|
==Timeline==
In the early–mid-2000s, Greece's economy was strong and the government took advantage by running a large deficit, partly due to high defence spending amid [[Greek–Turkish relations|historic enmity to Turkey]]. As the world economy cooled in the late 2000s, Greece was hit especially hard because its main industries—[[Greek Merchant Navy|shipping]] and [[tourism in Greece|tourism]]—were especially sensitive to changes in the business cycle. As a result, the country's debt began to pile up rapidly. In early 2010, as concerns about Greece's national debt grew, policy makers{{who|date=June 2015}} suggested that emergency bailouts might be necessary.
===Possible default or restructuring===
{{Further|Sovereign default}}
<div style="float: right; clear:right;">{{Greek governmental bonds 2 years graph}}
Without a [[bailout]] agreement, there was a possibility that Greece would prefer to [[Sovereign default|default]] on some of its debt. The premiums on Greek debt had risen to a level that reflected a high chance of a default or restructuring. Analysts gave a wide range of default probabilities, estimating a 25% to 90% chance of a default or restructuring.<ref>{{cite web|title='De-facto' Greek default 80% sure: Global Insight – MarketWatch |url=http://www.marketwatch.com/story/de-facto-greek-default-80-sure-global-insight-2010-04-28 |publisher=MarketWatch |date=28 April 2010 |accessdate =2 May 2010 }}</ref><ref>{{cite web|title=Government Debt Issuers Most Likely to Default|url =http://www.cnbc.com/id/34465366/Government_Debt_Issuers_Most_Likely_to_Default?slide=3 |page=3|publisher=CNBC |date=1 March 2010 }}</ref>
A default would most likely have taken the form of a restructuring where Greece would pay creditors, which include the up to €110 billion 2010 Greece bailout participants i.e. Eurozone governments and IMF, only a portion of what they were owed, perhaps 50 or 25 percent.<ref>{{cite news|title=Greece Turning Viral Sparks Search for EU Solutions (Update2) |url=http://www.bloomberg.com/apps/news?pid=20601010&sid=aCW0uYHW707A |publisher=Bloomberg |date=29 April 2010 |accessdate=2 May 2010 |first=Simon |last=Kennedy}}
</ref> It has been claimed that this could destabilise the [[Euro Interbank Offered Rate]], which is backed by government securities.<ref>{{cite news|url=http://blogs.reuters.com/felix-salmon/2010/04/28/roubini-on-greece/ |title=Roubini on Greece |publisher=Reuters |author=Felix Salmon |date=27 April 2010 |accessdate=5 May 2010}}</ref>
Some experts have nonetheless argued that the best option at this stage for Greece is to engineer an “orderly [[default (finance)|default]]” on Greece’s public debt which would allow the country to withdraw simultaneously from the Eurozone and reintroduce a national currency, such as its historical [[drachma]], at a debased rate<ref name="ReferenceB">M. Nicolas J. Firzli, "Greece and the Roots the EU Debt Crisis" ''The Vienna Review'', March 2010</ref> (essentially, coining money). Economists who favor this approach to solve the Greek debt crisis typically argue that a delay in organising an orderly default would wind up hurting EU lenders and neighbouring European countries even more.<ref>Louise Armitstead, "EU accused of 'head in sand' attitude to Greek debt crisis" ''The Telegraph'', 23 June 2011</ref>
At the moment, because Greece is a member of the eurozone, it cannot unilaterally stimulate its economy with monetary policy, as has happened with other economic zones, for example the U.S. Federal Reserve expanding its balance sheet over {{Nowrap|$1.3 trillion}} since the global financial crisis began, temporarily creating new money and injecting it into the system by purchasing outstanding debt.<ref>{{cite news | url=http://www.reuters.com/article/idUSTRE60D5WK20100114 |agency=Reuters | first=Burton | last=Frierson | title=Fed's balance sheet liabilities hit record | date=14 January 2010}}</ref>
===Downgrading of creditworthiness (December 2009 – April 2010)===
On 23 April 2010, the Greek government requested an EU/IMF bailout package to be activated, providing them with a loan of {{Nowrap|€45 billion}} to cover their financial needs for the remaining part of 2010.<ref>{{Cite journal|title=Greek Bailout Talks Could Take Three Weeks|publisher=Bloomberg L.P.|url=http://www.businessweek.com/news/2010-04-20/greek-bailout-talks-could-take-three-weeks-bond-payment-looms.html|date=20 April 2012}} {{dead link|date=February 2012}}</ref><ref>{{Cite news|title=Greece Seeks Activation of €45bn EU/IMF Aid Package|work=The Irish Times |url=http://www.irishtimes.com/newspaper/breaking/2010/0423/breaking28.html |date=4 April 2010|deadurl=yes}} {{Dead link|date=April 2014|bot=RjwilmsiBot}}</ref> [[Standard & Poor's]] slashed Greece's sovereign debt rating on 27 April to BB+ amidst hints of [[Default (finance)|default]] by the Greek government,<ref name=nyt04282010>{{cite news |url = http://www.nytimes.com/2010/04/28/business/global/28drachma.html |work=The New York Times |first1=Jack |last1=Ewing |title=Cuts to Debt Rating Stir Anxiety in Europe |date=27 April 2010}}</ref><ref>{{cite news|url=http://www.theaustralian.com.au/business/markets/sp-downgrades-greek-debt-to-junk/story-e6frg91o-1225859110788|title=S&P downgrades Greek debt to junk|author=Katie Martin and Terence Roth|publisher=Dow Jones Newswires|date=28 April 2010|accessdate=6 May 2010}}</ref> in which case investors were thought to lose 30–50% of their money.<ref name=nyt04282010 /> [[Stock market]]s worldwide and the Euro currency declined in response to this announcement.<ref>{{cite news|url=http://news.bbc.co.uk/2/hi/business/8647441.stm|title=Greek bonds rated 'junk' by Standard & Poor's|publisher=BBC |date=27 April 2010|accessdate=6 May 2010}}</ref>
Yields on Greek government two-year bonds rose to 15.3% following the downgrading.<ref>{{cite news |publisher=BBC News |title=Greek credit status downgraded to 'junk' |url=http://news.bbc.co.uk/2/hi/business/8647903.stm |date=27 April 2010|accessdate=2 May 2010}}</ref> Some analysts continue to question Greece's ability to refinance its debt. [[Stock market]]s worldwide declined in response to this announcement.<ref>{{cite news |url=http://news.bbc.co.uk/2/hi/business/8647441.stm |publisher=BBC News |title=Markets hit by Greece junk rating |date=27 April 2010}}</ref>
Following downgrades by Fitch and Moody's, as well as Standard & Poor's,<ref>{{cite news|title=Timeline: Greece's economic crisis|agency=Reuters |url=http://www.reuters.com/article/idUSTRE62230T20100303 |date=3 March 2010|accessdate=2 May 2010}}</ref> Greek bond yields rose in 2010, both in absolute terms and relative to German government bonds.<ref name="ecb-long">{{cite web|title=ECB: Long-term interest rates |url=http://www.ecb.int/stats/money/long/html/index.en.html |accessdate=2 May 2010 }}</ref> Yields have risen, particularly in the wake of successive ratings downgrading. According to ''[[The Wall Street Journal]]'', "with only a handful of bonds changing hands, the meaning of the bond move isn't so clear."<ref>{{cite news|last=Lauricella |first=Tom |url=http://online.wsj.com/article/SB10001424052748704133804575198390974245622.html |title=Investors Desert Greek Bond Market – WSJ.com |work=The Wall Street Journal |date=22 April 2010 |accessdate=5 May 2010}}</ref>
On 3 May 2010, the European Central Bank (ECB) suspended its minimum threshold for Greek debt "until further notice",<ref>{{cite web|url=http://www.businessspectator.com.au/bs.nsf/Article/ECB-suspends-rating-limits-on-Greek-debt-549GS?opendocument&src=rss |title=ECB suspends rating limits on Greek debt , News |publisher=Business Spectator |date=22 October 2007 |accessdate=5 May 2010}}</ref> meaning the bonds will remain eligible as collateral even with junk status. The decision will guarantee Greek banks' access to cheap central bank funding, and analysts said it should also help increase Greek bonds' attractiveness to investors.<ref>{{Cite news|url=http://www.reuters.com/article/idUSLDE6420A920100503 |title=UPDATE 3-ECB will accept even junk-rated Greek bonds |agency=Reuters |date=3 May 2010|accessdate=5 May 2010}}</ref> Following the introduction of these measures the yield on Greek 10-year bonds fell to 8.5%, 550 [[basis points]] above German yields, down from 800 basis points earlier.<ref>{{cite news|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aTTlZki30xTI&pos=3 |title=Trichet May Rewrite ECB Rule Book to Tame Greek Risk (Update2) |publisher=Bloomberg |date=30 May 2005 |accessdate=5 May 2010 |first=Simon |last=Kennedy}}</ref> As of 22 September 2011, Greek 10-year bonds were trading at an effective yield of 23.6%, more than double the amount of the year before.<ref>{{cite news|url=http://www.bloomberg.com/apps/quote?ticker=GGGB10YR:IND |title=Greece 10 Year (GGGB10YR:IND) Index Performance |publisher=Bloomberg |accessdate=23 September 2011}}</ref>
===First Economic Adjustment Programme for Greece (May 2010 – June 2011)===
{{main|First Economic Adjustment Programme for Greece}}
{{Sync|First Economic Adjustment Programme for Greece|date=December 2014}}
On 1 May 2010, the Greek government announced a series of austerity measures<ref>{{cite news|url= http://www.in.gr/news/article.asp?lngEntityID=1132263|title=Fourth raft of new measures|publisher=In.gr|date=2 May 2010|accessdate=6 May 2010|language=el}}</ref> to persuade Germany, the last remaining holdout, to sign on to a larger EU/IMF loan package.<ref name="NY Times protest">{{cite news|title=Three Reported Killed in Greek Protests|author=Dan Bilefsky|author=Judy Dempsey|date=5 May 2010|work=The New York Times|url=http://www.nytimes.com/2010/05/06/world/europe/06greece.html?src=me|accessdate=5 May 2010}}</ref> The next day the eurozone countries and the International Monetary Fund agreed to a three-year {{Nowrap|€110 billion}} loan (see below) retaining relatively high interest rates of 5.5%,<ref>{{cite web|title=Revisiting Greece |work=The Observer at Boston College |url=http://www.thebcobserver.com/2011/11/02/revisiting-greece/ | date=2 November 2011}}</ref> conditional on the implementation of austerity measures. Credit rating agencies immediately downgraded Greek governmental bonds to an even lower junk status.
