There seemed to be a real possibility that Greece and perhaps others might have to give up the euro. The response included bailout loans, for a total of five countries, and a promise from the European Central Bank that it would, if necessary, buy the government debts of countries in danger of being forced out of the eurozone.
Tassos Smetopoulos and his team of volunteers run a food handout in central Athens. Fifty-four-year-old Fotini, who was laid off three years ago, is one of the few who will speak openly. This proud nation has struggled to accept its loss of dignity. I'm embarrassed that I can't buy my little grandchildren a present. We just want to live comfortably in our own homes so we can look our children in the eyes. Read more from Mark. Those employed often have jobs for which they are overqualified, such as chemistry graduate Panagiota Kalliakmani, Seeing career prospects in her home city of Thessaloniki shattered, she is now finding work as a chef.
Some , Greeks have emigrated in search of work since the crisis began while those depending on state benefits have seen their income whittled away. He can no longer support the families of his two sons and can barely cover his and his wife's needs. This is what I wake up to every morning. Greece emerges from eurozone bailout programme. How did this start? What happened next? What about the people? Are things better?
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Related Topics. Greece Eurozone Greece debt crisis. Published 20 August Published 19 August Published 22 June The economy contracted 0. In March , the Bank of Greece predicted the economy would return to growth by the summer. It only shrank 0. They were reluctant to call in bad debt, believing that their borrowers would repay once the economy improved. That tied up funds they could have lent to new ventures. It planned to use the funds to pay interest on its debt.
Greece continued with austerity measures. It passed legislation to modernize the pension and income tax systems. It promised to privatize more companies, and sell off nonperforming loans.
In May , Tsipras agreed to cut pensions and broaden the tax base. In return, the EU loaned Greece another 86 billion euros. Greece used it to make more debt payments. Tsipras hoped that his conciliatory tone would help him reduce the But the German government wouldn't concede much before its September presidential elections.
In July, Greece was able to issue bonds for the first time since It planned to swap notes issued in the restructuring with the new notes as a move to regain investors' trust. On January 15, , the Greek parliament agreed on new austerity measures to qualify for the next round of bailouts. On January 22, the eurozone finance ministers approved 6 billion to 7 billion euros.
The new measures made it more difficult for unions strikes to paralyze the country. They helped banks reduce bad debt, opened up the energy and pharmacy markets, and recalculated child benefits. On August 20, , the bailout program ended. Most of the outstanding debt is owed to the EU emergency funding entities. These are primarily funded by German banks. Until the debt is repaid, European creditors will informally supervise adherence to existing austerity measures. The deal means that no new measures would be created.
How did Greece and the EU get into this mess in the first place? The seeds were sown back in when Greece adopted the euro as its currency. Greece had been an EU member since but couldn't enter the eurozone. Its budget deficit had been too high for the eurozone's Maastricht Criteria. All went well for the first several years. Like other eurozone countries, Greece benefited from the power of the euro.
It lowered interest rates and brought in investment capital and loans. In , Greece announced it had lied to get around the Maastricht Criteria. The EU imposed no sanctions. Why not? There were three reasons. France and Germany were also spending above the limit at the time.
They'd be hypocritical to sanction Greece until they imposed their own austerity measures first. There was uncertainty on exactly what sanctions to apply. They could expel Greece, but that would be disruptive and weaken the euro. The EU wanted to strengthen the power of the euro in international currency markets.
As a result, Greek debt continued to rise until the crisis erupted in Greece could have abandoned the euro and reinstated the drachma. Without the austerity measures, the Greek government could have hired new workers. Greece could have converted its euro-based debt to drachmas, printed more currency and lowered its euro exchange rate. That would have reduced its debt, lowered the cost of exports, and attracted tourists to a cheaper vacation destination.
At first, that would seem ideal for Greece, but foreign owners of Greek debt would have suffered debilitating losses as the drachma plummeted. That would debase the value of repayments in their own currency. Some banks would go bankrupt. Most of the debt is owned by European governments, whose taxpayers would foot the bill. Plummeting drachma values would have triggered hyperinflation , as the cost of imports skyrocketed. Many companies refused to export these items to a country that might not pay its bills.
The country couldn't attract new foreign direct investment in such an unstable situation. The only countries that would have lent to Greece are Russia and China. While the German economy benefited from increased exports to Greece, banks, including German banks, benefited from Greek borrowing to finance cheap imported German goods and services. As long as borrowing costs remained relatively cheap and the Greek economy was still growing, such issues continued to be ignored. In , U. As capital began to dry up, Greece faced a liquidity crisis , forcing the government to seek bailout funding, which they eventually received with staunch conditions.
Bailouts from the International Monetary Fund and other European creditors were conditional on Greek budget reforms, specifically, spending cuts and higher tax revenues. These austerity measures created a vicious cycle of recession with unemployment reaching These measures, applied amidst the worst financial crisis since the Great Depression , proved to be one of the largest factors attributing to Greece's economic implosion. Austerity measures also created a humanitarian crisis: homelessness increased, suicides hit record highs , and public health significantly deteriorated.
While Greece had structural issues in the form of corrupt tax evasion practices, Eurozone membership allowed the country to hide from these problems for a time but ultimately created an economic straitjacket and an insurmountable debt crisis evidenced by the country's massive default. International Markets. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile.
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