I/II. http://edition.cnn.com/2015/07/13/europe/how-greece-reached-this-point/
Between rock, hard place, Greece picks austerity. How did it get into this mess? By Don Melvin, CNN Updated 2010 GMT (0310 HKT) July 13, 2015 [Video] Source: CNN Greece given $96B in bailout money 01:51 (CNN)Greece's affair with the euro began with the grandest of hopes. But then it all went terribly wrong. In talks over the weekend, Greek Prime Minister Alexis Tsipras faced an awful choice: Either abandon the euro currency and watch Greece's economy collapse, or accept more austerity in the knowledge it will cause his people even more torment. He chose the latter -- slow pain rather than utter disaster. It was a far cry from Greece's early dreams. The euro seemed at first a shining star, a common currency that would ensure prosperity on a par with the rest of Europe. And Greece was an eager suitor. The country approved the euro in 2001 -- in time to be among the first countries to use the new currency when the first bank notes rolled out in 2002. In the beginning, the most ambitious attempt ever to create a new multinational currency all seemed to go well. The predicted problems with banks and vending machines never materialized. The euro surpassed the dollar in value. The launch was hailed as a success. And yet for Greece, it seems now to have all fallen flat. Just how did the country get into such a fix? Greece adopts the euro ... Greece approves the euro in 2001, becoming among the first wave of countries to adopt the new multinational currency. 2001: Greece became the 12th -- and last -- country to join the eurozone before the launch of the euro at the beginning of 2002. To join, a country had to demonstrate it had achieved "economic convergence" with the other eurozone members -- a requirement meant to ensure that different countries would not jeopardize the common currency. When Greece was accepted, Finance Minister Yannos Papantoniou described it as a day that would place Greece firmly at the heart of Europe. But warnings were sounded. The president of the European Central Bank, Wim Duisenberg, said Greece had much to do in terms of improving its economy and controlling inflation. ... but bogus figures hide the true extent of its deficit. Greek Finance Minister Evangelos Venizelos announces in 2011 his country would miss its deficit targets. 2002: Everyone now agrees that Greece cooked its books. One of the economic convergence requirements was that a country not have a budget deficit of more than 3% of its gross domestic product. It was a requirement imposed on all countries, but one not followed over the years by all eurozone countries -- not even that advocate of strict discipline, Germany. Yet the extent to which Greece hid its economic problems from fellow eurozone members would prove staggering. Two years later, a new government discovers the true figures ... Greece's road to economic crisis 03:19 March 2004: In March, the center-right government of Prime Minister Konstantinos Karamanlis came to power. And it took a look at the books. What it discovered was appalling. The budget deficit was not 1.5%, as reported, but 8.3% -- 5½ times higher than thought. The Karamanlis government faced a dilemma: What should it do with this shocking information? ... but says nothing as the Olympics approach. With graffiti apparent, the 2004 Olympic Games Complex appears in disrepair in February 2012 in Athens, Greece. August 2004: The Olympic Games were coming -- returning to Greece, the land of their birth. It was the country's turn to shine on the international stage. Well, the government thought, no need to upset people, inside Greece or out. So instead of revealing the extent of the deficit -- and starting to deal with it -- the government decided to say nothing. The global financial crisis hits ... Ben Bernanke heads back to the classroom to discuss the 2008 financial crisis 02:50 2007: The financial crisis had its roots not in Greece, but in the United States, 5,000 miles away. >From there, it spread around the world. It hit countries around the globe to varying extents. Other European Union countries were affected severely -- notably Spain and Ireland -- and others suffered as well. ... and Greece is slammed harder than many other countries. Bailout referendum polarizes Greek people 03:41 2008: But few countries were less prepared to deal with an economic downturn than Greece. With a yawning gap between revenues and expenditures, it was particularly vulnerable. In 2008, the country's tax collection, such as it was, collapsed. The hole in the budget grew too big to hide. The country needed help. And the other eurozone countries, fearing contagion -- that, if Greece defaulted on its debts, other eurozone countries' cost of borrowing would rise to unsustainable levels -- felt they had no option but to give Greece the help it needed. International lenders rescue Greece, but ... [Graph] Greek unemployment soared as austerity took its toll. 2010: In 2009, international investors, spooked by the revelation that Greece's previously announced debt and deficit figures were inaccurate, became worried about the country's ability to pay its debts. Greece's credit rating was downgraded, first by Fitch and then by Moody's. The country's cost of borrowing spiked, and the situation risked running out of control. So the other eurozone countries, in the form of the so-called troika -- the European Commission, European Central Bank and International Monetary Fund -- stepped in to prop up the patient. ... the conditions attached to the bailouts increase unemployment. Greece unemployment gets even worse. Matthew Chance reports 02:54 [Video] 2010: In May 2010, leaders of the eurozone and the Greek government agreed on the conditions for a 110 billion euro bailout loan. But the bailout came with strict conditions -- among them that the government improve its tax collection and save money to bring its budget into balance. Saving government money, though, meant laying off government workers. Those laid-off workers had less to spend, so other businesses suffered and laid off workers, too. Unemployment rose, depressing government tax revenues. The crisis deepened. Greece borrows new money to pay old debts ... A protester, holding a banner against the Greek government, takes part in a demonstration in July 2013 in Athens. 