This was followed by an announcement of the ECB on 3 May that it will still accept as collateral all outstanding and new debt instruments issued or guaranteed by the Greek government, regardless of the nation's credit rating, in order to maintain banks' liquidity.<ref name="Polya Lesova 2010">{{cite web|last=Lesova|first=Polya|title=ECB suspends rating threshold for Greece debt instruments|url=http://www.marketwatch.com/story/ecb-suspends-rating-threshold-for-greek-debt-2010-05-03-3400|work=MarketWatch|accessdate=5 May 2010|date=3 May 2010}}</ref>
The [[Third austerity package (Greece)|new austerity package]] was met with great anger by the Greek public, leading to [[May 2010 Greek protests|massive protests]], riots and social unrest throughout Greece. On 5 May 2010, a national strike was held in opposition to the planned spending cuts and tax increases. In Athens some protests turned violent, killing three people.<ref name="NY Times protest" />
[[File:2011 Greece Uprising.jpg|thumb|100,000 people protest against the austerity measures in front of parliament building in Athens (29 May 2011).]]
[[File:George Papandreou and Jose Manuel Barroso.jpg|thumb|upright|Former Prime Minister [[George Papandreou]] and European Commission President [[José Manuel Barroso]] after their meeting in Brussels on 20 June 2011.]]
[[File:Lucas Papademos - Plenary Hall, Parliament 16 November 2011 (6).jpg|thumb|Interim prime minister Lucas Papademos defends the austerity measures in parliament (November 2011).]]
Still the situation did not improve. It was originally hoped that Greece’s first adjustment plan together with the {{Nowrap|€110 billion}} support package would reestablish Greek access to private capital markets by the end of 2012. However it was soon found that this process would take much longer.
The November 2010 revisions of 2009 deficit and debt levels made the 2010 targets even harder to reach, and indications signaled a recession harsher than forecast.<ref>{{cite news|last=Skrekas|first=Nick|url=http://online.wsj.com/article/SB10001424052748703453804575479162284898390.html|title=Greek GDP Revised Down|work=Wall Street Journal|date=8 September 2010|accessdate=19 May 2011}}</ref> In May 2011 it became evident that due to the severe economic crisis tax revenues were lower than expected, making it even harder for Greece to meet its fiscal goals.<ref>{{cite news |url=http://www.theguardian.com/business/2011/jun/19/greek-debt-crisis-eurozone-ministers?intcmp=239 |title=Greek debt crisis: eurozone ministers meet amid deepening gloom |work=The Guardian |date=19 June 2011 |accessdate=24 October 2011 |first=Ian |last=Traynor |location=London}}</ref>
After the findings of a bilateral EU-IMF audit in June, which called for further austerity measures, Standard and Poor's downgraded Greece's sovereign debt rating to CCC, the lowest in the world.<ref>{{cite web|url=http://news.ph.msn.com/business/article.aspx?cp-documentid=4903548|title=Athens concludes EU-IMF audit: finance ministry|publisher=msn.net|date=3 June 2011|accessdate=16 June 2011}}{{dead link|date=May 2012}}</ref> The major political parties failed to reach consensus on the necessary measures to qualify for a further bailout package, and amidst riots and a general strike, Prime Minister [[George Papandreou]] proposed a re-shuffled cabinet, and a vote of confidence in the parliament.<ref>{{cite web|url=http://english.aljazeera.net/news/europe/2011/06/201161655151693509.html|title=Global markets shaken by Greek debt crisis|publisher=Al Jazeera English|accessdate=16 June 2011}}</ref><ref>{{cite news|url=http://www.dailymail.co.uk/news/article-2003709/Athens-riots-Police-tear-gas-protesters-hurl-Greek-yoghurt.html|title=After the battle of Athens: Greek PM reshuffles government in desperate bid to force through austerity measures|work=Daily Mail |location=UK|date=16 June 2011|accessdate=16 June 2011|first=Wil|last=Longbottom}}</ref>
The crisis sent ripples around the world and major stock exchanges absorbed losses.<ref>{{cite news|url=http://www.reuters.com/article/2011/06/15/us-markets-stocks-idUSTRE75512M20110615|title=Greek debt fears sink Wall Street, more losses eyed|publisher=Reuters|date=16 June 2011|accessdate=16 June 2011}}</ref> To ensure the release of the next 12 billion euros from the eurozone bail-out package (without which Greece would have had to default on loan repayments in mid-July), the government proposed additional spending cuts worth {{Nowrap|€28 billion}} over five years.<ref>{{cite news |url=http://www.bbc.co.uk/news/world-europe-13886099 |title=EU leaders pledge to do what is needed to help Greece |publisher=BBC News |date=23 June 2011 |accessdate=24 October 2011}}</ref>
On 27 June 2011 the trade unions began a forty-eight hour labor strike intended to force parliament members into voting against the [[Fourth austerity package (Greece)|austerity package]]; the first such strike in Greece since 1974. One [[United Nations]] official cautioned that the next planned package with new extra austerity measures in Greece could potentially pose a violation of [[human rights]], if it was implemented without careful consideration to the peoples need for "food, water, adequate housing and work under fair and equitable conditions".<ref name="UN human rights">{{cite news |title=Greek austerity measures could violate human rights, UN expert says |url=http://www.un.org/apps/news/story.asp?NewsID=38901 |accessdate=11 November 2013 |publisher=[[United Nations|UN News Centre]] |date=30 June 2011}}</ref> Nevertheless, the new extra fourth package with austerity measures was approved on 29 June 2011, with 155 out of 300 members of parliament voting in favour.
===Second Economic Adjustment Programme for Greece (July 2011 – present)===
{{main|Second Economic Adjustment Programme for Greece}}
{{Move portions|Second Economic Adjustment Programme for Greece|section=y|date=December 2014}}
[[European sovereign debt crisis#EU emergency measures|EU emergency measures]] continued at an extraordinary summit on 21 July 2011 in Brussels, where euro area leaders agreed to extend Greek (as well as Irish and Portuguese) loan repayment periods from 7 years to a minimum of 15 years and to cut interest rates to 3.5%.
