Greek government employees during a protest
European leaders reached an agreement with Greece in late October to help prevent it from going bankrupt. The European Commission, European Central Bank (ECB), and International Monetary Fund (IMF) announced the deal, which amounts to a second bailout for the distressed southern European nation. Greece will receive around 110 billion euros ($152.11 billion) in loans from countries within the eurozone and from the IMF. Banks agreed to write off 50 percent of the face value of their Greek debt—meaning they would demand repayment of just half their original loans.
The Greek government has already implemented austerity measures including tax hikes and pension and salary cuts for public-sector employees. Now Greeks will have to tighten their belts further. So far, such measures have failed to reduce significantly the country’s huge budget deficit, and most investors have lost confidence in Greece’s ability to repay its debts. With the government unable to secure financing, the Greek economy has shrunk by 5.5 percent this year. The Greek finance minister warned that the present “difficult situation” was necessary in order to prevent the “catastrophe” that would result from a default.
Earlier in October, as the Greek parliament passed austerity measures, youths rioted in Athens, clashing with police during a massive antigovernment protest. Police used tear gas and stun grenades in response, and demonstrators set up burning barricades in the streets and occupied government buildings. Fifty police were injured, as well as a few protesters.
The goal of the bailout is to prop up the Greek economy, reassure financial markets, and prevent the spread of woes to other debt-laden European economies like Spain and Italy. The common currency union, which includes Greece and 15 and other European nations that share the euro, is under severe strain. A default by Greece could cause severe disruptions to the economies of France and Germany, whose banks hold billions in Greek debt.
For more, see “Greek Debt Crisis Threatens Stability of Euro.”
Image credit: LOUISA GOULIAMAKI/AFP/Getty Images
- Eurozone Crisis Explained
Find breaking news on the Greek debt crisis, as well as background, context, and perspective here.
(Source: BBC News, October 27, 2011)
Review the developing Greek debt crisis, basic facts about the eurozone, and details of the new deal to help Greece avoid default.
(Source: New York Times; accessed October 28, 2011)
- It’s All Connected: An Overview of the Euro Crisis
To better understand the European debt crisis and the relationships between national economies check out this interactive graphic.
(Source: New York Times, October 22, 2011)
- Greece: Riots as Austerity Steps Get 1st Approval
Read about the riots that erupted against austerity measures, as Greece’s debt crisis worsened in October.
(Source: Associated Press, October 19, 2011)