A Chronology of the European Sovereign Debt Crisis1

By Babak Amini

2008:

January 1: Cyprus and Malta join the Eurozone, bringing the total number of members to fifteen.

February 3: Dimitris Christofias of the Progressive Party of Working People (AKEL) wins the second round of the Cypriot presidential election with 53.4% of the vote, becoming the first communist to hold a presidential position in the EU.

September 15: Lehman Brothers, the fourth largest investment bank in the US, files for bankruptcy, triggering a chain reaction in the world economy leading to global financial crisis. European banks have been experiencing shortage of liquidity since August 2007. The European Central Bank (ECB) responds by liquidity injection (August and December 2007) and by an increase of interest rates (July 2008).

October 8: As pressure on European banks increases, the ECB announces fixed-rate full allotment to support the European banks with liquidity.

November 26: The ECB announces a two-year €200bn stimulus package (€170bn of which is to be supplied by national governments) to help European economies confront the global financial crisis.

2009:

January 1: Slovakia becomes the newest member of the Eurozone.

January 14: Standard & Poor’s Financial Services (S&P), one of the most important credit-rating agencies in the world, downgrades Greece’s credit rating from A to A-, citing weakness in fiscal management.2 This is followed by the downgrading of Spain from AAA to AA+ four days later, after the government of Spain announces a €90bn stimulus package.

April 27: S&P downgrades Greece’s credit rating to ‘junk’ status (meaning highly speculative), citing the country’s weak economic, political, and budgetary conditions.

June 4-7: European Parliament elections. The Christian Democratic group European People’s Party (EPP) leads with 35.8% (274 seats), followed by the Progressive Alliance of Socialists and Democrats (S&D) with 25.6% (196 seats). The European United Left/Nordic Green Left (GUE/NGL) achieves 4.6% (35 seats).

October 4: PASOK wins the Greek parliamentary election (with 43.9%: 160 seats) and George Papandreou becomes Prime Minister. This is primarily due to popular resentment towards the New Democracy party for corruption and reckless spending. On October 20, the new government officially announces that the deficit is 12.5% of GDP, much higher than previously estimated.3

2010:

January 14: After an EU report condemned “severe irregularities” in Greece’s accounting,4 the Greek government announces a three-year plan to reduce the public deficit to 2.8% of GDP in 2012, which includes cutting public sector wages and reforming tax schemes and pensions. After a period of uncertainty about which partners should assist Greece, EU leaders agree to cooperate with the IMF to provide a rescue package to the country.

May 2: The Eurozone and IMF unveil a three-year rescue package to Greece amounting to €110bn (€30bn from the IMF and the rest from the EU) in return for imposing austerity measures to reduce public deficit from 13.5% to 3% by 2014. In response, 100,000 Greek protesters take to the streets of Athens, shouting “let the plutocracy pay”.5 This is followed by a general strike on May 11, with large demonstrations in major Greek cities.

May 9: The Eurozone members agree to establish a European Financial Stability Facility (EFSF) with a total budget of €440bn. This is coupled with a separate initiative called the European Financial Stabilization Mechanism (EFSM) to raise up to €60bn in financial markets backed by the European Commission (EC), to provide financial relief for troubled member states and ensure stability of the Euro, which is falling rapidly against the US dollar. Soon after, the epicenter of the crisis shifts to Ireland.

September 30: The Irish central bank announces that the cost of bailing out the Anglo-Irish Bank could be up to €34bn (5% of GDP), causing the country’s public deficit to go up to 32% of GDP. This announcement is followed by a downgrading of Ireland’s credit rating by all three major credit rating agencies (Fitch Rating, Moody’s, and S&P).

October 28: The EU leaders agree to establish a permanent mechanism, European Stability Mechanism (ESM), to deal with crisis in the Eurozone, with maximum lending budget of €500bn, to eventually retire the two earlier initiatives, the EFSF and EFSM.6

November 24: A few days after the Irish government issued a request for financial assistance, the EU and the IMF approve an €85bn bailout package to Ireland in return for harsh austerity measures to meet the target of a 3% deficit by 2014.7

2011:

January 1: A new member, Estonia, joins the Eurozone.

February 23: 100,000 workers, pensioners, and students in Greece attend a demonstration leading to violent clashes with the police.

March 26: 250,000 people join a march in London, organized by the Trade Union Congress, against budget cuts in the public sector.

April 6: Portugal announces that the country needs external aid in order to deal with its deepening financial issues.

May 15: The 15M anti-austerity movement is launched with massive multi-day demonstrations in numerous cities across Spain.

May 17: The European Council agrees to a three-year bailout package for Portugal totaling €78bn (€26bn pledged by the IMF).

June 19: Papandreou, who wins a vote of confidence from the Greek parliament, announces that the country needs a second €110bn bailout package.

June 30: The Greek parliament passes a new €28.4bn austerity plan, which includes new tax hikes (€15bn) over 5 years, and cuts to social benefits and the public sector (€13bn), with an additional €50 from privatization of public assets.8 This provokes a two-day general strike.