They also approved the construction of a new {{Nowrap|€109 billion}} support package, of which the exact content was to be debated and agreed on at a later summit, although it was already certain to include a demand for large privatisation efforts.<ref name="autogenerated1">[http://www.european-council.europa.eu/home-page/highlights/a-common-response-to-the-crisis-situation.aspx?lang=en "A common response to the crisis situation"], European Council webpage.</ref> In the early hours of 27 October 2011, eurozone leaders and the IMF also came to an agreement with banks to accept a 50% write-off of (some part of) Greek debt,<ref name="Skai 50">{{cite web|url=http://www.skai.gr/news/politics/article/184567/kourema-50-tou-ellinikou-hreous/ |title="Κούρεμα" 50% του ελληνικού χρέους" |publisher=[[Skai TV]] |date=27 October 2011|accessdate=27 October 2011}}</ref><ref name="BBC 50">{{cite news|url=http://www.bbc.co.uk/news/world-europe-15478358 |title=Barroso: Europe 'closer to resolving eurozone crisis' |publisher=[[BBC]] |date=27 October 2011|accessdate=27 October 2011}}</ref><ref name="Bloomberg 50">{{cite news|url=http://www.bloomberg.com/news/2011-10-27/papandreou-says-new-funding-gives-greece-time-new-prospects.html |title=Papandreou: EU Deal Gives Greeks Time |publisher=[[Bloomberg L.P.|Bloomberg]] |date=27 October 2011|accessdate=27 October 2011 |first1=Maria |last1=Petrakis |first2=Natalie |last2=Weeks}}</ref> the equivalent of {{Nowrap|€100 billion}},<ref name="Skai 50"/> to reduce the country's debt level from €340bn to €240bn or 120% of GDP by 2020.<ref name="Skai 50" /><ref name="Euro Summit Statement">{{cite web|url=http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/125644.pdf |title=Euro Summit Statement |work=[[Council of the European Union]] |date=26 October 2011 |accessdate=28 October 2011}}</ref><ref name="Main results of Euro Summit">{{cite web|url=http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/125645.pdf |title=Main results of Euro Summit |work=Council of the European Union |date=26 October 2011 |accessdate=28 October 2011}}</ref><ref name="bbc-2012-02-09">{{cite news |url=http://www.bbc.co.uk/news/business-13798000 |title=Q&A: Greek debt crisis |publisher=BBC News |date=9 February 2012 |accessdate=11 February 2012}}</ref>
On 7 December 2011, the new interim [[National unity government|national union government]] led by [[Lucas Papademos]] submitted its plans for the 2012 budget, promising to cut its deficit from 9% of GDP 2011 to 5.4% in 2012, mostly due to the write-off of debt held by banks. Excluding interest payments, Greece even expects a primary surplus in 2012 of 1.1%.<ref>{{cite news|url=http://www.bbc.co.uk/news/business-15791008 |title=Greek budget will 'cut deficit' by 2012 |publisher=[[BBC News]] |date=7 December 2012 |accessdate=7 December 2012}}</ref> The austerity measures have helped Greece bring down its ''primary deficit before interest payments'', from €25bn (11% of GDP) in 2009 to €5bn (2.4% of GDP) in 2011,<ref name="IMF-2012">{{cite news |url=http://www.theguardian.com/business/2012/feb/01/imf-austerity-harming-greeve |title=IMF official admits: austerity is harming Greece |work=The Guardian |date=1 February 2012 |accessdate=1 February 2012 |first=Helena |last=Smith |location=Athens}}</ref><ref name="SZ-staat-neu">{{cite news |url=http://www.sueddeutsche.de/wirtschaft/sparpaket-in-griechenland-der-ganze-staat-soll-neu-gegruendet-werden-1.1282482 |title=Der ganze Staat soll neu gegründet werden |publisher=Sueddeutsche |date=13 February 2012 |accessdate=13 February 2012}}</ref> but as a side-effect they also contributed to a worsening of the Greek recession, which began in 2008 and only became worse in 2010 and 2011.<ref name="National Accounts">{{cite web|title=Quarterly National Accounts: 4th Quarter 2011 (Provisional)|url=http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A0704/PressReleases/A0704_SEL84_DT_QQ_04_2011_01_P_EN.pdf|publisher=Hellenic Statistical Authority|accessdate=9 March 2012|date=9 March 2012}}</ref>
Overall the Greek GDP had its worst decline in 2011 with −7.1% <ref>{{cite web|title=Real GDP Growth Rate|url=http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tec00115|publisher=Eurostat|accessdate=26 May 2013}}</ref> a year where the seasonal adjusted industrial output ended 28.4% lower than in 2005,<ref name="Eurostat -industrial production 2011">{{cite news |url=http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-14022012-AP/EN/4-14022012-AP-EN.PDF |title=Eurostat Newsrelease 24/2012: Industrial production down by 1.1% in euro area in December 2011 compared with November 2011|work=Eurostat |date=14 February 2012 |accessdate=5 March 2012}}</ref><ref name="guardian-block20">{{cite news |url=http://www.theguardian.com/business/2012/feb/14/eurozone-crisis-live-uk-credit-rating-moodys-downgrade#block-20 |title=Eurozone debt crisis live: UK credit rating under threat amid Moody's downgrade blitz |publisher=Guardian |date=14 February 2012 |accessdate=14 February 2012 |location=London |first1=Graeme |last1=Wearden |first2=Juliette |last2=Garside}}</ref> and with 111,000 Greek companies going bankrupt (27% higher than in 2010).<ref name="Companies going bankrupt in 2011">{{cite news |url=http://www.sueddeutsche.de/wirtschaft/schuldenkrise-pleitewelle-rollt-durch-suedeuropa-1.1277487 |title=Pleitewelle rollt durch Südeuropa |work=Sueddeutsche Zeitung |date=7 February 2012 |accessdate=9 February 2012}}</ref><ref name="Drop in budget revenues">{{cite news |url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_25206_07/02/2012_426623 |title=Dramatic drop in budget revenues |work=Ekathimerini |date=7 February 2012 |accessdate=16 February 2012 |first=Prokopis |last=Hatzinikolaou}}</ref> As a result, the seasonally adjusted unemployment rate also grew from 7.5% in September 2008 to a, at the time, record high of 19.9% in November 2011, while the youth unemployment rate during the same time rose from 22.0% to as high as 48.1%.;<ref name="Eurostat-unemployment">{{cite news |url=http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-01032012-AP/EN/3-01032012-AP-EN.PDF |title=Eurostat Newsrelease 31/2012: Euro area unemployment rate at 10.7% in January 2012|work=Eurostat |date=1 March 2012 |accessdate=5 March 2012}}</ref><ref name="google-unemployment-data">{{cite news |url=http://www.google.com/publicdata/explore?ds=z8o7pt6rd5uqa6_&ctype=l&strail=false&bcs=d&nselm=h&met_y=unemployment_rate&fdim_y=seasonality:sa&scale_y=lin&ind_y=false&rdim=country_group&idim=country_group:eu:non-eu&idim=country:de:gr:es&ifdim=country_group&tstart=410482800000&tend=1322953200000&hl=en&dl=en |title=Seasonally adjusted unemployment rate |work=Google/Eurostat |date=10 November 2011 |accessdate=7 February 2012}}</ref> since then both rates have kept rising with seasonally adjusted unemployment rate and youth unemployment rate reaching respectively 25.1% in July 2012 and 55% in June 2012 setting new record high values.<ref name="YouthUnemploymentMaxBasedOnELSTAT">{{cite web|title=Labour Force Survey: June 2012|url=http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A0101/PressReleases/A0101_SJO02_DT_MM_06_2012_01_F_EN.pdf|publisher=Hellenic Statistical Authority|accessdate=6 September 2012|location=Piraeus|format=PDF|date=6 September 2012}}</ref>
<ref name="unemployment">{{cite web|title=Labour Force Survey: July 2012|url=http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A0101/PressReleases/A0101_SJO02_DT_MM_07_2012_01_F_EN.pdf|publisher=Hellenic Statistical Authority|accessdate=12 October 2012|location=Piraeus|format=PDF|date=11 September 2012}}</ref>
In February 2012, an IMF official negotiating Greek austerity measures, admitted the so-far implemented measures were harming Greece in the short term, and cautioned that although further spending cuts were certainly still needed, it was important the fiscal consolidation was not implemented with an excessive pace, as time should now also be given for the implemented economic reforms to start to work.<ref name="IMF-2012"/>
Some of the economic experts had argued in June 2010 that the best option for both Greece and the EU would be to engineer an [[Default (finance)#Orderly defaults|orderly default]] on Greece’s public debt, and by the same time force Greece to withdraw from the eurozone, with a reintroduction of its national currency the [[drachma]] at a debased rate. The argument for the latter part of this radical approach, was that Greece also strongly needed to improve its competitiveness in order to reestablish positive growth rates, and a reintroduction of the old drachma would enable Greece to return using the [[devaluation]] tool as a mean for that.<ref name="ReferenceB"/><ref name="Roubini-orderly-default">{{cite web|url=http://www.ft.com/cms/s/0/a3874e80-82e8-11df-8b15-00144feabdc0.html#axzz1YqwjSbNl|author=Nouriel Roubini|title=Greece’s best option is an orderly default|work=Financial Times|date=28 June 2010|accessdate=24 September 2011}}</ref>
