July 16, 2015

Greek Prime Minister Alexis Tsipras during a session of parliament on the evening of July 15, 2015. Credit: © Aris Messinis, AFP/Getty Images

Late last night, Greek lawmakers voted to accept austerity measures proposed by the European Union (EU) in return for a financial bailout of 86 billion euros ($94 billion). No one had been sure how the vote late on Wednesday would go. Greek legislators were asked to choose between two difficult options. On the one hand, they could choose a reform package of austerity measures similar to those that, over the last five years, had inflicted great hardship on Greece and its people and to which 60 percent of the Greek people had voted “no” just last week. The other choice led to leaving the eurozone and probably the EU, reinstating its old currency (the drachma), and the upheaval of financial collapse.

Greek Prime Minister Alex Tsipras came to power on Jan. 26, 2015, as the leader of Syriza, an anti-austerity party. After five years of EU-mandated austerity, the Greek government still owed a large amount in national debt and the Greek economy had shrunk by 25 percent. On July 5, the Greek people had voted against a nearly identical bailout package in a national referendum. Tsipras had pushed hard for debt reduction for Greece as part of the bailout, but stronger members of the EU, especially Germany, were totally opposed. Tsipras stated that although he strongly disagreed with the terms of the final EU bailout deal, he still was asking the Greek parliament to vote in favor of it. The bill passed, but some 60 members voted against it, including 32 from Tsipras’s own party, splitting the unity of Syriza.

The bailout package must garner parliamentary approval by all of the eurozone countries. Until this bailout can be finalized, the EU is preparing a bridge fund of 7 billion euros to reopen Greece’s banks and temporarily prop up its economy.

A report from the International Monetary Fund (IMF), released on Tuesday, July 14, stated that debt reduction needed to be a part of the bailout given to Greece in order for the country to have any hope of recovering from its economic woes. The IMF was quoted in the report as saying, “Greece will need debt relief far beyond what eurozone partners have been prepared to consider due to the devastation of its economy and banks in the last two weeks.” Because the IMF is a major creditor for Greece, perhaps there will be some additional negotiation concerning this bailout, Greece’s third in five years.

Other Behind the headline articles: 

• EU agrees to bailout terms for Greece (July 2015)
• Greece Votes Oxi! (July 2015) 
• Greece Closes Banks, as Economic Crisis Escalates (June 2015)
• Greece Gets a Reprieve (February 2015) 

August 14, 2013

The longest recession to hit the eurozone has officially ended, economists at Eurostat, the statistical office for the European Union (EU), announced today. Economists generally define a recession as the contraction of a nation’s gross domestic product for two consecutive quarters. Eurostat officials said the eurozone’s recession, which began in the fourth quarter of 2011, ended during the second quarter of 2013, as the group’s collective economic output grew by a total of 0.3 percent. The recession was the longest in continental Europe in the past 40 years. The eurozone, which was founded in 1999, consists of 17 EU countries that use the euro as a common currency.

Economists cautioned, however, that economic growth across the eurozone remained uneven. The bloc emerged from the recession mainly because of growth in France and Germany, whose economic output increased by 0.5 and 0.7 percent, respectively. However, the economies of some eurozone countries, including Italy, the Netherlands, and Spain, continued to contract during the second quarter, though at a slower rate. In Greece, the rate of economic contraction slowed slightly. Portugal, one of the bloc’s weakest economies, grew by a surprising 1.1 percent.

The euro has replaced the individual currencies of 17 member nations of the European Union. (European Central Bank)

Officials noted that unemployment across the eurozone remains high, exceeding 25 percent in some countries. They also warned that despite the the good news, Europe’s economy remains deeply troubled. “I hope there will be no premature, self-congratulatory statements stating ‘the crisis is over,’” the EU’s top monetary official wrote in a blog.

Additional World Book articles:

• Crisis in the Eurozone (a Special Report)
• Economics, World 2010 (a Back in Time article)
• Economics, World 2011 (a Back in Time article)

June 20, 2012

Antonis Samaras, the leader of Greece’s conservative New Democracy Party, was sworn in as prime minister, heading a three-party coalition that is committed to upholding Greece’s bailout commitments. His New Democracy party joined forces with the leftist PASOK party and the smaller Democratic Left party. The formation of the new coalition government ended–at least for now–a protracted political crisis that threatened to plunge Europe deeper into financial chaos. New Democracy won recent parliamentary elections with 29.67 percent of the vote. The leftist Syriza party, which came in second, ran on its opposition to the terms of a bailout that kept Greece from defaulting on its national debt earlier this year. European officials had warned that failing to live up to the terms of the agreement could result in Greece’s expulsion from the eurozone.

In March, the European Union and International Monetary Fund loaned Greece 130 billion euros (172 billion dollars), but the conditions were severe. The agreed upon program of “austerity” was designed to drastically lower Greece’s national debt. This was to be accomplished by slashing public sector jobs, the minimum wage, and old-age pensions; it also called for Greece to privatize–that is, to sell off–such publicly owned assets as transportation and utility companies. According to many economists, the austerity program has, in fact, plunged Greece’s economy deeper into recession–pushing unemployment higher and depressing tax revenues. These economists also argue that austerity has dragged Greece even deeper into debt.

The Parthenon crowns Athens, the capital of Greece. (© Dagli Orti, The Art Archive)

While not rejecting the terms of the bailout, Samaras’s New Democracy party seeks to change it. However, both German Chancellor Angela Merkel and the German foreign minister have stated that the substance of the bailout agreement is “not negotiable,” though the “timeframe could be discussed.” Speaking in Athens, Greek political and economic analyst Theodore Couloumbis noted, “The crisis has been postponed, not necessarily averted. For this [latest] government to last it has to show results. You can’t continue with 50 percent youth unemployment and a fifth straight year of recession.”

