The Greek government-debt crisis is one of a number of current European sovereign-debt crises. Beginning in late 2009, fears of a sovereign debt crisis developed among investors concerning Greece's ability to meet its debt obligations due to strong increase in government debt levels.
May 2010 - Greece granted €110bn aid to avert meltdown as Papandreou says he has sealed a deal with the EU and IMF, opening the door for a bail-out in return for extra budget cuts of €30bn
June 2011 - Greece gets the lowest credit rating in the world after S&P downgrades it by three notches to CCC from B
July 21 - Euro zone leaders agree on second rescue package with extra 109 billion euros of government money, plus contribution by private sector bondholders estimated to total as much as 50 billion euros by mid-2014.
October 21 - Greece approves more austerity measures, defying violent protests in Athens and a general strike.
February 6th: Merkel tells Greece to hurry on accepting the painful terms for the new EU/IMF bailout. Venizelos, who has again met lenders, warns the stakes are rising.
February 9th: After repeated delays and all-night talks with leaders of the three Greek coalition parties and EU and IMF inspectors, political leaders clinch a deal. Unemployment in Greece rises to 20.9 per cent, a new record, after austerity measures already in place. Greece's two major labour unions GSEE and ADEDY say they will hold a 48-hour strike for February 10th & 11th. Euro zone finance ministers demand more steps by Greece and a parliamentary seal of approval before providing aid under the new bailout.
Greece’s debt crisis of 2010 was triggered by high budget deficits that reached 13.6% of GDP – 4
times the amount allowed by the EU – and high national debt levels reaching €300bn, representing
124% of GDP. This high spending, mainly funded by other European counterparts, was done to heighten
the luxurious life of Greeks, causing a furor throughout the region when the Greeks debt crisis
threatened to collapse the entire Eurozone.
Which would mean that if “private sector creditors” have to take a hit, the ECB will have to take the largest hit. For it’s by far the largest holder of Greek bonds, even if it’s not in fact private sector itself.
For what has been happening is that the ECB has been buying bonds in the open markets as a way of reducing the interest rate that Greece must pay on market borrowings. Plus, and here’s where it gets more dangerous, it has been taking Greek bonds as collateral against loans to: well, against loans to people like the Greek banks. Which, if there is a haircut on the bonds, will all go bust immediately. Leaving the ECB with that collateral which is now worth so much less than the loan against it that it will (near, maybe,) wipe out the ECB’s capital.
January 25: Defying private creditors the ECB insists that it will not agree to a writedown of its own Greek debt holdings.
April 12: Greece’s unemployment rate rose to 21.8% in January.
Greece’s public spending excluding interest payments accounted for 32 percent of GDP, while public revenues excluding social security contributions amounted to only 20 percent. This discrepancy is due partly to inefficient tax collection, as well as tax invasion particularly among high-income bracket individuals, resulting in ongoing fiscal deficits.
Greece’s competitiveness is declining relative to its peers in the European Union. A measure of Greece’s competitiveness has decreased by more than 25 percent since becoming an EU member in 2000. The average wage and unit labor cost in Greece were higher than its counterparts in the euro area.