Greece had been faking accounting data for a decade.
European Union set a very strict guide that Hellenics couldn´t avoid.
Evolution of the recession that damaged Balcanic Peninsula
Greece was the most affected country in the EU during the economic crisis. The large issuance of public debt to finance its deficit reached a point that was worrisome at the end of 2009.
The effects of the Great Recession provoked in the USA was contagious to the Eurozone, and Greece suffered soon that effects due to the vulnerable economy structure of the country.
The structural weaknesses of the Greece economy; the Greek system was destabilized due to the bad planning of the government through the years, as an excessive military expense, lost of fiscal income and the international imbalance created by the design failures of the eurozone, caused the structure of the Greek economy to weaken, making it susceptible to changes in the economy and the economy crisis. The debt and deficit reached levels of GDP, and this situation is unsustainable for any State, so the bankruptcy of the system was uncontrollable.
A growing banking crisis caused by the exposure of European and Greek banks to a drastic increase in private debt in Greece, after the adoption of the common currency, the euro. These events led to the bankruptcy of the banking system in Greece, so the credit was over and no company was able to access financing, so the liquidity of these was reduced to nothing.
A sudden crisis of the creditors due to the scandal about the falsification of the macroeconomic data related to the levels of public debt and budget deficit by the Greek government of Karamanlis since 2001, before entering the euro zone. This fact was the trigger for the large declines in the Athens stock exchange caused by the crisis of confidence of creditors. After this, a rating agency assessed sovereign debt at the level of junk bonds, leaving the country out of the markets with the impossibility of financing itself and with the need for a rescue by the IMF and the EU. The inability to finance the debt forced to make important cuts in the public sector, which caused social demonstrations and riots in the streets.
The First Bailout
In 2010, the Greek government had to ask for a ransom from Europe due to the impossibility of maintaining public debt and the threat of bankruptcy of the system. The Troika formed by the IMF, the European Commission and the ECB, granted the first rescue to Greece, a loan of 110,000 million euros. This rescue contained conditions for the government, which had to impose these measures, such as austerity policies, structural reforms and the privatization of government assets. The cuts in social spending caused many general demonstrations, and the Greek Parliament’s decision on the pensions of public officials ended in protests by this group of workers.
The Second Bailout
The Greek government could not maintain the situation, so it was forced to ask for the second financial bailout in 2011. This request generated a lot of tension with the Central Bank and the International Monetary Fund, which considered ignoring the problem to cause bankruptcy of the Greek system.
However, the 240,000 millions outlay of funs took place in 2012, ratifying the second bailout programme that would increase Greek debt but also would try to join the reductionary policies that EU had set for the mentioned country. It seemed to have kicked in during almost 2 years, but it soon turned to a deterioration of the recession, what increased importantly inestability in the government and on the streets.
Uncertainty reached its highest level when SYRIZA Party won the national elections in 2014, since their ideas were far from respecting EU plans and returning European funds. This provoked the fall of Greek stockmarket prices and liquidity crisis became worse.
President Alexis Tsipras convoked a referendum to consult opinion about renegotiate EU Bailouts, what caused controversy around many sectors.
The Third Bailout
Under these circumstances, the Prime Minister applied a banking block (“corralito”) in order to avoid banking panic or masive deposites extraction.
Despite the fact that referendum results meant refusal to EU and international organuzations policies and adjustments, Greek Government requested a new bailout programme that was finally applied in 2015. It consisted in 86,000 million funds that avoided country bankruptcy and Grexit, which is the current that is in favour of leaving the Euro-Community and European Union.
The conjunction made Alexis Tsipras resign of his charge and convoke elections, that would win again but in coalition with another political party.
It is known as the idea that rised during the Greek crisis to leave the European Union in order to act independently. This would allow the country to devaluate its own currency (possibly the dracma).
Markets from around the world would interprete this reaction as if Eurozone had not credibility since one member can exit and return when it is convinient for its own. Nevertheless, this choice was not effective and Greece stayed in EU after long periods of negotiations.
Consequences of Grexit would have been suspension of payments on the one hand,and on the other hand it would have led German and French credit institutions to bankruptcy.
It was positive having stopped this current since it could have spread to other countries like Spain or Italy, and Eurozone would have lost too much estability.
Social consequences of Greek Recession
It obviously damaged people situation as they saw how their incomes got reduced more and more, violence increased since the country ran out of basic resources.
Public system got worse, so sectors such as health one cuased a decrease in life expectancy and an increase in suicide rate (among others).
Poverty grew noticeably and too many children suffered from alimentary problems according to several population analysis.
“I’m retired. I can not live in these conditions. I refuse to look for food in the trash. That’s why I’ve decided to end my life “. This was a suicide note of a 77-years-old Greek man that was found during this period.