In June 2011, a majority of the economists indeed agreed to recommend an orderly default straight away, as it was predicted to be unavoidable for Greece at the long term, and that a delay in organising an orderly default (by lending Greece more money throughout a few more years) would simply end up hurting EU lenders and neighboring European countries even more.<ref name="telegraph-head-in-sand">{{cite news|url=http://www.telegraph.co.uk/finance/financialcrisis/8594698/EU-accused-of-head-in-sand-attitude-to-Greek-debt-crisis.html|author=Louise Armitstead|title=EU accused of 'head in sand' attitude to Greek debt crisis|work=The Telegraph|date=23 June 2011|accessdate=24 September 2011|location=London}}</ref>
However, if Greece were to leave the euro, the economic and political impact would be devastating. According to Japanese financial company [[Nomura Holdings|Nomura]] an exit would lead to a 60 percent [[devaluation]] of the new drachma. [[UBS]] warned of "[[hyperinflation]], military [[coup]]s and possible [[civil war]] that could afflict a departing country".<ref name="NYT-Greece">{{cite news |url=http://topics.nytimes.com/top/news/international/countriesandterritories/greece/index.html |title=Greece |publisher=New York Times |date=22 January 2012 |accessdate=23 January 2012 |first=Niki |last=Kitsantonis}}</ref><ref>{{cite news |url=https://www.nytimes.com/2011/12/13/business/global/a-greek-what-if-draws-concern-dropping-the-euro.html?_r=1&hp |title=Pondering a Dire Day: Leaving the Euro |publisher=New York Times |date=12 December 2011 |accessdate=23 January 2012}}</ref> A confidential staff note drawn up in February 2012 by the [[Institute of International Finance]], also revealed that they now favoured an orderly default with a continued Greek membership of the Euro, as the opposite scenario was expected to create losses of at least {{Nowrap|€1 trillion}}.<ref name="IIF-default-report">{{cite news |url=http://www.athensnews.gr/portal/11/53784 |title=Full text of IIF default report |work=Athens News |date=5 March 2012 |accessdate=5 March 2012}}</ref>
To avoid a chaotic Greek disorderly default or the systemic risks to the Eurozone in the scenario with Greece leaving the Euro, the EU leaders decided in October 2011, to engineer and offer an [[Default (finance)#Orderly defaults|orderly default]] combined with a €130bn bailout loan, making it possible for Greece to continue as a full member of the Euro. The offered orderly default and bailout loan, was however conditional, that Greece at the same time approved a [[Fifth austerity package (Greece)|new austerity package]].<ref name="bbc-2012-02-09"/>
====Meeting requirements for activation of the second bailout loan====
On 12 February 2012, amid riots in Athens and other cities that left stores looted and burned and more than 120 people injured, the Greek parliament approved the new austerity package, with a 199–74 majority. Forty-three lawmakers from the ruling Socialist [[Panhellenic Socialist Movement|PASOK]] and conservative [[New Democracy (Greece)|New Democracy]] who voted against the bill were immediately expelled from their parties, reducing the ruling coalitions's majority in the 300-seat parliament from 236 to 193.<ref name="bailout-vote">{{cite news |url=http://www.cbc.ca/news/world/story/2012/02/12/greece-bailout-vote.html |title=Greece passes new austerity deal amid rioting |publisher=CBC News |date=12 February 2012 |accessdate=13 February 2012}}</ref> The vote is now expected to pave the way for the EU, ECB and IMF to jointly release the funds, which are supposed to cover all the Greek financial needs in 2012–2014. According to the bailout plan, Greece should then be stable enough for a full return in 2015, to obtain all its future needs of economic funding from the private capital markets.<ref name="bailout plan and IMFs contribution">{{cite news |url=http://news.outlookindia.com/items.aspx?artid=752315|title=IMF Offering 13 Bn Euros for Greek Bailout Package|publisher=Outlookindia.com |date=21 February 2012 |accessdate=6 March 2012}}</ref>
On 21 February 2012 the [[Euro Group]] finalized the [[second bailout package (Greece)]] (see below), which was extended from €109 billion to €130 billion. In a marathon meeting in Brussels private holders of governmental bonds accepted a slightly bigger [[Haircut (finance)|haircut]] of 53.5%<ref name="second-bailout-agreement">{{cite news |url=http://consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/128075.pdf |title=Eurogroup statement |accessdate=21 February 2012 |publisher=Euro Group |date=21 February 2012}}</ref> Creditors are invited to swap their Greek bonds into new 3.65% bonds with a maturity of 30 years, thus facilitating a €110bn debt reduction for Greece, if all private bondholders accept the swap.<ref name="SZ-Rettungspaket">{{cite news |url=http://www.sueddeutsche.de/wirtschaft/geld-fuer-griechenland-freigegeben-das-rettungspaket-kommt-die-zweifel-bleiben-1.1289418 |title=Das Rettungspaket kommt, die Zweifel bleiben |publisher=Sueddeutsche |date=21 February 2012 |accessdate=21 February 2012}}</ref>
EU Member States agreed to an additional retroactive lowering of the bailout interest rates. Furthermore, they will pass on to Greece all profits that their central banks made by buying Greek bonds at a debased rate until 2020. Altogether this is expected to bring down Greece's unsustainable debt level from a forecast 198% in 2012,<ref name="EC draft"/> to a more sustainable level of 117% of GDP in 2020,<ref>{{cite news |url=http://www.sueddeutsche.de/wirtschaft/folgen-des-reformen-griechenland-spart-sich-auf-schwellenland-niveau-herunter-1.1307351 |title=Griechenland spart sich auf Schwellenland-Niveau herunter |accessdate=13 March 2012 |publisher=[[Süddeutsche Zeitung|Sueddeutsche]] |date=13 March 2012}}</ref> somewhat lower than the originally expected 120.5%.<ref name="second-bailout-agreement"/> The deal is expected to be finalized before 20 March, when Greece needs to repay bonds worth €14.5bn or default on its debts.<ref name="2nd-bailout">{{cite news |url=http://www.theguardian.com/business/2012/feb/21/greece-bailout-key-elements-deal |title=Greece bailout: six key elements of the deal |accessdate=21 February 2012 |publisher=Guardian |date=21 February 2012 |location=London |first=Nils |last=Pratley}}</ref>
On 9 March 2012 a crucial milestone was reached, when it was announced that 85.8% of private holders of Greek government bonds regulated by Greek law (equal to {{nowrap|€152 billion}}), had agreed to the [[debt restructuring]] deal. As this number was above the 66.7% threshold, it enabled the Greek government to activate a [[collective action clause]] (CAC), so that the remaining 14.2% (equal to {{nowrap|€25 billion}}) were also forced to agree. At the same time it was announced that 69.8% of private holders of Greek government bonds regulated by foreign law (equal to {{nowrap|€20 billion}}), also had agreed to the debt restructuring deal.<ref name="Accept percentage for the restructure of Greek debt">{{cite news |url=http://av.r.ftdata.co.uk/files/2012/03/9-MARCH-2012.pdf|format=PDF |title=Hellenic Republic - Ministry of Finance - Press release (9 March)|publisher=Ministry of Finance |date=9 March 2012 |accessdate=9 March 2012}}</ref>
Thus, the total amount of debt to be restructured was now guaranteed to be minimum 95.7% (equal to {{nowrap|€196.7 out of €205.5 billion}}), while the remaining 4.3% of the private holders (equal to {{nowrap|€8.8 billion}}) were offered a prolonged deadline at March 23 to voluntarily join the debt swap.<ref name="Accept percentage for the restructure of Greek debt"/> A deadline that subsequently got prolonged to April 20,<ref name="Extended bond swap deadline">{{cite news |url=http://www.nytimes.com/2012/04/06/business/global/greece-says-97-percent-of-bondholders-agree-to-swap.html |title=97% of Investors Agree to Greek Debt Swap|work=The New York Times |date=5 April 2012 |accessdate=23 April 2012}}</ref><ref name="PSI new deadline">{{cite news |url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_11/04/2012_437583 |title=PSI participation at 96.6 pct |publisher=Ekathimerini |date=11 April 2012 |accessdate=23 April 2012}}</ref> with the positive outcome, that the total and final amount of acceptance rose to 96.9% (equal to €199.1 out of {{nowrap|€205.5 billion}}), corresponding to a haircut or debt relief worth {{nowrap|€106.5 bn}}.<ref name="PSI participation 96.9%">{{cite news |url=http://greece.greekreporter.com/2012/04/25/greece-says-final-participation-in-massive-debt-writedown-reaches-96-9-percent/ |title=Greece Says Final Participation in Massive Debt Writedown Reaches 96.9 Percent |work=Greek Reporter |date=25 April 2012 |accessdate=25 April 2012}}</ref> The Greek government currently discuss, how they shall treat the remaining group of foreign bondholders who opted to refuse the deal, and a final answer is only expected after the [[Greek legislative election, May 2012|May 6 national election]]; but in all circumstances no later than May 15, where the first holdouts are due for a repayment of their maturing bond.<ref name="Bondholders refusing the deal">{{cite news |url=http://online.wsj.com/article/SB10001424052702303990604577365992964156550.html?mod=fox_australian|title=Greek Debt Restructuring Leaves Dissent Question|work=The Wall Street Journal |date=25 April 2012 |accessdate=30 April 2012}}</ref>
