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Greek Debt Crisis Explained | EEE > .> EU >>
Greek government-debt crisis: Greece faced a sovereign debt crisis in the aftermath of the financial crisis of 2007–2008. Widely known in the country as The Crisis (Η Κρίση, I Krísi), it reached the populace as a series of sudden reforms and austerity measures that led to impoverishment and loss of income and property, as well as a small-scale humanitarian crisis. In all, the Greek economy suffered the longest recession of any advanced mixed economy to date. As a result, the Greek political system has been upended, social exclusion increased, and hundreds of thousands of well-educated Greeks have left the country.
The Greek crisis started in late 2009, triggered by the turmoil of the world-wide Great Recession, structural weaknesses in the Greek economy, and lack of monetary policy flexibility as a member of the Eurozone. The crisis included revelations that previous data on government debt levels and deficits had been underreported by the Greek government: the official forecast for the 2009 budget deficit was less than half the final value as calculated in 2010, while after revisions according to Eurostat methodology, the 2009 government debt was finally raised from $269.3bn to $299.7bn, i.e. about 11% higher than previously reported.
The crisis led to a loss of confidence in the Greek economy, indicated by a widening of bond yield spreads and rising cost of risk insurance on credit default swaps compared to the other Eurozone countries, particularly Germany. The government enacted 12 rounds of tax increases, spending cuts, and reforms from 2010 to 2016, which at times triggered local riots and nationwide protests. Despite these efforts, the country required bailout loans in 2010, 2012, and 2015 from the International Monetary Fund, Eurogroup, and the European Central Bank, and negotiated a 50% "haircut" on debt owed to private banks in 2011, which amounted to a €100bn debt relief (a value effectively reduced due to bank recapitalisation and other resulting needs).
After a popular referendum which rejected further austerity measures required for the third bailout, and after closure of banks across the country (which lasted for several weeks), on 30 June 2015, Greece became the first developed country to fail to make an IMF loan repayment on time (the payment was made with a 20-day delay). At that time, debt levels stood at €323bn or some €30,000 per capita, little changed since the beginning of the crisis and at a per capita value below the OECD average, but high as a percentage of the respective GDP.
Between 2009 and 2017, the Greek government debt rose from €300bn to €318bn. However, during the same period the Greek debt-to-GDP ratio rose up from 127% to 179% due to the severe GDP drop during the handling of the crisis.
The Greek crisis started in late 2009, triggered by the turmoil of the world-wide Great Recession, structural weaknesses in the Greek economy, and lack of monetary policy flexibility as a member of the Eurozone. The crisis included revelations that previous data on government debt levels and deficits had been underreported by the Greek government: the official forecast for the 2009 budget deficit was less than half the final value as calculated in 2010, while after revisions according to Eurostat methodology, the 2009 government debt was finally raised from $269.3bn to $299.7bn, i.e. about 11% higher than previously reported.
The crisis led to a loss of confidence in the Greek economy, indicated by a widening of bond yield spreads and rising cost of risk insurance on credit default swaps compared to the other Eurozone countries, particularly Germany. The government enacted 12 rounds of tax increases, spending cuts, and reforms from 2010 to 2016, which at times triggered local riots and nationwide protests. Despite these efforts, the country required bailout loans in 2010, 2012, and 2015 from the International Monetary Fund, Eurogroup, and the European Central Bank, and negotiated a 50% "haircut" on debt owed to private banks in 2011, which amounted to a €100bn debt relief (a value effectively reduced due to bank recapitalisation and other resulting needs).
After a popular referendum which rejected further austerity measures required for the third bailout, and after closure of banks across the country (which lasted for several weeks), on 30 June 2015, Greece became the first developed country to fail to make an IMF loan repayment on time (the payment was made with a 20-day delay). At that time, debt levels stood at €323bn or some €30,000 per capita, little changed since the beginning of the crisis and at a per capita value below the OECD average, but high as a percentage of the respective GDP.
Between 2009 and 2017, the Greek government debt rose from €300bn to €318bn. However, during the same period the Greek debt-to-GDP ratio rose up from 127% to 179% due to the severe GDP drop during the handling of the crisis.
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