With the impending referendum on Sunday the Greece crisis has become crucial up to the extent of threat looming large of its exit (Grexit - Greece exit) from the Euro bloc. The crisis is not only affecting Greece but the entire European Union and even rest of the world economies.
What is the Greece crisis all about? Here is a cheat-sheet on the Greece's bankruptcy crisis:
- Start of the Greek crisis: The Greece crisis hails back to 2009, which finds its roots in the European debt crisis supposed to have arisen out of the Great Recession. The crisis affected Greece the most supposedly due to the weak financial structure of the country. Greece's debt to GDP ratio was a whopping 146 per cent in 2010.
- Closed doors to private capital lending: The credit rating agencies downgraded the Greece's government debt to junk bond status, thus closing the doors for the country to raise funds via capital lending market.
- Bailout by Troika: The 'Troika' of Eurozone countries, European Central Bank (ECB) and International Monetary Fund (IMF) issued two bailouts of a total of 240 billion euros on condition of implementation of austerity measures by Greece. The austerity measures included pension and wage cuts to reduce government's budget deficit. A delay of implementation of austerity measures by Greece has said to have exacerbated its financial stability. IMF also agreed to issue a third bailout of 8.2 billion euros during January 2015-March 2016.
- Towards growth: In 2014 the situation improved for Greece and there was positive economic growth and improved outlook for the economy to the extent that it was able to access private lending market. Through sale of bonds the government was able to fill the financing gap for 2014.
- Hurdle in recovery: Just when the Greek economy seemed to be on the path of recovery, the decision to hold a premature snap election in December 2014 spoiled it all. The new government refused to adhere to the austerity conditions set by the creditors which made the Troika suspend all pending bailout measures to Greece.
- Failed talks with troika: The new government headed by Prime Minister Alexis Tsipras failed to renegotiate the terms of bailout on June 14, which was considered as its "last attempt" towards recovery. Tsipras refused more conditional austerity measures, including more pension and wage cuts. Tsipras has in fact accused the creditors of trying to "humiliate" Greeks. Tsipras rejected the the EU and IMF demands of spending cuts and tax hikes calling it as a "blackmail" attempt.
- Debt default: Greece, which became the first developed country to default IMF debt, was supposed to repay 1.6 billion euros ($1.8 billion) by June 30. Moody's cut its rating on Greece to 'Caa3' from 'Caa2'.
- Grexit: The crisis headed headed for an impasse as EU and IMF have expressed their inability to negotiate further. Analysts said after Greece being a debt defaulter, the country's membership to the currency bloc came under the scanner.
- Greece capital controls: From June 28, the government put in place capital control measures with the banks and stock markets being closed till July 6. A daily limit of withdrawal of 60 euros from ATMs was also put in place.
- Greece protests: Tens of thousands of Greeks rallied to support their leftwing government's rejection of a tough international bailout. While at the same time there were huge rival rallies against the decision.
- Greece referendum: PM Tsipras put the bailout deal to a referendum. 'No' vote will jeopardise Greece 's membership of the euro. A 'Yes' vote may bring the government down, ushering in a new period of political instability for the country
- Euro down: The European stock market has been volatile since January 22, days before the left-wing Syriza party of Greek Prime Minister Alexis Tsipras won power in a parliamentary election.