After the announcement from Greece, that a minimum of 95.7% of the holders of Greek government bonds would be a part of the scheduled debt swap, the president of the [[Euro Group]] [[Jean-Claude Juncker]] declared, that Greece had now also met the last of the conditions for the next bailout package to be activated.<ref name=bbc-restructuring>{{cite news|url=http://www.bbc.co.uk/news/business-17308804|title=Greece 'meets bailout conditions' after debt swap|date=9 March 2012|publisher=BBC News|accessdate=9 March 2012}}</ref> As the debt swap deal caused significant economic losses to private creditors, [[Fitch Group|Fitch]] downgraded Greece's sovereign debt rating from "C" to "RD" (Restricted Default),<ref>{{cite news|url=http://www.reuters.com/article/2012/03/09/idUSL2E8E97FN20120309|title=Fitch cuts Greece's issuer default ratings to 'RD' |date=9 March 2012|publisher=Reuters|accessdate=9 March 2012}}</ref> and the [[International Swaps and Derivatives Association|ISDA]] declared a [[credit event]], meaning that {{nowrap|€3.5 billion}}<ref>{{cite news|url=http://www.telegraph.co.uk/finance/financialcrisis/9136124/Greece-is-likely-to-need-third-bail-out.html|title=Greece is 'likely to need third bail-out' |last=Gosden|first=Emily|date=10 March 2012|work=Telegraph|accessdate=11 March 2012|location=London}}</ref> worth of [[credit default swap]]s (CDSs) on Greek debt would be triggered.<ref>{{cite news|url=http://www.bloomberg.com/news/2012-03-09/greek-debt-deal-might-trigger-3-billion-of-default-swaps-under-isda-rules.html|title=Greece Deal Triggers $3B in Default Swaps: ISDA|last=Moses|first=Abigail|author2=Childs, Mary |date=9 March 2012|publisher=Bloomberg|accessdate=9 March 2012}}</ref> The deal with a €107 bn debt relief, is the largest government debt restructuring in history.<ref name=bbc-restructuring />
In regards of the debt-to-GDP ratio, the deal slightly improved the numbers from the previously forecast 198% of GDP in 2012<ref name="EC draft"/> to a new forecast at 160.5% of GDP in 2012. The reason for this mediocre improvement, is not only because the restructured debt to private creditors only represented 58% of the total public debt (with no haircut implemented for the remaining 42% being held by public creditors); but also because Greece along with the debt relief, had to set up some new "temporary debt" of €48bn to recapitalize Greek banks (getting financial assets in return with an unknown long-term duration).<ref name="Temporary debt financed through EFSF">{{cite web |url=http://www.efsf.europa.eu/attachments/201203-efsf-newsflash-n02.pdf |title=EFSF funding programme: EFSF’s contribution to Private Sector Involvement (PSI)|publisher=EFSF |date=March 2012|accessdate=30 March 2012}}</ref>
The need for money to recapitalize Greek banks, is not only due to the losses created by the debt restructure, but also because EU as part of the bailout plan requires the banks to raise their core [[tier 1 capital]] ratio to minimum 9% by end-September 2012 and to minimum 10% in June 2013. Despite the fact that the recapitalization is scheduled to happen with a €25bn disbursement in Q2 2012 and a remaining €23bn disbursement in Q1 2013, both disbursements will account-wise be noted as new debt created in 2012.<ref name="Second Economic Adjustment Programme for Greece"/> A temporary €35bn bank guarantee for the restructured debt was also loaned for in March 2012, but this loan was canceled again straight after the bank guarantee had expired in July 2012.<ref name="Lending operations by EFSF">{{cite web |url=http://www.efsf.europa.eu/about/operations/index.htm |title=Lending operations by EFSF|publisher=EFSF |date=3 August 2012|accessdate=11 August 2012}}</ref>
Net reduction of debt will be €58.5bn by the end of 2012 (reducing the debt-to-GDP ratio by 27%-point), with the full €106.5bn (equal to a debt-to-GDP ratio decline of 50%-point) only to take effect some years ahead, if Greece at that point of time succeeds to sell their financial assets used for bank recapitalisation at a 1:1 price to some private financial investors. The €48bn temporary debt established to recapitalize banks, will be fully financed by the new €130bn bailout package.<ref name="Debt restructure facts">{{cite web |url=http://www.social-europe.eu/2012/03/the-mystery-tour-of-restructuring-greek-sovereign-debt/ |title=The Mystery Tour of Restructuring Greek Sovereign Debt |author=Ronald Janssen |date=28 March 2012 |publisher=Social Europe Journal |accessdate= 2 April 2012}}</ref>
====Cancellation/revision of the second bailout loan====
In May 2012 several EU officials reminded Greece, that no matter the outcome of the parliamentary elections, they had a choice to either
* respect and follow the agreed debt rescue plan, with the needed requirement to approve the next round of €11.9bn fiscal austerity for the budget years 2013 and 2014
[[Exclusive or|or]]
* have the second bailout loan immediately cancelled, followed by an uncontrolled default and exclusion from the eurozone.<ref name="Draft for the €11.9bn austerity package outlined for approval in September 2012">{{cite web|url=http://www.ft.com/intl/cms/s/0/be2d117a-f389-11e1-b3a2-00144feabdc0.html#axzz25DZMmPAq|title=Greek police protest at pay cut plans |work=Financial Times|accessdate=1 September 2012|date=31 August 2012}}</ref>
As all attempts to form a new government failed after the parliamentary elections in May, a new round of elections were scheduled for June.<ref>{{cite journal|last=Xypolia|first=Ilia|title=Sorry, folks..the wake is over|journal=London Progressive Journal|date=May 2012|url=http://londonprogressivejournal.com/article/view/1140|accessdate=15 October 2012}}</ref>
The June election resulted in the formation of a new government that respected the initially signed debt rescue plan and acknowledged the need to approve the planned [[Sixth austerity package (Greece)|fiscal austerity package]] for budget years 2013 and 2014. The new government did, however, request that the Troika extend from 2015 to 2017 the deadline for the Greek government to be self-financed and no longer need to receive additional bailout funds. The Troika will evaluate this request as part of a new analysis of the Greek economy's sustainability and of the current progress of the Greek government in following the initially agreed "debt rescue plan". The report is expected to be published in September 2012.<ref name="Greece seeks 2-year austerity extension">{{cite web|url=http://www.ft.com/intl/cms/s/979cd2f4-e635-11e1-ac5f-00144feab49a,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F979cd2f4-e635-11e1-ac5f-00144feab49a.html&_i_referer=#axzz25DZMmPAq|title=Greece seeks 2-year austerity extension |publisher=Financial Times|accessdate=1 September 2012|date=14 August 2012}}</ref><ref name="Debt sustainability analysis started">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_24/07/2012_453600|title=Off-track Greek program calls for more debt restructuring, say EU officials |publisher=Ekathimerini|accessdate=24 July 2012|date=24 July 2012}}</ref>
As initial findings indicated the bailout programme was widely off track, the Troika decided to withhold the scheduled €31.5bn bailout disbursement for August 2012; with the message that the transfer awaited reassurance by the first review report of the programme, that Greece had managed to put the bailout plans conditional implementation of measures back on track, and still were committed to follow the agreed path to restore and reform the economy. If the report finds, that Greece did not deliver any progress on the agreed path outlined in the bailout plan, the second bailout loan will most likely get cancelled. If the report finds, that significant real implementation progress was achieved, but that certain unforeseen factors justify a prolonged deadline for Greece to restore its fiscal balance, a revision of the second bailout loan will most probably be granted. It was rumored by the end of August 2012, that a 2-year extension of the deadline, would require the Troika to expand the bailout package with an extra €20bn to Greece. The Troika's programme review report however still needed first to get published, before IMF or EU would even start to consider stating any official opinion about revision proposals, or decide if the second bailout loan should be cancelled due to an insufficient amount of progress for Greece in the attempt to follow the earlier agreed bailout plan.<ref name="Eurozone leaders delay Greece aid decision">{{cite web|url=http://www.ft.com/intl/cms/s/0/257d0a50-ec6a-11e1-8e4a-00144feab49a.html#axzz25DZMmPAq|title=Eurozone leaders delay Greece aid decision |publisher=Financial Times|accessdate=1 September 2012|date=22 August 2012}}</ref>
