Greece: background to the financial debacle

Greece currently has a 14bn euro debt repayment due on March 20 and needs the EU’s money to complete it.

Eurozone ministers agreed a second bailout on Tuesday for the country worth 130bn euros to avoid Greece's bankruptcy. The loan comes under strict conditions including permanent monitoring on the ground. 

Greece promised to reduce its debt to 120.5% of its GDP by 2020 in order to receive the money. International experts fear the rescue deal won’t be enough to meet this target.

How did Greece get into so much trouble?

Even before joining the euro, Greece has always been living beyond its means. In 10 years, the debt never went under 100% of the GDP and successive governments ignored the deficit. 

Greece adopted economic reforms to make borrowing easier in order to become a member of the EU. Public spending increased drastically and tax evasion got out of control.

In December 2009, the Greek government announced that its debt had reached 300bn euros, the highest in its modern history.

Greece received a first bailout worth 110bn euros from the Eurozone and the IMF in 2010. To deal with the debt, the government implemented austerity measures that included massive cuts in public spendings, pensions and reduction in wages.

These measures sparked street protests and anger from the Greek population.

 What is the price of the bailout?

The first loan failed to stop the crisis from worsening and in exchange for the new deal agreed on February 21 this year, Greece will have to apply tougher austerity measures.

The population is once again affected by the new decision to cut 3.3bn euros in salaries and pension.

In addition, an amendment in the constitution will give priority to debt repayments to the expense of government services funding.

However union workers in the country are sceptical the strategy will help restore growth.