for the classification of public debt. Each category has a different meaning in the management and use of public debt.1 Classification by subject According to Vietnamese law, public debt is not only government debt but also guaranteed debt and local authority’s debt.1 Government debt In the structure of public debt, the majority of these are government debts.
5 Government debts include domestic and foreign loans which are signed or issued by the State, or other loans signed, issued or authorized by the Ministry of Finance under the provisions of law. However, they exclude debts issued by Central Bank for the implementation of monetary policy in each period.