2010-2012 Protests grew. The country tossed out the government of social democratic Prime Minister George Papandreou and ran through two provisional prime ministers -- all in 2011 -- before turning to the conservative party of Antonis Samaras. Still, the bailout medicine didn't do the trick. In February 2012, the government accepted another bailout loan, bringing the total borrowed to 246 billion euros. A new austerity plan was agreed to as well. The amount owed to the international lenders was now 135% of the country's GDP. And things got worse. Unemployment rose to near 30%. Youth unemployment soared over 50%. What Greek crisis means for you ... and the country runs out of money again ... IMF's Lagarde: Balance is key moving forward with Greek recovery 04:28 [Video] 2015: Despite austerity, the budget refused to balance. More money was needed -- and, realistically, debt relief as well if the country was ever to stand again on its own two feet. Greece was now led by Tsipras' left-wing government. Relations between representatives of the international lenders and Tsipras and his finance minister, Yanis Varoufakis, were poisonous -- hampering negotiations. In June, the negotiations broke off, with each side apparently daring the other to be the cause of a Greek exit from the eurozone. Greece crisis 101: What's going on? leading to the current crisis. People celebrate in front of the Greek parliament in Athens on July 6 after voters rejected a debt bailout by creditors. At the end of June, Greece defaulted on a repayment to the International Monetary Fund. The banks started to run out of money. Capital controls were introduced, limiting the amount of money people could withdraw each day. Varoufakis resigned at the Prime Minister's behest, saying he was an impediment to negotiations. Talks resumed. After weeks of brinksmanship, including the rupture of negotiations and the holding of a referendum -- in which the Greek people apparently voted "No" to more austerity -- a deal to lend the country more money and have the government sell some assets was reached. The country will not fall out of the euro. But it could fall further into the economic abyss. Whether further austerity will ultimately save the economy by restoring investor confidence or increase unemployment for a population that is already suffering -- or both -- remains to be seen. In either event, the gloss is off the country's affair with the euro. And, for the Greek people, more pain lies ahead. The Greek crisis in 2 minutes II. http://www.nytimes.com/interactive/2015/business/international/greece-debt-crisis-euro.html?_r=0 Greece’s Debt Crisis Explained By THE NEW YORK TIMES UPDATED July 13, 2015 Email Share Tweet Save More What’s the latest? Greece and its European creditors announced an agreement in Brussels on Monday that aims to resolve the country’s debt crisis and keep it in the eurozone, but that will require further budgetary belt-tightening that Prime Minister Alexis Tsipras could have trouble selling back in Athens. The agreement does not guarantee that Greece will receive its third bailout in five years. But it does allow the start of detailed negotiations on a new assistance package for Greece. Any easing of Greece’s debt repayment obligations would not include something Greece had previously made a condition of any deal: a so-called haircut, or reduction of the overall debt, which is more than €300 billion. What happens next? One open question is whether the deal gives enough confidence to the European Central Bank to let it continue channeling sorely needed emergency funding to Greek banks. As part of Greece’s commitments, Chancellor Angela Merkel of Germany said, a fund will be created to use the proceeds from selling off assets owned by the Greek government to help pay down the country’s debt. That fund would be “to the tune of” €50 billion, she said. Greece will also be required to seek assistance from the International Monetary Fund and to agree to let the organization continue to monitor the country’s adherence to its bailout commitments. The Greek Parliament will also be required to approve the terms of the agreement “without delay,” according to the document released on Monday morning. The agreement will call for Greece to raise taxes in some cases and pare pension benefits. Despite the agreement, Greek banks are expected to remain closed this week. To reopen, the banks would need more emergency loans from the European Central Bank. How does the crisis affect the global financial system? In the European Union, most real decision-making power, particularly on matters involving politically delicate things like money and migrants, rests with 28 national governments, each one beholden to its voters and