The subsequent three months were used by the Greek government to negotiate with the Troika about the exact content of the conditional ''"Labor market reform"'' and ''"Midterm fiscal plan 2013–16"'', in order to put the bailout plan back on track. The two major bills featured together austerity measures worth €18.8bn, of which the first €9.3bn were scheduled for 2013. In return, the Troika indicated a willingness to accept paying a third bailout loan on €30bn to finance the two-year extension of the bailout programme, while also looking into solutions for reducing the Greek debt into a sustainable size (i.e. through the launch of a debt-buy-back programme for private held government bonds and/or offering debt-relief measures in the form of lower interest rates combined with prolonged debt maturities). On 7 November 2012, facing the alternative of a default by the end of November if not passing the negotiated Troika package,<ref name="Greece needs bailout payment in November">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_05/10/2012_464693|title=Samaras raises alarm about lack of liquidity, threat to democracy |publisher=Ekathimerini|accessdate=7 October 2012|date=5 October 2012}}</ref> the Greek parliament passed the conditional ''"Labor market reform"'' and ''"Midterm fiscal plan 2013–16"'' with 153 out of 300 MPs voting yes, and the parliament late on 11 November finally also passed the ''"Fiscal budget for 2013"'' with the support by 167 out of 300 MPs.<ref name="Troika report slated for Nov.2012">{{cite web|url=http://news.kathimerini.gr/4dcgi/_w_articles_politics_100042_04/10/2012_497524|title=Unsustainable debt, restructuring or new stimulus package|language=Greek|publisher=Kathimerini|date=4 October 2012|accessdate=4 October 2012}}</ref>
The conclusion of the Troika's long awaited first programme review surveillance report, had depended on the outcome of the Greek parliament's pass of the mentioned bills.<ref name="Troika report slated for Nov.2012" /><ref name="Troika report ETA">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_03/10/2012_464286|title=One step forward, two back for Greece on debt|publisher=eKathimerini|date=3 October 2012|accessdate=4 October 2012}}</ref> When all three bills had been passed, the first complete draft version of the Troika report was immediately distributed to the Eurogroup. The report mapped the results and status for implemented programme measures and the state of the ''Greek economy, pending structural reforms, privatisation programme and debt sustainability''. Among other things it showed, that the 2-year extension of the bailout programme would cost €32.6bn of extra loans from the Troika (€15bn in 2013–14 and €17.6bn in 2015–16).<ref name="Troika report November 2012">{{cite web|url=http://sup.kathimerini.gr/xtra/media/files/fin/troika_ekthesi.pdf|title=Troika report (Draft version 11 November 2012)|format=PDF|publisher=European Commission|date=11 November 2012|accessdate=12 November 2012}}</ref>
In December 2012, the Eurogroup decided not to transfer a third bailout loan, but instead approved an adjustment-package together with ECB and IMF, featuring a set of debt relief measures for the already granted EFSF debt pile (lower interest rate and longer maturity) along with reimbursement of the Greek interest payments paid until 2020, effectively closing the entire fiscal financing gap for 2013–16. As part of this adjustment agreement, IMF however delivered its reimbursement of interests in the form of some new bailout loan tranches, worth €8.2bn, to be paid at regular intervals until 14 March 2016.<ref name="imf.org">{{cite web|url=http://www.imf.org/external/np/tre/activity/2012/101012.htm|title=IMF Financial Activities -- Update October 10, 2012|publisher=IMF|date=10 October 2012}}</ref><ref name="Second Economic Adjustment Programme for Greece (Fourth review April 2014)" /> A final element of the adjustment package was a pre-required debt buyback by the Greek government of roughly 50% of the remaining PSI bonds, which also helped to lower the debt-to-GDP ratio with 10.6 benchmark points, helping the country to maintain a sustainable debt outlook for 2020.
====Return to bond market====
Both of the latest bailout programme audit reports, released independently by the European Commission and IMF in June 2014, revealed that even after transfer of the scheduled bailout funds, there was still a forecast financing gap of: ''€5.6bn in 2014, €12.3bn in 2015, and €0bn in 2016''. The forecast financing gaps needs either to be covered by the government's additional lending from capital markets, or to be countered by additional fiscal improvements through expenditure reductions, revenue hikes or increased amount of privatizations.<ref name="EC fourth review 2014"/><ref name="IMF fifth review 2014"/> In April 2014, the Greek government managed for the first time in four years to return to the private capital markets, and finance the first €3bn part of its financing gap by the issuance of a five-year government bond with a yield of 4.95%.<ref>{{cite news|title=Greece €3bn bond sale snapped up|url=http://www.ft.com/cms/s/0/49af3560-c085-11e3-a74d-00144feabdc0.html|accessdate=10 April 2014|newspaper=Financial Times|date=10 April 2014|author=Wigglesworth, Robin|author2=Moore, Elaine|author3=Hope, Kerin}}</ref> It is "to be decided" for the fiscal years 2014–16, to which degree the government will continue covering their financing gaps by the issuance of government bonds.<ref name="EC fourth review 2014" /><ref name="IMF fifth review 2014" /> The next official European Commission review of the bailout programme—scheduled for release around November/December 2014,<ref>{{cite web|url=http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/index_en.htm|title=Financial assistance to Greece|publisher=European Commission|date=12 September 2014}}</ref><ref>{{cite web|url=http://www.tovima.gr/en/article/?aid=632633|title=Critical upcoming dates regarding the Greek bailout program|publisher=Tovima|date=18 September 2014}}</ref> is expected to reveal to which extend the Greek government plans to tap the bond market for additional capital.
Anger and protests about the previously passed austerity measures however continued in Greece, with a 24-hour strike among government workers on 9 July 2014, timed to coincide with an audit by inspectors from the International Monetary Fund, the European Union and European Central Bank.<ref name="GreekStrike">{{cite news|title=State workers in Greece hold strike to protest layoffs|url=http://www.greekherald.com/index.php/sid/223650639/scat/48158b5a5afd369b/ht/State-workers-in-Greece-hold-strike-to-protest-layoffs|accessdate=9 July 2014|work=Greek Herald}}</ref> On 10 July 2014, the Greek ministry of finance nevertheless managed to sell another €1.5bn worth of three-year government bonds at a yield of 3.5%, to finance the next chunk of the governments financing gap in 2014.<ref>{{cite web|url=http://greece.greekreporter.com/2014/07/10/greece-raises-cash-in-3-year-bond-auction/|title=Greece Raises Cash in 3-Year Bond Auction|work=Greek Reporter|date=10 July 2014}}</ref> In September 2014, roughly €1.6bn of existing Treasury bills were swapped into the previously issued three-year and five-year bond series, so that the total amount of new issued bonds reached €6.1bn in 2014.<ref>{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_11/09/2014_542846|title=Market shows appetite for bond swap|publisher=ekathimerini|date=11 September 2014}}</ref><ref>{{cite web|url=http://www.grreporter.info/en/greece_reschedules_debt_worth_16_billion_euro/11693|title=Greece reschedules a debt worth 1.6 billion euro|publisher=GR Reporter|date=12 September 2014}}</ref> The Greek government plan to issue some additional seven-year and ten-year bonds, to fund their financing gap in 2015.<ref name="Irish Independent" />
Achieving and sustaining a government [[structural surplus]] since 2012, along with arrival of an improved economic outlook where the real GDP was forecast to grow by a positive 0.6% in 2014 followed by 2.9% in 2015 and 3.7% in 2016—while the unemployment rate was forecast to fall from 27.5% in 2013 to 26.8% in 2014 and further to 22.0% in 2016, all helped foster the successful return by the Greek government to lend again from the private capital markets by issuing government bonds.<ref name="Newsbomb.gr" /><ref name="EC Autumn 2014 forecast for Greece" /> Presumably the positive market financing opportunities opening up for Greece already in April 2014, was also fostered by ECB's preceding promise towards the markets, of standing ready to initiate unlimited bond buying support (through its [[Outright Monetary Transactions|OMT programme]]), in the event of market interest rates being evaluated to be unacceptably high—from the moment Greece return to the market and issue a new ten-year bond. A promise which helped convince many investors, that they better expect the long-term Greek government bond yields soon would decline to those "more acceptable levels", in the eyes of ECB.
