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Greece debt crisis: 7 years old and not over

Greek Finance Minister Tsakalotos talks to European Commissioner Moscovici during a eurozone finance ministers meeting in Brussels Photograph: (Reuters)

AFP Attica, Greece Feb 20, 2017, 06.26 PM (IST)

In the latest episode of its seven-year debt crisis, Greece on Monday agreed to compromise on new bailout reforms in a bid to break a deadlock between its eurozone and IMF creditors.

Europe and the Washington-based International Monetary Fund have been at loggerheads for months over whether Greece can meet budget targets, sparking fears of a new "Grexit" crisis. 

Here are the main points in Greece's financial troubles:

A year-and-a-half after the 2008 banking crisis, the Greek public deficit is revised sharply upwards to 15 per cent, causing Greek debt ratings to worsen. In April 2010, the country is excluded from capital markets and in danger of defaulting.

The term "Grexit" begins to circulate. Faced with the risk of the euro collapsing, the eurozone club of 19 countries resolves to help Greece by accepting the participation of the IMF in the rescue plan.

In May 2010, Greece becomes the first country in the eurozone to receive an international aid loan, of 110 billion euros, at the price of strict austerity. Athens is shaken by violent demonstrations.

In 2011, the country's economic situation deteriorates, debt continues to swell and recession sets in. 

In 2012, the eurozone and the IMF grant a second loan of 130 billion euros, and the debt of banks and insurance companies is restructured in the spring: 107 billion euros out of 206 are erased.

The demonstrations continue. The country is plunged into the deepest depression of its recent history.

A coalition of right-wingers and socialists is formed in June 2012. In the face of calls for more austerity from its creditors, especially from Germany, the Greek government tries to resist.

Poul Thomsen, then the IMF representative in Greece, confesses in 2012 to "errors" in the two bailouts.

An IMF report in 2013 says the impact of austerity on rising unemployment and falling consumption has been underestimated. A restructuring of public debt is the suggested solution, but the eurozone, especially Germany, does not want to hear about it.

In April 2014, Greece is able to tap into the markets briefly and successfully.

But in early 2015, leftist Prime Minister Alexis Tsipras comes to power on an anti-austerity platform.

After months of harsh discussions, creditors threaten to cut off loans and the country misses a payment deadline to the IMF at the end of June.

Despite a referendum in early July confirming Greek opposition to the demands of creditors, Tsipras signs a third loan of 86 billion euros over three years.

The IMF is reluctant to participate. Athens must accept new cuts in public spending, tax increases and social security reforms.

In May 2016, the first review of the third loan gets the green light from Brussels against the backdrop of a slightly improving Greek economy, but negotiations over the second review run into disagreements between European and IMF experts. 

An IMF report in January 2017 warns that Greece's debt "is highly unsustainable" and "will become explosive in the long run" without significant debt relief, which Europe is reluctant to provide.

The IMF disputes that Greece can reach the positive targets forecast by Europe without further reforms, leaving Athens caught between its creditors.

"People have learnt to live on autopilot," says Christos Tsougaris, a renewable energy entrepreneur in Athens.A meeting in Brussels on Monday appears to show progress towards ending the standoff.

Greek Finance Minister Euclid Tsakalotos approves reforms that will be automatically triggered if Athens fails to meet budget targets, according to European sources.

Officials representing the lenders are due to return to Athens shortly for talks on new measures.


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