User:Papastc/sandbox

A recent history of Greece's unsustainable debt.

* Early 1980's-2008:

Successive Greek governments promised civil servants lavish salaries and pension benefits with the view of getting elected or re-elected. As Greece did not have the wealth to support such salaries and benefits, successive Greek governments went to the markets and borrowed the money.

* 2008-2010:

The sub-prime mortgage crisis hits the US in 2008. The European Union leaders did nothing about the crisis as they thought it would not affect Europe.

When the ripple effects from the sub-prime created a credit crunch, the Greek government found itself without creditors to borrow money from and with a debt that it could not service.

* 2010-2015:

In 2010, most of the Greek debt was held by major European banks. Those banks lent heavily to Greece since the inception of the euro thinking their money was safe as Greece was part of the Eurozone. They were wrong.

European leaders faced a conundrum in 2012. If Greece was let to go bankrupt then major European banks would have faced serious problems as banks did in the US due to sub-price crisis. Faced with such a prospect and instead of bailing out the banks who due to questionable due diligence practices lent to Greece to such extent, European governments decided to bail out Greece, without any debt forgiveness.

This meant that all the greek debt held by the European banks would have to be transferred to European taxpayers. As a result the European institutions and the IMF gave additional loans to Greece to pay out old loans plus interest. Consequently, Greece found itself with a 250+ billions of euro debt, which of course cannot be repaid given the size of the Greek Economy.

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