The Eurozone Debt Crisis and Greece

In October 2009 Greece's new government revealed that its budget deficit was far larger than previously reported, around 12 percent of GDP rather than about 6 percent, and it was later revised higher still. Investors began demanding much higher interest rates from Greece and then from other euro members with high debts or banking problems, including Ireland, Portugal, Spain and Cyprus. Because these countries shared the euro, they could not devalue, and the crisis threatened the currency itself.

Greece received rescue loans from euro-area governments and the IMF from 2010, conditioned on deep spending cuts and tax increases, and in 2012 private bondholders accepted large losses. Greek GDP fell by roughly a quarter and unemployment peaked above 27 percent. In July 2012 ECB President Mario Draghi pledged to do 'whatever it takes' to preserve the euro, calming markets. Debate continues over whether austerity was necessary discipline or deepened the depression, and over how responsibility should be shared between lenders and borrowers.