It was 2009 when the Greek crisis changed the course of European history. On 22 June 2018, a historic agreement formally drew it to a close. A summary of the story so far.
Ten years have passed and finally, at least on paper, the Greek crisis is over. After years of extreme hardship and countless difficulties, the country can stand on its own two feet. We retrace the history, the key milestones and the most significant events, to bring some order to our thoughts on this wound that remains open at the heart of Europe.
In the wake of his government's inauguration, Prime Minister George Papandreou, a leading figure in Pasok, the Panhellenic Socialist Movement, reveals that previous governments had falsified budget data on public finances in order to allow Greece to enter the eurozone. The public deficit for 2009 – Papandreou declares – amounts to 12.7 per cent, more than double the previous estimates. The Hellenic economy, the prime minister states in no uncertain terms, is at risk of collapse.
This is the official beginning of the Greek crisis, which deteriorates within the space of a few weeks. While the Athens government scrambles to respond by drawing up a privatisation plan, tackling tax evasion, introducing structural reforms and freezing public sector wages, deficit forecasts for 2009 shoot up to 15 per cent and rating agencies downgrade Greek debt.
Greece finds itself crushed under a debt of 350 billion euros. Accessing financial markets is impossible, as government bonds have been rated as "junk". Talk of an exit from the eurozone begins on multiple fronts. Athens requests an international bailout, which is granted in May: it had never happened before to a eurozone country. Europe and the International Monetary Fund provide 110 billion euros over three years to avert a payment default, which would have dramatic repercussions for the stability of the European economy.
The bailout is conditional on a punishing austerity programme involving pension and wage cuts, tax rises and structural reforms. Protests and strikes rage across the country, with violent and tragic incidents. One such incident occurs in May, when three people die trapped inside a bank that has been set on fire.
Greece shows no signs of recovery. As rating agencies once again cut the rating of Greek securities, the country's real economy is on its knees. In February 2011, for instance, unemployment reaches 15.9 per cent, rising to a staggering 40.4 per cent among young people between the ages of 15 and 24. The government repeatedly raises property taxes and cuts pensions, as well as placing 30,000 public sector employees on reduced hours.
For the first time, talk begins of the troika, an informal supervisory body made up of the International Monetary Fund, the European Union and the European Central Bank. It is precisely the troika that overcomes Germany's resistance and gives the green light to the European Financial Stability Facility (Efsf).
Eurozone leaders in October 2011 draw up a second rescue package, worth 130 billion euros, designed to reduce the debt from 198 per cent to 120.5 per cent of GDP by 2020. Part of these funds is used to recapitalise the country's private banks, which hold nearly 29 billion euros of sovereign debt in their coffers. The conditions for the loan remain the same: severe public spending cuts. When in February parliament votes on yet another austerity plan, full-scale street battles erupt in Syntagma Square in Athens.
The second aid package is definitively approved in February 2012 and implemented from the following month. Through a manoeuvre known as an haircut, necessary to avoid default, private holders of Greek bonds see their face value reduced by 50 per cent, with maturities extended at the same time. The second bailout was due to expire in 2014 but is subsequently extended to 30 June 2015.
After years of uninterrupted recession, in the third quarter of 2014 the Greek economy shows growth for the first time, at 0.7 per cent of GDP. Living conditions for the population remain extremely harsh. Three and a half million people are in employment; three million are either unemployed or economically inactive. Healthcare is provided by community clinics, as funding for public hospitals has been halved over four years.
Against this backdrop, the radical left coalition Syriza, led by Alexīs Tsipras, triumphs in the elections of 25 January 2015. Its economic programme centres on the renegotiation of the public debt. "We will not accept humiliating conditions in these negotiations," is the promise of the newly appointed prime minister of Athens. On 30 June, Greece, lacking the necessary funds, fails to repay an instalment of 1.6 billion euros to the International Monetary Fund. And, to prevent a liquidity crisis, it closes its banks, bans capital transfers abroad and imposes strict limits on cash withdrawals.
Tsipras, in a unilateral decision, calls a referendum for 5 July. Asked to accept or reject the creditors' debt restructuring proposals, 62 per cent of Greeks vote "no".
Despite the popular vote, which represents a domestic political victory for him, Tsipras fails to gain the upper hand in the difficult negotiations with creditors. In the night between 12 and 13 July 2015, after 17 uninterrupted hours of negotiations, the eurozone gives the go-ahead for the third Greek bailout, approved in August. A further injection of 86 billion euros, bringing the total to 326 billion: the largest rescue operation ever.
The demands are particularly tough in this case too: VAT increases, pension reform, new labour laws and a rise in indirect taxes. This triggers an internal split within the governing party, Syriza, leading to the calling of fresh general elections for 30 September 2015. The electoral round ends with another victory for the outgoing president Tsipras.
After the peak of tension surrounding the referendum, the media spotlight on the Greek crisis seems to fade. In July 2017 Athens returns to financial markets with 3 billion euros in five-year bonds. Two months later, the EU finance ministers formally declare the country's exit from the excessive deficit procedure, which had been initiated in 2009.
Over these years, in the words of European Commissioner for Economic and Financial Affairs Pierre Moscovici, Greece has implemented 95 of the 110 reforms imposed on it by the troika. From a financial standpoint, Greece's health has improved markedly, even if it remains uneven.
But this shaky improvement in economic data does not equate to an improvement in living conditions for the population. On the contrary, it is precisely ordinary people who have paid the highest price. Compared to the pre-crisis period, the real economy is unrecognisable. The unemployment rate, according to the OECD, still stood at 21 per cent at the end of 2017. Half a million people have emigrated abroad, a third of GDP has gone up in smoke, wages have fallen, and two hundred thousand shops have closed. In hospitals, vaccines and sutures are in short supply, a nurse looks after an average of 40 patients, and surgeons make do with 600 euros a month. According to the plans, around 27,000 homes are set to go to auction, although this is one of the issues that has sparked the most public protest.
On the night of 22 June 2018, yet another interminable Eurogroup negotiation reached a conclusion: Greece passes the test. The government has approved all the required reforms. This means the European Union releases the final loan tranche, worth 15 billion euros, which guarantees the country's self-sufficiency for the next two years. At the same time, despite Germany's opposition, the troika eases Athens's debt (currently equivalent to 180 per cent of GDP), allowing it to begin repayments from 2032 rather than 2022.
Greece can finally stand on its own two feet: the official end of receivership is set for 20 August. Although it remains a form of "supervised freedom", given that creditors will carry out checks at regular intervals. Prime Minister Tsipras, as he had promised on several occasions, marks the moment by wearing a tie for the very first time. And Commissioner for Economic Affairs Pierre Moscovici declares that "the Greek crisis ends tonight in Luxembourg".