A 48-hour national strike was called.The situation was more than an economic crisis; it became a humanitarian crisis. Following the 2007 world financial crisis, the Eurozone debt crisis and the longterm problems of the Greek economy, Greece faced significant problems, like the high rate of unemployment (25% in December 2012), tax invasion and corruption of the political parties. The catch was that the swap was performed at a fictional exchange rate unrelated to spot or future rates, which hid the true extent of the debt obligation.
2016. In 2011, Greece’s creditors agreed to take a large haircut on their debt of 53.5% of the face value (up from a previous maximum of 50%) to avoid a disorderly default by Greece on its debt.Greece had not had access to the capital markets since 2010 to raise funds. Such substantial increases resulted from earlier actions undertaken by Eurostat as well as initiative taken by the incoming Greek government in spring 2004 to launch a thorough fiscal audit.Revisions in statistics, and in particular in government deficit data, are not unusual. The 2008 financial crisis was the worst economic disaster since the Great Depression of 1929. 2006. The Greek debt crisis. Eurostat Report on Greek Government Deficit and Debt Statistics (January): European Commission. It must run primary surpluses of 3.5% of GDP until 2022, and an average of 2.2% until 2060. Therefore, even a rough gauge was impossible of just how high a premium Greek market interest rates ought to trade to compensate for the higher risk of default.A number of red flags emerging in the run-up to the crisis ought to have forewarned investors of the looming crisis: unsustainable debt levels, lax monetary policy with easy access to credit, massive tax evasion, surging government spending with government tax revenues flat as a share of GDP despite a strongly-growing economy, and the Greek government’s poor track record in providing reliable and honest economic data.Only the luckiest, as opposed to the most highly skilled investors, would have been able to judge the turning point, at some stage in the middle of the current decade, when investor confidence had bottomed, interest rates had peaked, the economy would start growing again, and unemployment would fall. Private-sector lending had been falling through the 1980s, a period associated with strong credit growth in many developed countries because of financial and economic liberalization. Instead of strictly observing its own rules for membership, the EU chose to grant Greece membership. This initial intervention was subsequently referred to as the first Greek bailout.Just days after the bailout was agreed to, the Greek government announced its third austerity package, involving spending cuts and tax increases amounting to EUR30 billion over the next three years. 2012. Although Greek government bond issues in early 2010 were readily taken up by investors, it was at the cost of increasing interest rates, as shown in Exhibit 8. If Greece had not agreed to the single currency, it could have devalued its currency to stimulate exports and its economy and inflate its way out of the crisis. Real GDP contracted by approximately one-fourth between 2009 and 2015.Investors allowed the strong economic upswing and convergence of the Greek economy with its Eurozone partners to distract them from closer scrutiny of Greece’s fundamental financial and economic problems. Despite Greece being beset by economic mismanagement and misreporting of economic performance by successive governments, investors failed to pick up on or act on a growing collection of warning signs.Government policy encouraging a strong but inflationary boom in the run-up to Greece joining the Eurozone, poor financial management, low accountability, excessive public spending, and massive tax fraud—all played a part in bringing about the Greek sovereign debt crisis.