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The Greece crisis is approaching its climax. Either Greece will default on its payment or it will get an extension to repay debt. The third option of Greece actually repaying its debt is not possible simply because it does not have money.
Greece and loan defaults go a long way. Greece has the dubious distinction of being the first country in the world to default. Greece is also a chronic defaulter. According to economists Carmen Reinhart and Kenneth Rogoff, Greece has spent 50 of the past 200 years in default.
But this time it is different. Greece will be, if it happens, defaulting on the biggest ever debt in the history of the world.
Read more from our special coverage on "GREECE CRISIS"
How did Greece manage to get here? Here is a timeline of how Greece stands at the precipice of the biggest ever debt default.
1. Earthquake: The foundation of the present default goes back to the 1999 earthquake in Greece that devastated a major part of the country leaving 50,000 buildings to be reconstructed, most of it on government money.
2. Dotcom crisis: The Greek economy depends a lot on shipping and tourism. With the dotcom crisis, which led to a financial crisis, tourism and shipping sector were both impacted, which affected the economy badly.
3. Eurozone brings hope: Greece was not among the first nations to join the Euro zone, but it did so in 2001. Entering the Eurozone meant that the country could borrow more easily and at terms which were far better than Greece would have got on its own credentials.
4. 2004 Olympics: Greece borrowed heavily within the Eurozone to meet the expenditure needed for the 2004 Olympics. Many people within Greece blame the government’s unwarranted spending during Olympics which led to the current crisis. But this is not true. The expenditure needed for the Olympics was $12.2 billion spread over seven years, while the total debt stands at $382 billion. However, the event symbolises the way the Greek government splurged with the easy money it could get from Eurozone.
5. Reality check: Within months of the closing ceremony in Athens, it came to the knowledge of the Eurozone members that the government had fudged their accounts to get in the Eurozone. Though Eurozone members had suspected it since 2004, the new government elected in 2009 admitted that the numbers were cooked up. The country had a fiscal deficit number of 15.7% while earlier government estimates were 6-8%. By this time Greece had a debt to GDP ratio of 113%, the highest in Eurozone.
6. Crisis of confidence: Falsification of numbers led to a crisis of confidence which resulted in bond yields shooting up as few were willing to lend money to Greece. Interest rates touched near the 30% mark.
7. First bailout: On 2 May 2010, the Eurzone countries, European Central Bank (ECB) and International Monetary Fund (IMF), responded by launching a 10 billion euro bailout loan to rescue Greece from sovereign default and meet its financial needs from May 2010 to June 2013. There were however conditions attached. Greece had to implement austerity measures, bring about structural reforms, and privatization of government assets.
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8. 8. 8. 8. 8.Second bailout: However, on account of strict austerity measures the Greek economy worsened despite a delay in implementation by the government of the agreed conditions in the bailout programme. Greece was given a second chance with a bailout of 130 billion euros. All private creditors holding Greek government bonds were required at the same time to sign a deal accepting extended maturities, lower interest rates, and a 53.5% loss of capital. The deal was ratified in February 2012.
9. Further relief: Due to a worsened recession and continued delay of implementation of the conditions in the bailout programme, the lenders agreed to provide Greece with a last round of significant debt relief measures in December 2012. The IMF extended its support with an extra 8.2 billion euros of loans to be transferred during the period of January 2015 to March 2016.
10.Snap polls and even further relief: Just when the economy was picking up, a premature parliamentary election resulted with the extreme left-wing Syriza party winning the election with promises of refusing the terms of the bailout signed by the earlier government, which led to hardship for the people of Greece. After the election, the Eurozone members granted a further four-month technical extension of its current bailout programme to Greece accepting the payment terms attached to its last tranche to be renegotiated with the new Greek government before the end of April so that the review and last financial transfer could be completed before the end of June 2015.
We are now nearing the end of June 2015 and its payback time. Greece still wants to negotiate and delay its payment.
