How the Greek tragedy unfolded
Greece is on the verge of a potentially catastrophic debt default that could rupture the eurozone just 10 years after it joined the single currency. Here’s a brief timeline of the country’s recent financial history:
January 1 2001
Greece joins the eurozone
Greece joins the single currency two years after the eurozone was created. The Athens government claims the “historic” achievement will put Greece at the heart of Europe and guarantee stability and prosperity because it has brought its finances into line with European Union demands. But even then critics question whether the euro project will suffer from the inclusion of another weaker member. Wim Duisenberg, president of the European Central Bank at the time, warns that Greece had to keep striving to improve its economy, with inflation at an unacceptably high 4%.
November 15 2004
Greece admits fudging euro entry
The first clear proof that all is not well in Greece comes when the government admits it has not actually met the qualifying standard to join the eurozone at all. Revised budget data shows that the Greek budget deficit has never been below 3% since 1999, as EU rules demand.
March 29 2005
Having ousted Greece’s socialist government a year earlier, the right-wing New Democracy party imposes an austerity budget to try slash Greece’s deficit and get to public finances back on track after the cost of hosting the 2004 Olympics. It includes higher taxes on alcohol and tobacco, and an increase in VAT from 18% to 19%.
A year after the austerity budget, Greece’s economy appears to be growing strongly again, with GDP up 4.1% in the first three months of 2006.
October 4 2009
Papandreou becomes prime minister
George Papandreou’s Panhellenic Socialist Movement wins power after New Democracy calls a snap general election, asking the Greek people for a new mandate to tackle the looming financial crisis. The economy has contracted by 0.3% and the national debt has risen to €262-billion, from €168-billion in 2004. At this stage the government expects the 2009 deficit to reach 6% of GDP.
Debt fears mount
Papandreou admits that the Greek economy is in “intensive care”, as European finance ministers express concern about the size of the country’s debt.
Credit rating downgraded
International ratings agency Fitch cuts Greece’s long-term debt to BBB+ from A-. This is the first time in a decade that Greece does not have an A rating and the move sends shares falling across the world. Standard & Poor’s soon follows suit.
March 3 2010
Greece adopts austerity
Papandreou announces a tough austerity package as Greece struggles to persuade the financial markets that it can cut its deficit and repay its debts.
Greece activates €45-bn EU/IMF loans
Papandreou turns to the International Monetary Fund for help after Greece is priced out of the international bond markets.
Greece granted €110-bn aid to avert meltdown
European finance ministers agree to a €110-billion rescue package for Greece, designed to cover the country’s borrowing requirements until 2013. In return, Greece pledges to bring its budget deficit into line through unprecedented budget cuts.
Europe’s day of action against cuts
Thousands of workers take to the streets in Greece, as part of co-ordinated action against the austerity measures being implemented across Europe. Strikes and protests also take place in Portugal, Ireland, Slovenia and Lithuania.
April 17 2011
Furious Greeks press for country to default on debt
Greek borrowing costs start rising sharply again on fears that its austerity measures are failing to work. Greece is now deep in recession, and the number of people taking to the streets to demand a change of course keeps growing.
General strike prompts violent clashes in Athens
Papandreou’s efforts to pass a four-year austerity programme to save €28-billion hang in the balance as police clash with protesters during a general strike. The depth of anger fuels fears that Greece will not keep qualifying for its original bailout.
Greece needs another €110-bn bailout to avoid debt default, says Papandreou
Greece admits that it needs a second rescue package to fend off default. Germany drops its demand that private creditors must take a “haircut”, but European leaders remain split over the best way forward.
EU leaders must act decisively or face disaster, says IMF
The IMF warns European leaders that they risk creating a second financial crisis unless they resolve the Greek situation rapidly, ahead of a crucial vote of confidence in Papandreou’s administration.—