The 

Greek government-debt crisis was the sovereign debt crisis faced by Greece in

the aftermath of the financial crisis of 2007–08. Widely known in the country as The
Crisis (Greek: Η Κρίση), it reached the populace as a series of sudden reforms
and austerity measures that led to impoverishment and loss of income and property, as
well as a small-scale humanitarian crisis.[6][7] In all, the Greek economy suffered the
longest recession of any advanced mixed economy to date. As a result, the Greek
political system has been upended, social exclusion increased, and hundreds of
thousands of well-educated Greeks have left the country.[8]

The Greek crisis started in late 2009, triggered by the turmoil of the world-wide Great
Recession, structural weaknesses in the Greek economy, and lack of monetary policy
flexibility as a member of the Eurozone.[9][10] The crisis included revelations that previous
data on government debt levels and deficits had been underreported by the Greek
government:[11][12][13] the official forecast for the 2009 budget deficit was less than half the
final value as calculated in 2010, while after revisions according to Eurostat methodology,
the 2009 government debt was finally raised from $269.3bn to $299.7bn, i.e. about 11%
higher than previously reported.[citation needed]

The crisis led to a loss of confidence in the Greek economy, indicated by a widening
of bond yield spreads and rising cost of risk insurance on credit default swaps compared
to the other Eurozone countries, particularly Germany.[14][15] The government enacted 12
rounds of tax increases, spending cuts, and reforms from 2010 to 2016, which at times
triggered local riots and nationwide protests. Despite these efforts, the country required
bailout loans in 2010, 2012, and 2015 from the International Monetary Fund, Eurogroup,
and European Central Bank, and negotiated a 50% "haircut" on debt owed to private
banks in 2011, which amounted to a €100bn debt relief (a value effectively reduced due
to bank recapitalisation and other resulting needs).

After a popular referendum which rejected further austerity measures required for the
third bailout, and after closure of banks across the country (which lasted for several
weeks), on 30 June 2015, Greece became the first developed country to fail to make an
IMF loan repayment on time[16] (the payment was made with a 20-day delay).[17][18] At that
time, debt levels stood at €323bn or some €30,000 per capita,[19] little changed since the
beginning of the crisis and at a per capita value below the OECD average,[20] but high as
a percentage of the respective GDP.

Between 2009 and 2017, the Greek government debt rose from €300bn to €318bn.[21]
[22]
 However, during the same period the Greek debt-to-GDP ratio rose up from 127% to
179%[21] due to the severe GDP drop during the handling of the crisis.

Historical crisis

Greece, like other European nations, had faced debt crises in the 19th century, as well as
a similar crisis in 1932 during the Great Depression. The 2010-2018 debt crisis lead to
several references to Greece's default history including those by economists Carmen
Reinhart and Kenneth Rogoff, who wrote that "From 1800 until well after World War II,
Greece found itself virtually in continual default".[26] (actually Greece became independent
in 1830, and between 1830 and WWII it recorded fewer cases of default than Spain or
Portugal [23]). In general, however, during the 20th century Greece enjoyed one of the
highest GDP growth rates in the world[27] (for a quarter century – early 1950s to mid
1970s – second in the world after Japan). Average Greek government debt-to-GDP for
the entire century before the crisis (1909–2008) was lower than that for the UK, Canada
or France[23][25] (see table), while for the 30-year period until its entrance into the European
Economic Community in 1981,[28] the Greek government debt-to-GDP ratio averaged only
19.8%.[25] Indeed, accession to the EEC (and later the European Union) was predicated
on keeping the debt-to-GDP well below the 60% level; and certain members watched this
figure closely.[29]

Between 1981 and 1993 it steadily rose, surpassing the average of what is today the
Eurozone in the mid-1980s. For the next 15 years, from 1993 to 2007 (i.e. before
the Financial crisis of 2007–2008), Greece's government debt-to-GDP ratio remained
roughly unchanged (the value was not affected by the 2004 Athens Olympics), averaging
102%[25][30] – a value lower than that for Italy (107%) and Belgium (110%) during the same
15-year period,[25] and comparable to that for the U.S. or the OECD average in 2017.[31]