taxpayers. This tension has grown only more acute since the January 1999 introduction of the euro, which now binds 19 nations into a single currency zone watched over by the European Central Bank but leaves budget and tax policy in the hands of each country, an arrangement that some economists believe was doomed from the start. Since Greece’s debt crisis began in 2010, most international banks and foreign investors have sold their Greek bonds and other holdings, so they are no longer vulnerable to what happens in Greece. (Some private investors who subsequently plowed back into Greek bonds, betting on a comeback, regret that decision.) And in the meantime, the other crisis countries in the eurozone, like Portugal, Ireland and Spain, have taken steps to overhaul their economies and are much less vulnerable to market contagion than they were a few years ago. Debt in the European Union Gross government debt as a percentage of gross domestic product plotted through the fourth quarter of 2014. Source: Eurostat What if Greece left the eurozone? At the height of the debt crisis a few years ago, many experts worried that Greece’s problems would spill over to the rest of the world. If Greece defaulted on its debt and exited the eurozone, they argued, it might create global financial shocks bigger than the collapse of Lehman Brothers did. Now, however, some people believe that if Greece were to leave the currency union, in what is known as a “Grexit,” it wouldn’t be such a catastrophe. Europe has put up safeguards to limit the so-called financial contagion, in an effort to keep the problems from spreading to other countries. Greece, just a tiny part of the eurozone economy, could regain financial autonomy by leaving, these people contend — and the eurozone would actually be better off without a country that seems to constantly need its neighbors’ support. Greece’s G.D.P. and Unemployment Rates in Europe First quarter 2015 average; *Britain is the three-month average through February. Source: Eurostat Others say that’s too simplistic a view. Despite the frustration of endless negotiations, European political leaders see a united Europe as an imperative. At the same time, they still haven’t fixed some of the biggest shortcomings of the eurozone’s structure by creating a more federal-style system of transferring money as needed among members — the way the United States does among its various states. Exiting the euro currency union and the European Union would also involve a legal minefield that no country has yet ventured to cross. There are also no provisions for departure, voluntary or forced, from the euro currency union. PLAY VIDEO 3:52 A 2013 video on how Greeks were turning to dirty and environmentally damaging solutions for heat after the government raised taxes on heating oil by 450 percent. Credit Video by Nikolia Apostolou on Publish Date February 03, 2013 How did Greece get to this point? Greece became the epicenter of Europe’s debt crisis after Wall Street imploded in 2008. With global financial markets still reeling, Greece announced in October 2009 that it had been understating its deficit figures for years, raising alarms about the soundness of Greek finances. Suddenly, Greece was shut out from borrowing in the financial markets. By the spring of 2010, it was veering toward bankruptcy, which threatened to set off a new financial crisis. To avert calamity, the so-called troika — the International Monetary Fund, the European Central Bank and the European Commission — issued the first of two international bailouts for Greece, which would eventually total more than 240 billion euros, or about $264 billion at today’s exchange rates. The bailouts came with conditions. Lenders imposed harsh austerity terms, requiring deep budget cuts and steep tax increases. They also required Greece to overhaul its economy by streamlining the government, ending tax evasion and making Greece an easier place to do business. Photo A father and daughter at a demonstration in Athens in late June. Credit Eirini Vourloumis for The New York Times If Greece has received billions in bailouts, why is there still a crisis? The money was supposed to buy Greece time to stabilize its finances and quell market fears that the euro union itself could break up. While it has helped, Greece’s economic problems haven’t gone away. The economy has shrunk by a quarter in five years, and unemployment is above 25 percent. The bailout money mainly goes toward paying off Greece’s international loans, rather than making its way into the economy. And the government still has a staggering debt load that it cannot begin to pay down unless a recovery takes hold. Many economists, and many Greeks, blame the austerity measures for much of the country’s continuing problems. The leftist Syriza party rode to power this year promising to renegotiate the bailout; Mr. Tsipras said that austerity had created a “humanitarian crisis” in Greece. But the country’s exasperated creditors, especially Germany, blame Athens for failing to conduct the economic overhauls required under its bailout agreement. They don’t want to change the rules for Greece. Greece’s Creditors Liz Alderman, James Kanter, Jim Yardley, Jack Ewing, Niki Kitsantonis, Suzanne Daley, Karl Russell, Andrew Higgins and Peter Eavis contributed reporting. -- Peace Is Doable -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send an email to [email protected]. Visit this group at http://groups.google.com/group/greenyouth. For more options, visit https://groups.google.com/d/optout.
