The Greek Debt Crisis

APR 23 2010 · 12:00

Demonstrators fill Syntagma Square in Athens during the anti-austerity Aganaktismenoi movement, 2011, at the height of the Greek bailout crisis. Place: Athens (formal request); Brussels and Frankfurt (subsequent decisions) Figures: George Papandreou, Greek Prime Minister · Wolfgang Schäuble, German Finance Minister · Jean-Claude Trichet, then Mario Draghi, ECB Presidents · Yanis Varoufakis, Greek Finance Minister (2015) · Alexis Tsipras, Greek Prime Minister (2015) The Request On 23 April 2010, from the island of Kastellorizo, George Papandreou formally requests financial assistance from the European Union and the International Monetary Fund. Greek ten-year yields have crossed 9 percent. The previous October's revised deficit number (12.7 percent of GDP, twice what the prior government had reported) has revealed that the country has been borrowing on terms its books cannot support. The first sovereign-debt crisis inside the eurozone has begun. The structural diagnosis is immediate and uncontested among economists: a monetary union without fiscal union cannot survive a major asymmetric shock without either fiscal transfers or exit. Greece can no longer devalue (it does not have its own currency), cannot inflate (the ECB sets policy for Germany too), and cannot grow its way out at the speeds required. What it can do is borrow from the so-called Troika (European Commission, ECB, IMF) on terms that mandate austerity. Five Governments and the German Floor The crisis runs to 2018. Three bailout programs total roughly €289 billion. Five Greek governments fall. Unemployment peaks at 27.5 percent in 2013. The Tsipras-Varoufakis government wins a 5 July 2015 referendum to reject Troika conditions with 61 percent όχι, then accepts harsher conditions a week later under the threat of euro exit. The Eurogroup confirms, by the manner of its negotiation, that pooled sovereignty has a German floor: there is a member-state whose preferences the union will not override. Greece does not exit. The eurozone holds. But the price has been paid in two coins: the Greek standard of living (which by 2018 has fallen roughly 25 percent from the 2008 peak), and the European public's confidence that the monetary union belongs to all its members equally. Both currencies devalue further over the remainder of the decade. (See [[brexit-vote-2016]] for the political aftershock.) Video: Al Jazeera English Inside Story panel on the Greek bailout programme, the austerity terms imposed by the Troika, and the political crisis they triggered.