Additional World Book articles:

• Bond
• Euro
• Economics 2010 (a Back in Time article)
• Economics 2011 (a Back in Time article)
• Greece 2011 (a Back in Time article)
• Crisis in the Eurozone (a special report)

June 18, 2012

Antonis Samaras, leader of Greece’s conservative New Democracy Party, met with President Karolos Papoulias today to discuss the formation of a new coalition government. New Democracy won yesterday’s parliamentary elections with 29.67 percent of the vote, guaranteeing that Greece will remain in the eurozone, at least for now. The leftist Syriza party came in second with 26.9 percent of the vote. Syriza ran on its opposition to the terms of a bailout that kept Greece from defaulting on its national debt earlier this year. European officials had warned that failing to live up to the terms of the agreement could result in Greece’s expulsion from the eurozone.

In March, the European Union and International Monetary Fund loaned Greece 130 billion euros (172 billion dollars), but the conditions were severe. The agreed upon program of “austerity” was designed to drastically lower Greece’s national debt. This was to be accomplished by slashing public sector jobs, the minimum wage, and old-age pensions; it also called for Greece to privatize–that is, to sell off–such publicly owned assets as transportation and utility companies. According to many economists, the austerity program has, in fact, plunged Greece’s economy deeper into recession–pushing unemployment higher and depressing tax revenues. These economists also argue that austerity has dragged Greece even deeper into debt.

The Parthenon crowns Athens, the capital of Greece. (© Dagli Orti, The Art Archive)

While not rejecting the terms of the bailout, Samaras’s New Democracy party seeks to change it. However, both German Chancellor Angela Merkel and the German foreign minister have stated that the substance of the bailout agreement is “not negotiable,” though the “timeframe could be discussed.”

Speaking in Athens, Greek political and economic analyst Theodore Couloumbis noted, “The crisis has been postponed, not necessarily averted. For this [latest] government to last it has to show results. You can’t continue with 50 percent youth unemployment and a fifth straight year of recession.”

Additional World Book articles:

• Bond
• Euro
• Economics 2010 (a Back in Time article)
• Economics 2011 (a Back in Time article)
• Greece 2011 (a Back in Time article)
• Crisis in the Eurozone (a special report)

Dec. 9, 2011

European Union (EU) leaders, meeting in Brussels, Belgium, have agreed to a pact that requires member nations to enforce stricter fiscal (public finance) discipline in their national budgets. In the future, financial officials of member nations will submit tax and spending plans to EU officials for their approval before showing budgets to their government. The accord includes penalties for breaking deficit limits. (A deficit is the amount by which a sum of money falls short.)  The actions were taken in response to the current eurozone debt crisis. (The eurozone consists of the 17 member countries of the European Union that have adopted the euro as their single currency.) Investors worldwide fear that Greece, Ireland, Italy, Portugal, and Spain could default (fail to pay when due) on their national debts–that is, their government bonds. A default by Italy, Europe’s third-largest economy, could throw economies around the world into recession if not depression.

The EU leaders also agreed to provide an additional $200 billion ($268 billion) to the International Monetary Fund to shore up the European bailout fund to cover Italy and Spain through the current debt crisis. A permanent $500-billion ($670-billion) European Stability Mechanism will be put into effect by July 2012, which will run concurrently with the existing $440-billion ($590-billion) European Financial Stability Facility. The new rules on spending and budgets will not be implemented by an EU treaty but by an intergovernmental treaty, which will likely be more easily ratified (approved) by individual countries.

German Chancellor Angela Merkel, along with French President Nicholas Sarkozy, served as architects of the plan to impose fiscal discipline on eurozone countries. © Sean Gallup, Getty Images

Efforts to reach unanimity (complete agreement) among the 27 EU member nations, as desired by German Chancellor Angela Merkel, failed. British Prime Minister David Cameron insisted that the United Kingdom be exempted from certain financial regulations. Analysts see his objections chiefly as a means to protect “the city of London,” that is, Britain’s highly important banking and financial services sector. International affairs experts noted that while Europe is taking a big step towards closer integration, the United Kingdom appears to be isolating itself, limiting its influence on the future course of events.

Additional World Book articles

• Europe
• Money
• Back in Time (Europe 1999 – euro launched)

Nov. 13, 2011

Mario Monti, a highly respected economist and a former European Union (EU) commissioner, has been nominated to become Italy’s prime minister and form a new government to tackle the acute national debt crisis. (National debt is the total amount that a federal government owes because of money it has borrowed by selling bonds or other securities.) Italy’s former prime minister, Silvio Berlusconi, formally resigned on November 12 after a new austerity package (strict economic measures) were passed by both houses of parliament. The austerity package includes a mixture of tax increases and spending cuts with the aim of saving 59.8 billion euros ($89.6 billion) to balance the budget by 2014. On November 9, the yield, or rate of interest, on 10-year Italian government bonds shot above 7 percent. (A bond is a certificate issued by a government promising to pay back money it has borrowed). Higher-risk bonds must pay a higher interest rate to attract buyers. When the interest rate on the government bonds of Greece and Ireland in 2010 and Portugal in 2011 climbed to 7 percent, the three countries were forced to seek bailouts from the European Union to avoid bankruptcy (the state of being legally unable to pay debts).

The euro has replaced the individual currencies of 17 member nations of the European Union, including Italy and Greece. European Central Bank

On November 10, Greek political leaders named Lucas Papademos as prime minister. Papademos, also a respected economist, is a former vice president of the European Central Bank. The coalition (multiparty) government he will lead has pledged to save Greece from bankruptcy by quickly approving the tough terms of the second bailout package that was approved by European Union leaders on October 26.

Additional World Book articles:

• Economics
• Crisis in the Eurozone (a special report)