====Attempt to complete the second programme under its initially agreed terms====
Greece experienced positive economic growth in each of the 3 first quarters of 2014.<ref name="Greek GDP data for 2005–2014" /> The return of economic growth, along with the now existing underlying structural budget surplus of the general government, build the basis for the debt-to-GDP ratio to start a significant decline in the coming years ahead,<ref name="EC Autumn 2014 forecast for Greece"/> which will help ensure that Greece will be labeled "debt sustainable" and fully regain complete access to private lending markets in 2015. While the ''Greek government-debt crisis'' hereby is forecast officially to end in 2015, it shall be noted this positive forecast is based on the ''"assumption Greece will meet the primary surplus targets of its [bailout] programme in 2015 and 2016 – as a result of the fiscal-structural reforms under its [bailout] programme and the improved economic environment"''.<ref name="EC Autumn 2014 forecast for Greece" />
During the second half of 2014, on the back of the improved economic environment and the successful return to raise additional funding capital at the private lending market, the Greek government began a new negotiation round with the Troika. The negotiations were this time about how to comply with the programme requirements, to ensure activation of the payment of its last scheduled eurozone bailout tranche in December 2014, and about a potential update of its remaining bailout programme for 2015–16. When calculating the impact of the 2015 fiscal budget presented by the Greek government, there were a disagreement, with the calculations of the Greek government showing it fully complied with the fiscal targets of its agreed ''"Midterm fiscal plan 2013–16"'', while the Troika calculations were less optimistic and returned a not covered financing gap at €2.5bn (being required to be covered by additional austerity measures).<ref name="Troika negotiations in autumn 2014">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_16/11/2014_544644|title=Analysis: Markets keep government in check|publisher=Kathimerini|date=16 November 2014}}</ref> As the Greek government insisted their calculations were more accurate than those presented by the Troika, they submitted an unchanged fiscal budget bill to the parliament, which was passed by 155 against 134 votes on the midnight of 7 December.<ref name="Fiscal budget 2015 passed by parliament">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_08/12/2014_545225|title=Greek Parliament passes 2015 budget as leaders clash|publisher=Kathimerini|date=8 December 2014}}</ref> On this basis, the [[Eurogroup]] met on 8 December and agreed to support a technical two-month extension of the part of the Greek bailout programme under its guidance, making time both for completion of the long awaited fifth final programme review and assessing the possibility for the [[European Stability Mechanism]] to set up a precautionary Enhanced Conditions Credit Line (ECCL) in place by 1 March 2015.<ref name="Eurogroup December 2014">{{cite web|url=http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/146112.pdf|title=Eurogroup statement on Greece – 8 December 2014|format=PDF|publisher=Eurogroup|date=8 December 2014}}</ref>
The press recently rumored that the Greek government had proposed to put an immediate end to the previously agreed and continuing IMF bailout programme for 2015–16, replacing it with the transfer of €11bn unused bank recapitalization funds currently held as reserve by HFSF, along with establishment of the precautionary ECCL. The ECCL instrument is often used as a follow-up precautionary measure, when a state has exited its sovereign bailout programme, functioning as an extra backup guarantee mechanism with transfers only taking place if adverse financial/economic circumstances materialize, but with the positive effect that its sole existence help calm down financial markets – making it more safe for investors to buy government bonds – and hereby it will aid the attempt for the government to raise funding capital from the private capital market.<ref name="Troika negotiations in autumn 2014" /> In December, the rumor about the premature halt of the ongoing IMF bailout programme was confirmed, with the Troika planning instead to transform it into a precautionary ECCL by the end of February, at the request of the Greek government.<ref name="Athens News Agency">{{cite web|url=http://www.hri.org/news/greek/ana/2014/14-12-17.ana.html#10|title=German finance ministry forwards to Bundestag Greece's requests for extension and precautionary credit line|publisher=Athens News Agency|date=17 December 2014}}</ref>
====Attempt to renegotiate the terms for completion of the second programme====
Following the rejection of the government's candidate for president in parliamentary votes during December 2014, a [[Greek legislative election, 2015|snap parliamentary election]] was held on 25 January 2015.<ref name="Greek parliamentary election 2015">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_29/12/2014_545772|title=Greece heading to snap elections after Parliament fails to elect president|publisher=Khaterimini|date=29 December 2014}}</ref> The premature election threatened to endanger the recently gained Greek economic recovery, because of the political uncertainty of what would follow and the unavoidable delay of continued implementation of structural reforms.<ref name="Greek recovery endangered by election">{{cite web|url=http://money.cnn.com/2014/12/23/news/economy/greece-election-risk/|title=Stakes rise for Greece as risky election looms|publisher=CNN|date=23 December 2014}}</ref><ref name="DPA 29-12-2014">{{cite web|url=http://www.dpa-international.com/news/international/early-elections-for-greece-after-parliament-fails-to-pick-president-a-43736464.html|title=Early elections for Greece after parliament fails to pick president|publisher=DPA International|date=29 December 2014}}</ref><ref name="Reuters 29-12-2014">{{cite web|url=http://uk.reuters.com/article/2014/12/29/uk-greece-vote-result-idUKKBN0K70NH20141229|title=Greece heads to election after PM Samaras loses vote on president|publisher=Reuters|date=29 December 2014}}</ref> The rising political uncertainty also caused the Troika to suspend all scheduled remaining financial aid to Greece under its bailout programme, while noting its support would only resume pending the formation of a new-elect government respecting the already negotiated terms - agreed with the incumbent government.<ref name="Bailout suspended until formation of a new-elect government"/>
Opinion polls ahead of the election provided the anti-bailout party [[Coalition of the Radical Left|Syriza]] – which announced it would not comply with the previously negotiated terms in the bailout-agreement and demand a "write down on most of the nominal value of debt, so that it becomes sustainable" – with a lead, causing adverse developments on financial markets, with the [[Athens Stock Exchange]] suffering an accumulated loss of roughly 30% since the start of December 2014, and the interest rate of the ten-year government bond rising from a low of 5.6% in September 2014<ref name="Financial market response to election polls">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_05/01/2015_545943|title=Greek parties embark on election amid debate on euro|publisher=Kathimerini (Bloomberg)|date=5 January 2015}}</ref> to 10.6% on 7 January 2015.<ref name="Greek interest rate on 7 Jan 2015">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_07/01/2015_546000|title=Greek 10-year bond yields exceed 10 pct for first time since 2013|publisher=Kathimerini (Bloomberg)|date=7 January 2015}}</ref> According to the ECB Executive Board member from France, "It is illegal and contrary to the treaty to reschedule a debt of a state held by a central bank", meaning such a thing would be incompatible with continued membership of the eurozone.<ref name="ECB debt cancellation illegal">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_09/01/2015_546061|title=Greek debt held by ECB cannot be restructured, says Coeure|publisher=Kathimerini (Reuters)|date=9 January 2015}}</ref> However, the risk of a [[Greek withdrawal from the eurozone|Grexit]] (Greek exit from the eurozone) as a result of the upcoming elections, were assessed by economists from [[Commerzbank Ag]] only to be around 25%, if assuming the election would end with the same result as measured by the opinion polls in early January.<ref name="Risk for Grexit 25%">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_05/01/2015_545953|title='Grexit' is back: A Greek exit from the euro raises fears of fiscal contagion|publisher=Kathimerini (Bloomberg)|date=5 January 2015}}</ref>
[[Coalition of the Radical Left|The Syriza Party]] won the election and formed a new government, which declared the old bailout agreement was now cancelled, while requesting acceptance of an extended deadline from 28 February to 31 May 2015 for the process to negotiate a new replacing creditor agreement with the [[Eurogroup]].<ref name="Syriza won election and call for extended time to negotiate">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_02/02/2015_546777|title=Greece asks ECB to keep banks afloat as Tsipras pitches deal|publisher=Kathimerini (Bloomberg)|date=2 February 2015}}</ref> Due to the outlook for a prolonged time with uncertainty about the Greek governments implementation of economic policy, the European Central Bank concluded in early February, that the state now fulfilled all negative conditions (being outside an economic bailout programme while suffering from a junk credit rating) to remit an immediate halt for the Greek financial system to utilize their holdings of Greek government debt as unrestricted collateral when lending cheap liquidity from ECB. As a consequence of this ECB decision, additional pressure was put on Greece’s new government rapidly to deliver a new bailout agreement,<ref name="ECB shuts off direct cheap funds to Greek banks">{{cite news |url=http://www.bloomberg.com/news/articles/2015-02-04/ecb-shuts-off-direct-funds-to-greece-as-reform-progress-in-doubt|title=ECB shuts off direct funds to Greece as reform progress in doubt|publisher=Bloomberg|date=4 February 2015}}</ref> which would both help to solve the state's acute liquidity needs and re-open the access for the Greek financial system to lend liquidity more cheaply again from ECB.<ref name="Greek banks hope for a rapid deal to regain access to more cheap liquidity">{{cite news|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_28/05/2015_550470|title=Greek bank losses show predicament amid record outflows|publisher=Kathimerini (Bloomberg)|date=28 May 2015}}</ref> The ECB at the same time, continued injecting a growing amount of emergency lending to the Greek financial system, to keep it afloat,<ref name="ECB approved ELA to Greek banks">{{cite web|url=http://www.reuters.com/article/2015/01/21/greece-banks-ecb-idUSL6N0V04W120150121|title=UPDATE 1-ECB approves emergency funding line for Greek banks -banking source|publisher=Reuters|date=21 January 2015}}</ref> in a climate where a growing flee of both foreign and domestic private capital was observed, caused by a daily rise of the perceived sovereign-default risk and the associated risk for enforcement of [[capital controls]] restricting the access for private savers to withdraw money from their Greek bank accounts.<ref name="Deposits reached historic low">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_29/05/2015_550515|title=Greek bank deposits fall to lowest in more than a decade|publisher=Kathimerini (AP)|date=29 May 2015}}</ref> In early May 2015, ECB had an overall exposure towards Greek banks, equal to €110 billion. The vice president of ECB, however clarified ECB only ran a minor risk - even in the event of Greek sovereign default, as the first €70 billion were secured by collateral held by the Greek National Bank while the rest were assumed could be fully recovered from other non-sovereign collateral held by ECB.<ref name="ECB exposure towards Greece">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_04/05/2015_549681|title=ECB's Constancio says 'worst-case' Greek scenario will be avoided|publisher=Kathimerini (Reuters)|date=4 May 2015}}</ref> In the event Greece manage to negotiate a new bailout-deal with the Troika ahead of June 2015, it will benefit not only from the direct release of bailout funds to the state, but also indirectly from a re-opened access for its financial sector to much cheaper liquidity from ECB - while at the same time becoming part and benefiting from the [[Quantitative Easing]] bond buying program operated by ECB, which has the prospect to lower yields and help build the ground for increased economic growth.
