Global economy

Nagpur branch of Reserve Bank of India. I took...

The storm clouds are gathering once again. After a brief reprieve, the global picture is again starting to look nervous reminding us that the ghost of the 2008 financial crisis is still with us. Crucial elections this past weekend in Greece and France have pushed Europe back into uncertain times. A highly fractured mandate in Greece has thrown the nation into turmoil and a shift of power in France has raised questions over the fate of the European fiscal austerity pact.


The result has been a sharp rise in risk aversion across global markets this week. On Tuesday, the benchmark equity index in Greece tumbled to the lowest levels in 20 years. Greece was not the only market to tumble. France, Germany, Italy all saw a sell-off in equities reflecting the nervousness that has once again gripped equity investors who seem to be shunning risk assets. For India, this does not bode well. Global investors, rightly or wrongly, tend to bunch risk assets together. And so a risk-averse environment is unlikely to leave India untouched.


The return of risk aversion is evident in the bond markets as well. As investors sought safety, money returned to US treasuries and German bunds which are now seen among the safest assets available. German bund yields, which move inversely to prices, have dipped this week. At the same time, US managed to sell 3-year treasuries at the lowest yield in 3 months – a reflection of strong demand for these “safe assets”. This is bad news for capital flows coming into India through portfolio investment. Investors may not pullout money from Indian equity markets but they may not bring in any fresh money either.


The currency markets are seeing a ripple effect as well. As talk of a possible Greece exit picked up once again, the Euro tumbled. The Euro fell below 1.30/$ – a level that the single currency has held on to since January. The fall in the Euro has a direct bearing on all emerging market currencies including the Rupee. As the Dollar strengthens, all currencies adjust to the strength in the Dollar. And so the Rupee has fallen back towards 53.50/$ despite strong intervention from the Reserve Bank of India just last Friday. In the light of the Euro fall, it seems futile for the Reserve Bank of India to try and defend the currency especially at a time when forex reserves are anything but abundant. Yet the markets do expect the RBI to continue supporting the Rupee to some extent.


In all of this, the silver lining may lie in the decline in commodity prices. As concerns around the global economy rise, commodity prices have fallen as well. So crude oil prices have slipped to their lowest levels in 6 months. This comes as a relief to a country like India which is grappling with a wide current account deficit. A large chunk of our import bill is on account of oil imports and even a marginal decrease in oil prices is positive for India. Unfortunately some of the benefits of lower oil prices are taken away by the weaker currency. Still lower commodity prices are perhaps the only silver lining in an otherwise worrying global scenario.


All eyes are now on Europe but also on economic data from the US. Will the political turmoil is Greece die down? How well will France’s new leadership work with the German leadership? And will economic data suggest a moderation in the US economy? Will the appetite for risk assets among global investors return? All questions that will remain crucial for India and indian investors in the days ahead.

via Global economy: What gloom means for India, Sensex, rupee.

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Greece free trade zones

DSC04009-Greece Patmos Chora

Greece Listeni/ˈɡrs/ (Greek: Ελλάδα, ElladaIPA[eˈlaða] ( listen)), officially the Hellenic Republic (Ελληνική ΔημοκρατίαElliniki DimokratiaIPA: [eliniˈci ðimokraˈtia][10]), and historically Hellas (Ancient Greek: Ἑλλάς, HellasIPA: [hellás]), is a country in Southern Europe, politically also considered part of Western Europe.

Modern Greece traces its roots to the civilization of ancient Greece, generally considered the cradle of Western civilization. As such it is the birthplace of democracy, Western philosophy, the Olympic Games, Western literature and historiographypolitical science, major scientific and mathematical principles, and Western drama, including both tragedy and comedy. This legacy is partly reflected in the seventeen UNESCO World Heritage Sites located in Greece, ranking Greece 7th in Europe and 13th in the world. The modern Greek state was established in 1830, following the Greek War of Independence.

Greece has land borders with Albania, the Republic of Macedonia and Bulgaria to the north, and Turkey to the east. The Aegean Sea lies to the east of mainland Greece, the Ionian Sea to the west, and the Mediterranean Sea to the south. Greece has the 11th longest coastline in the world at 13,676 km (8,498 mi) in length, featuring a vast number of islands (approximately 1,400, of which 227 are inhabited), including Crete, the Dodecanese, the Cyclades, and the Ionian Islands among others. Eighty percent of Greece consists of mountains, of which Mount Olympus is the highest at 2,917 m (9,570 ft).

developed country with an advanced, high-income economy and very high standards of living (including the 21st highest quality of life as of 2010), Greece has been a member of what is now the European Union since 1981 and the eurozone since 2001, NATO since 1952, and the European Space Agency since 2005. It is also a founding member of the United Nations, theOrganisation for Economic Co-operation and Development, and the Organization of the Black Sea Economic Cooperation. Greece is the largest economy of the Balkans.

Athens is the capital and the largest city in the country (its urban area also including Piraeus).


Greece has three free trade zones, located at the Piraeus, Thessaloniki, and Heraklion port areas. Goods of foreign origin may be brought into these zones without payment of customs duties or other taxes and remain free of all duties and taxes if subsequently trans-shipped or re-exported.

Documents relating to the receipt, storage, or transfer of goods within the zones are free from stamp taxes.

Handling operations are carried out according to EU regulations 2504/88 and 2562/90.

Transit goods may be held in the zones free of bond. The zones may be used for re-packing, sorting and re-labelling operations.

Assembly and manufacture of goods are carried out on a small scale in the Thessaloniki free zone.

Storage time is unlimited, as long as warehouse charges are promptly paid every six months.