How did the Greek drama start? As I wrote in, The Greek Problem, the Greek debt crisis erupted in November 2009 when the newly elected Papandreou government announced that the country's deficit to GDP ratio for 2009 would be 12.7%. Just in February that year, the previous government had forecast 3.7% for 2009. Not that the EU's Stability and Growth Pact or the Maastricht Treaty required Euro members to adhere to twin goals (a) deficit/GDP ratio of 3% and debt/GDP ratio of 60%). The reason for this huge upward revision was that the Greek government had consistently mis-reported debt and deficit data to the Eurostat since 2007. This revelation rang alarm bells amongst international investors because Greece needed to roll-over €16 billion of its debt by April/May of 2010.
Greece was able to roll-over much of €16 billion debt in 3 tranches by mid-April (€8 billion in January, €5 billion in March and €1.5 billion mid-April) because the government was able to attract investors by passing two austerity bills (February 9 and March 5). However Greece's debt problems were far from over. The government still needed to refinance €54 billion in 2010 and they were due to pay €8.5 billion by mid-May. With multiple downgrades by the ratings agencies and upward revision to 2009 debt to GDP ratio to 13.7% in April 2010, Greece had no choice but to seek help from international agencies.
Greece was able to roll-over much of €16 billion debt in 3 tranches by mid-April (€8 billion in January, €5 billion in March and €1.5 billion mid-April) because the government was able to attract investors by passing two austerity bills (February 9 and March 5). However Greece's debt problems were far from over. The government still needed to refinance €54 billion in 2010 and they were due to pay €8.5 billion by mid-May. With multiple downgrades by the ratings agencies and upward revision to 2009 debt to GDP ratio to 13.7% in April 2010, Greece had no choice but to seek help from international agencies.
On April 23, the Papandreou government officially requests a bailout loan. On May 2, the Eurozone countries and the International Monetary Fund (IMF) agreed on a €110 billion bailout loan for Greece, conditional on compliance with the following three key points: (1) implementation of austerity measures, to restore the fiscal balance; (2) Privatization of government assets worth €50bn by the end of 2015, to keep the debt pile sustainable; (3) Implementation of outlined structural reforms, to improve competitiveness and growth prospects.
To comply with the bail-out plan, the Papandreou government passed the 3rd austerity measures on May 6, 2010 despite massive protest. On July 7, the parliament approved pension reforms and on December 15 passed laws for public companies, which cap monthly wages and cut salaries over €1,800 by 10%. The 4th austerity legislation was passed on June 29, 2011, also despite massive protests. It cut included new taxes and cut wages.
Economic situation gets worse and the EU consider 2nd bail-out for Greece. After torturous negotiation, on October 26, 211 the EU and Greece agreed to a new bail-out that included a 50% hair-cut on privately-held bonds or €100 billion and reduction in interest rates on debt. To comply with the requirement, the Papandreou government wanted to hold referendum on the austerity measures. Under tremendous international pressure that was shelved but the government fell. A new technocratic government was formed under Lucas Papademos and with support from 2 major parties, the 5th austerity measure was passed on February 12, 2012. On February 21, the Troika (EU, IMF, ECB) approved €130 bail-out, which required it to finance all Greek financial needs from 2012 to 2014 through a transfer of some regular disbursements.
To replace the technocratic government election was held on May 6, 2012 but no party wins a majority seat. So there was another election on June 27, which resulted in a coalition government under Alexis Samaras. This government request a 3rd bail-out. Technically, it asks the Troika to make payments beyond 2014 into 2017 given worsening economic situation.
On November 5, 2012, the parliament approves 6th austerity measures to get the Troika's disbursement. In November, Troika decides not to disbursed the money but the money was re-shuffled to make the debt math work. On July 27, 2013, it approves the 7th austerity measures.
While the economic situation is getting tenuous, politics is also become more unstable. in May 25, 2014 election of the European Parliament, the coalition of the far left SYRIZA wins. And on December 29, the parliament fails to elect the ceremonial President and new election for January 25, 2015 is announced.
On January 25, 2015 election SYRIZA won the most seats but not the majority by promising to get debt reduced and austerity measures ended. It forms a coalition government with the far right Independent Greeks.
To comply with the bail-out plan, the Papandreou government passed the 3rd austerity measures on May 6, 2010 despite massive protest. On July 7, the parliament approved pension reforms and on December 15 passed laws for public companies, which cap monthly wages and cut salaries over €1,800 by 10%. The 4th austerity legislation was passed on June 29, 2011, also despite massive protests. It cut included new taxes and cut wages.
Economic situation gets worse and the EU consider 2nd bail-out for Greece. After torturous negotiation, on October 26, 211 the EU and Greece agreed to a new bail-out that included a 50% hair-cut on privately-held bonds or €100 billion and reduction in interest rates on debt. To comply with the requirement, the Papandreou government wanted to hold referendum on the austerity measures. Under tremendous international pressure that was shelved but the government fell. A new technocratic government was formed under Lucas Papademos and with support from 2 major parties, the 5th austerity measure was passed on February 12, 2012. On February 21, the Troika (EU, IMF, ECB) approved €130 bail-out, which required it to finance all Greek financial needs from 2012 to 2014 through a transfer of some regular disbursements.
To replace the technocratic government election was held on May 6, 2012 but no party wins a majority seat. So there was another election on June 27, which resulted in a coalition government under Alexis Samaras. This government request a 3rd bail-out. Technically, it asks the Troika to make payments beyond 2014 into 2017 given worsening economic situation.
On November 5, 2012, the parliament approves 6th austerity measures to get the Troika's disbursement. In November, Troika decides not to disbursed the money but the money was re-shuffled to make the debt math work. On July 27, 2013, it approves the 7th austerity measures.
While the economic situation is getting tenuous, politics is also become more unstable. in May 25, 2014 election of the European Parliament, the coalition of the far left SYRIZA wins. And on December 29, the parliament fails to elect the ceremonial President and new election for January 25, 2015 is announced.
On January 25, 2015 election SYRIZA won the most seats but not the majority by promising to get debt reduced and austerity measures ended. It forms a coalition government with the far right Independent Greeks.
References:
Greece’s Debt Crisis: Overview, Policy Responses, and Implications (PDF)
Timeline: The Unfolding Eurozone Crisis
Wikipedia - Greek Debt Crisis Timeline
Wikipedia - Greek Government Debt Crisis
Timeline: The Unfolding Eurozone Crisis
Wikipedia - Greek Debt Crisis Timeline
Wikipedia - Greek Government Debt Crisis