During the latter period, the country's annual budget deficit usually exceeded 3% of GDP,
but its effect on the debt-to GDP ratio was counterbalanced by high GDP growth rates.
[23]
 The debt-to GDP values for 2006 and 2007 (about 105%) were established
after audits resulted in corrections according to Eurostat methodology, of up to 10
percentage points for the particular years (as well as similar corrections for the years
2008 and 2009). These corrections, although altering the debt level by a maximum of
about 10%, resulted in a popular notion that "Greece was previously hiding its debt".

he 2001 introduction of the euro reduced trade costs between Eurozone countries,
increasing overall trade volume. Labour costs increased more (from a lower base) in
peripheral countries such as Greece relative to core countries such as Germany without
compensating rise in productivity, eroding Greece's competitive edge. As a result,
Greece's current account (trade) deficit rose significantly.[32]

A trade deficit means that a country is consuming more than it produces, which requires
borrowing/direct investment from other countries.[32] Both the Greek trade
deficit and budget deficit rose from below 5% of GDP in 1999 to peak around 15% of
GDP in the 2008–2009 periods.[33] One driver of the investment inflow was Greece's
membership in the EU and the Eurozone. Greece was perceived as a higher credit
risk alone than it was as a member of the Eurozone, which implied that investors felt the
EU would bring discipline to its finances and support Greece in the event of problems.[34]

As the Great Recession spread to Europe, the amount of funds lent from the

European core countries (e.g. Germany) to the peripheral countries such as Greece
began to decline. Reports in 2009 of Greek fiscal mismanagement and deception
increased borrowing costs; the combination meant Greece could no longer borrow to
finance its trade and budget deficits at an affordable cost.[32]

A country facing a 'sudden stop' in private investment and a high (local

currency) debt load typically allows its currency to depreciate to encourage investment
and to pay back the debt in devalued currency. This was not possible while Greece
remained in the Euro.[32] "However, the sudden stop has not prompted the European
periphery countries to move toward devaluation by abandoning the euro, in part because
capital transfers from euro-area partners have allowed them to finance current account
deficits".[32] In addition, to become more competitive, Greek wages fell nearly 20% from
mid-2010 to 2014,[citation needed] a form of deflation. This significantly reduced income and
GDP, resulting in a severe recession, decline in tax receipts and a significant rise in
the debt-to-GDP ratio. Unemployment reached nearly 25%, from below 10% in 2003.
Significant government spending cuts helped the Greek government return to a
primary budget surplus by 2014 (collecting more revenue than it paid out,
excluding interest).[

The Greek crisis was triggered by the turmoil of the Great Recession, which lead the
budget deficits of several Western nations to reach or exceed 10% of GDP.[23] In the case
of Greece, the high budget deficit (which, after several corrections, was revealed that it
had been allowed to reach 10.2% and 15.1% of GDP in 2008 and 2009, respectively[36])
was coupled with a high public debt to GDP ratio (which, until then, was relatively stable
for several years, at just above 100% of GDP- as calculated after all corrections).[23] Thus,
the country appeared to lose control of its public debt to GDP ratio, which already
reached 127% of GDP in 2009.[21] In contrast, Italy was able (despite the crisis) to keep its
2009 budget deficit at 5.1% of GDP,[36] which was crucial, given that it had a public debt
to GDP ratio comparable to Greece's.[21] In addition, being a member of the Eurozone,
Greece had essentially no autonomous monetary policy flexibility.[9][10]

Finally, there was an effect of controversies about Greek statistics (due the
aforementioned drastic budget deficit revisions which led to an increase in the calculated
value of the Greek public debt by about 10%, public debt to GDP ratio of about 100%
until 2007), while there have been arguments about a possible effect of media reports.
Consequently, Greece was "punished" by the markets which increased borrowing rates,
making it impossible for the country to finance its debt since early 2010.
In January 2010, the Greek Ministry of Finance published Stability and Growth Program
2010.[37] The report listed five main causes, poor GDP growth, government debt and
deficits, budget compliance and data credibility. Causes found by others included excess
government spending, current account deficits, tax avoidance and tax evasion.[37]