Europe government

The Greek Economic Crisis: 5 Charts That tell The Story

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The “spread” over 10-year German bunds is the standard measure of perceived risk. It is the premium, or additional interest, that markets demand for holding the debt of a euro-zone country compared with the bonds isued by Germany, deemed the safest.


  • November 2009 – The new government pledges in its 2010 draft budget on Nov. 5 to save Greece from bankruptcy by cutting the budget deficit of 12.7 percent of GDP
  •  Nov. 20 Greece aims to cut the deficit to 8.7 percent of GDP in 2010
  • Dec 4: public debt rising to 121 percent of GDP in 2010 from 113.4 percent in 2009.

  • EU 2010 forecasts on Greece are worse, with the deficit seen at 12.2 percent of GDP and national debt rising to 124.9 percent, the highest ratio in the EU.
  • December 2009 — S&P on Dec. 7 puts the country’s A- sovereign rating on negative watch.
  •  Fitch Ratings, which had cut Greece to A- when the government revealed the higher deficit, cuts Greek debt to BBB+ with a negative outlook, the first time in 10 years a ratings agency has put Greece below the A investment grade.
  •  On Dec. 14, Greece pledges 10 percent cut in social security spending in 2010. 

  • Announces overhaul of pension system in six months and new tax system that will make wealthy carry bigger burden.
  • Dec. 16 S&P cuts Greece’s rating to BBB+ from A
  • Dec. 19 The German 10-year Bunds widen to an average 272 basis points, the widest in more than eight months
  •  Dec. 22 – Moody’s cuts Greek debt to A2 from A1, the third agency to downgrade Greece, but still two notches above that of Fitch and S&P.
  • January 2010 – Greece unveils a stability programme on Jan. 14 saying it will aim to cut its budget gap to 2.8 percent of GDP in 2012 from 12.7 percent in 2009.
  • February 2010 – Government extends a public sector wage freeze to those making below 2,000 euros a month for 2010, excluding seniority pay hikes.
  • On Feb. 3 the EU Commission says it backs Greece’s plan to reduce its budget deficit below 3 percent of GDP by 2012 and urges Greece to cut its overall wage bill.
  • A one-day general strike on Feb. 24 against the austerity measures cripples Greece’s transport and public services.

  •  Finance Ministry official anticipate Greece can cut the deficit by about 2 percentage points, short of a 4 percentage point target for 2010. This will mean additional economy measures worth 4.8 billion euros.

  • New package of public sector pay cuts and tax increases passed by the government on March 5 to save an extra 4.8 billion euros ($6.5 billion).
  • The measures include raising VAT by 2 percentage points to 21 percent, cutting public sector salary bonuses by 30 percent, increases in tax on fuel, tobacco and alcohol, as well as freezing state-funded pensions in 2010.

  • On March 15, euro zone finance ministers meeting in Brussels agree on a mechanism that will allow them to help Greece financially if needed, but they reveal no details except that it would be without loan guarantees.
source : Reuters
Charts Source : Economist

This entry was posted in Economics data, Europe government, Greece.

The making of The Europe Financial Crisis

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Trouble sprung up quickly in Europe after the global crash in 2008. In 2009, a new government in Greece discovered that it couldn’t pay off the debt it had incurred. That would be disastrous for those who made the loans to Greece—largely European banks, which own $71 billion in Greek debt and also have many commercial loans in the country. If those banks had to write off those assets, it would spur a financial crisis with cascading repercussions across the globe, increasing pressure on other European countries and financial institutions at a time of already fragile growth.  The U.S. wouldn’t be exempt: Our financial institutions own plenty of European debt, and the Euro zone is our largest trading partner. Many economists believe the initial stages of the Greek crisis helped slow economic recovery in the United States.
Thus began the last two-plus years of back-and-forth in Europe, as Greece came close to default and was halfheartedly bailed out in 2010 by other members of the Euro Zone. The group is led by Germany, a country that makes fiscal rectitude a watchword, and the European Central Bank, as fiscally conservative an institution as there is. Both are reluctant to offer much help the more profligate European countries unless they adopt austerity policies by raising taxes and cutting spending, which in turn hurts growth and has brought on popular demonstrations in Greece against the government and European institutions.

source : Good. Business

This entry was posted in economic infographics, Europe Financial Crisis, Europe government.