Economic Crisis of 2009-2012
From late 2009, fears of a sovereign debt crisis developed among investors concerning Greece's ability to meet its debt obligations due to strong increase in government debt levels. This led to a crisis of confidence, indicated by a widening of bond yield spreads and risk insurance on credit default swaps compared to other countries, most importantly Germany. Downgrading of Greek government debt to junk bonds created alarm in financial markets.
On 2 May 2010, the Eurozone countries and the International Monetary Fund agreed on a €110 billion loan for Greece, conditional on the implementation of harsh austerity measures. In October 2011, Eurozone leaders also agreed on a proposal to write off 50% of Greek debt owed to private creditors, increasing the EFSF to about €1 trillion and requiring European banks to achieve 9% capitalization to reduce the risk of contagion to other countries. These austerity measures have proved extremely unpopular with the Greek public, precipitating demonstrations and civil unrest.
There are widespread fears that a Greek default on its debt would have global repercussions, endangering the economies of many other countries in the European Union, threatening the stability of the European currency, the euro, and possibly plunging the world into another recession. It has been speculated that the crisis may force Greece to abandon the euro and bring back its former currency, the drachma.
Read more about this topic: History Of Modern Greece
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