The prolonged time-span without any active bailout-agreement, caused an increasingly growing liquidity crisis, which resulted in a new fourth recession hitting Greece - starting from Q4-2014.<ref name="Greece hit by a new 4th recession"/><ref name="Q4-2014 recession confirmed"/> According to the European economic forecast published in May 2015, the impact of this sudden unexpected recession for the entire part of 2015, would be that economic growth (real GDP) now only was expected to rise +0.5% compared to the earlier forecast +2.5%; while it was emphasized this attainment of low positive growth for the current year as a whole - was even a best case scenario forecast - at the premise on a fast successful conclusion to the current bailout-programme negotiations held between the Greek government and its public creditors in May 2015. The reason why the economic outlook became downgraded, was because the "positive momentum" building up in 2014 after Greece's savage recession came to an end, had been hurt by the political uncertainty erupting since the announcement in December of early elections, which further intensified after the election - due to the inability of the new-elect government to settle an economic policy agreement with its creditors within its first given deadline in February 2015.<ref name="Greek economic outlook deteriorates">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_05/05/2015_549716|title=Outlook for Greece casts cloud over Europe's 'brightest spring in several years'|publisher=Kathimerini (AP)|date=5 May 2015}}</ref> The ''Hellenic Confederation of Commerce and Enterprises'' (ECEE) estimated, that each day without an active bailout agreement under the new-elect government, had entailed daily costs equal to €22.3 million shrinkage of GDP, bankrupt closure of 59 shops, along with 613 jobs being lost.<ref name="Costs of no bailout deal">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_18/05/2015_550150|title=Every day without a deal costs 22.3 mln|publisher=Kathimerini|date=18 May 2015}}</ref> The political uncertainty, beside of damaging the economic growth, was found also to have caused a "significant shortfall" in collected state revenues beyond what could be explained by the lower growth, which led to a significant downgrade of the forecast Greek general government's structural budget balance in 2015 (declining from a previously forecast +1.6%, now to become negative at -1.4%).<ref name="Greek economic forecast May 2015">{{cite web|url=http://ec.europa.eu/economy_finance/eu/forecasts/2015_spring/el_en.pdf|title=European economic forecast Spring 2015: 8. GREECE - The recovery fails to accelerate amid high political uncertainty|publisher=European Commission|date=5 May 2015}}</ref> Finally, as a result of all these adverse developments, the debt-to-GDP ratio was also forecast to deteriorate, going up from the forecast six months ago of 170.2% in 2015 and 159.2% in 2016, now to be 180.2% in 2015 and 173.5% in 2016, making it increasingly unlikely for Greece to attain its bailout programme target of reaching a 124% ratio in 2020.<ref name="Debt ratio target unattainable">{{cite web|url=http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_05/05/2015_549742|title=Hopes of a GDP rebound evaporate|publisher=Kathimerini (AP)|date=5 May 2015}}</ref>
===Speculation about a third rescue package===
{{main|Third Economic Adjustment Programme for Greece}}
Speculation for the need to establish a third additional programme, began shortly after the second bailout programme had been ratified by all parties in February 2012. Due to a worse than initially forecast recession, along with a delayed implementation of the required structural reforms and privatizations outlined in the second programme, an uncovered financing gap indeed soon developed, with a size of €15bn for 2013–14 and €17.6bn for 2015–16.<ref name="Troika report November 2012"/> In December 2012, the Troika however decided not to establish a third €32.6bn bailout loan. The financing gap was instead patched by the Troika's approval of a comprehensive "debt relief" adjustment-package for the second programme, which introduced lower interest rate and longer maturity for all debt held by the European public creditors, along with reimbursement of all Greek interest payments paid on Troika held debt until 2020 - although it was a peculiarity the IMF reimbursements only were conducted in form of €8.2bn of new additional bailout loan tranches scheduled for transfer between January 2015 and March 2016.<ref name="imf.org"/>
A second round of speculation for a new third programme erupted, when continued delay of structural reforms and privatizations - along with a slower than expected economic recovery, had caused new additional financing gaps to develop of €5.6bn in 2014 and €12.3bn in 2015.<ref name="EC fourth review 2014"/><ref name="IMF fifth review 2014"/> The potential third programme was however this time avoided, as the Greek government on basis of having achieved a [[structural surplus]] and return of positive economic growth in 2014,<ref name="Newsbomb.gr"/><ref name="EC-spring-forecast 2015"/> now succeeded to regain access to the private lending market for the first time since eruption of its debt crisis - to the extent that its entire financing gap for 2014 was patched through a [[Greek government-debt crisis#Return to bond market|sale of bonds to private creditors]].<ref name="Irish Independent"/>
In May 2015, statements from several Troika officials hinted, that Greece now were likely very soon to need receiving a third follow-up support programme, which they were ready to offer and establish at the premise of a prior successful completion of the second programme.<ref name="Eurogroup press briefing May 2015"/><ref name="3rd program negotiations await 2nd program negotiations first to complete"/> The Economist speculated in early June 2015, that the Eurogroup as part of the upcoming deal about renegotiated terms for completion of the second programme, would extend it time-wise with another 2-3 month, both to make room for a proper implementation phase and to give time for designing all details of the needed third follow-up program. The third programme was speculated to be launched in September or October with a size between €30-50bn, of which a significant part would be earmarked for a new extra bank recapitalization and restructuring package - being needed to handle the challenge of a growing pile of [[Non-performing loans|Non-Performing Loans]] held by the Greek Banks.<ref name="3rd programme speculation (2015)">{{cite web|url=http://www.economist.com/news/europe/21653516-creditors-have-finally-agreed-terms-present-beleaguered-greek-government-offer-it-cannot|title=Greece's debt drama: An offer it cannot refuse|publisher=The Economist|date=2 June 2015}}</ref>
===Shutdown of banks and stock market (June 2015 – present)===
On 27 June 2015, the Greek government announced a shutdown of all banks in the country for at least ten days (six banking days), stating they would re-open on Tuesday, 7 July. It also said [[automated teller machine]]s, a large number of which had run out of cash, would "operate normally again by Monday noon at the latest" and that withdrawals would be limited to €60 a day for each account with exemptions for pension payments.
A matching week-long suspension of the [[Athens Exchange|Athens stock exchange (ATHEX)]] is thought to be most likely according to a [[Ekathimerini.com|Greek newspaper's online edition]], since the announced closure of Greek banks requires a suspension in Greece of the European [[TARGET2]] international financial settlement system which also processes ATHEX settlements. [[Western Union]] has also stopped operating in Greece.
==Countermeasures taken by the Greek government==
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