Backgrounder: Greece's debt crisis

16:14, May 13, 2010      

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The following are the major events that occurred in connection with the ongoing debt crisis in Greece:

Oct. 20, 2009: The Greek government conceded that the country's deficit continued to surge, exceeding 12 percent of its gross domestic product (GDP) in 2009, well beyond the EU deficit ceiling of three percent of GDP.

The Greek debt crisis then unfolded after the subsequent downgrading of Greece's sovereign credit rating by the world's three major rating agencies.

In the first two months of 2010, the Greek government unveiled a series of austerity measures aimed at cutting the country's soaring public debt, which, however, produced little effect.

Feb. 9, 2010: Germany considered a plan with its EU partners to offer Greece and other troubled eurozone members loan guarantees in an effort to prevent the spread of the Greek debt crisis.

Feb. 15, 2010: The EU finance ministers said they would give Greece a month to show that it can make substantial progress in cutting its staggering budget deficit.

Feb. 23, 2010: The debt-stricken Greek economy suffered a new blow as the country's four biggest banks were downgraded to the lowest investment status by Fitch rating agency.

March 3, 2010: Greece announced its package of austerity measures, which include cuts in salaries, freezing pensions and raising taxes to help save the country up to 4.8 billion euros (6.5 billion U.S. dollars).

March 25, 2010: EU leaders agreed on a eurozone and International Monetary Fund (IMF) bailout plan for debt-ridden Greece.

April 27, 2010: Rating agency Standard and Poor's slashed Greek debt by three notches to BB+, the highest junk-level rating as the ratings agency said medium-term financing risks related to the government's high debt burden are growing despite the government's already sizable fiscal consolidation plans.

May 2, 2010: EU leaders agreed to activate the aid package for Greece, offering along with the IMF 110 billion euros (about 146 billion U.S. dollars) to the country in the next three years.

For their part, the euro area members would contribute 80 billion euros(105.6 billion dollars), while the IMF would provide 30 billion euros (39.6 billion dollars).

In turn, Athens announced further spending cuts and tax increases totaling 30 billion euros (39.6 billion dollars) over three years, promising to slash its budget deficit to the EU limit of three percent of GDP by 2014 from 13.6 percent last year.

May 4, 2010: Stock markets in the United States and Europe plummeted, and the euro fell to a record low in 12 months against the dollar.

May 5, 2010: An estimated 100,000 workers took to the streets during a nationwide strike against the government's new harsh austerity measures. At least three workers were killed and five others injured during the strike.

May 10, 2010: EU finance ministers agreed on an unprecedented rescue mechanism worth up to 750 billion euros (956 billion U.S. dollars) to prevent the spread of the Greek debt crisis and restore confidence in financial markets.

Under the three-year Special Purpose Vehicle, the largest bulk of the 750 billion euros, or 440 billion euros (560 billion U.S. dollars), would come from bilateral loans from the 16 eurozone countries.

The European Commission would raise 60 billion euros (76.5 billion U.S. dollars) from financial markets on behalf of the EU. The IMF is expected to provide at least half of the EU contribution, or 250 billion euros (318.6 billion U.S. dollars).

May 12, 2010: The European Commission called for tough and even unpopular reforms to reinvent the continent's economic and social model to avoid a scenario similar to the Greek debt crisis.



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