July 21: The troika agrees to the second bailout package of €109bn for Greece, but this time with a call for voluntary participation of the private sector.9

August 7: The ECB begins to buy Spanish and Italian government bonds to ease the market pressure and lower the governments’ borrowing cost.

September 14: The Italian parliament passes a €50bn austerity package, to meet its deficit targets by 2013. However, these ‘structural adjustments’ by Spain and Italy do not stop the rating agencies from downgrading the credit ratings of these two countries in October. Top political and financial leaders in the UK, the US, and the EU call for swift and coordinated actions to contain the crisis.

October 6: The Bank of England announces it would inject £75bn into the UK economy through quantitative easing (QE) for the first time since its November of 2009 decision to increase the size of its QE to £200bn.

October 11: The Slovak coalition government collapses after Prime Minster Iveta Radičová ties approval of the plan to expand the EFSF rescue fund (requiring Slovakia to provide a guarantee worth €7.7bn) to a confidence vote. However, the Slovak parliament ratifies the plan (the last Eurozone country to do so) two days after calling for a new election.

October 15: Some 40,000 people in Lisbon and another 20,000 in Oporto march against austerity measures recently passed by the government, chanting “This debt is not ours!” and “IMF, get out of here now!”10 There is also a global day of protest in affiliation with the Occupy movement, held in 900 cities around the world, with hundreds of thousands participating.11 Political elites seem oblivious to the overwhelming public disagreement with the path of austerity.

October 21: Another bailout package of €8bn is approved for Greece, one day after new austerity measures are fast-tracked by the Greek parliament to prevent Greece from defaulting on its debt.

October 27: The Eurozone leaders reach an agreement with private shareholders to accept a 50% loss on Greek bonds and provide an additional €130bn bailout fund to the country. In addition, they increase the EFSF budget to €1 trillion.

October 31: Prime Minister Papandreou announces that Greece should hold a referendum on the latest debt deal. However, he calls off the plan on November 3 amid internal and external pressures.

November 11: The Italian parliament rushes a new round of austerity measures and approves the formation of an interim government to replace Prime Minister Silvio Berlusconi.

November 13: Mario Monti, the former EU commissioner, is named by the Italian President, Giorgio Napolitano, to head the government responsible for implementing harsh austerity measures.

November 20: The right-wing People’s Party gains a majority in the Spanish parliament, making Mariano Rajoy the Prime Minister. He soon proposes an additional €30bn in austerity measures and €10bn in stimulus measures.

November 26: The S&P downgrades the credit rating of Belgium from AA+ to AA, citing ‘political uncertainty’ while the country has failed to form a federal government since June 2010. Portugal’s credit rating is downgraded to ‘junk’ status (by Fitch), as is Hungary’s (by Moody’s), on November 24 and 25 respectively.

November 27: 100,000 protesters take to the streets of Dublin to demonstrate against the austerity measures imposed on Ireland. This is followed by a massive strike in the UK with the involvement of 24 trade union (with over 3 million members) against the public sector pension reforms.11

December 21: In the largest liquidity operation, the ECB pumps €489bn into 523 banks across Europe at an interest rate of 1% on the three-year loan.

2012:

January 14: The year 2012 starts with a series of credit-downgradings by the S&P including France (to AA+), Italy (to BBB+), Spain (to A), Cyprus (‘junk’), and Portugal (‘junk’).13 Two days later, the S&P downgrades the EFSF (to AA+), making it more difficult for the EFSF to raise money for the bailouts.

January 31: 25 out of 27 EU members agree to a fiscal treaty for tighter budgetary discipline, imposing automatic sanctions on countries that breach EU deficit limits and requiring changes in budgetary rules in the national laws. It also allows the European Court of Justice to monitor compliance. The UK and Czech Republic opt out, citing legal concerns and constitutional reasons.

February 12: In Greece, to be eligible for the second bailout package, the parliament passes a €3.3bn austerity package which includes laying off 150,000 public sector workers by 2015 and lowering the minimum wage by 22% to €600 per month.14 However, political turmoil forces the Greek coalition government to expel from its ranks the 43 MPs who do not support the bill. While the political debate is underway in parliament, 500,000 protesters gather outside the parliament building in opposition to the proposed bill. The European leaders welcome this ‘cooperation’ from the Greek government and agree that the private-sector creditors will take a 53.5% cut in the nominal value of their Greek government bonds rather than the 50% agreed earlier. Soon after, the troika approves a bailout package for Greece worth €130bn.

February 29: As the second ‘long-term refinancing operation’, the ECB releases €529.53bn in loans to 800 European financial institutions.

March 30: The Spanish government passes a budget containing €27.3bn of new cuts to meet the 5.3% target deficit demanded by Eurozone leaders. The deepening crisis in large economies such as Spain and Italy forces the Eurozone leaders to boost the ESM and the EFSF budget from €500bn to €700bn. This is followed by a substantial increase in IMF funding resources after it receives €430bn through international pledges,15 doubling its lending power.

April 23: The push for austerity leads to the collapse of the Dutch government, as Prime Minister Mark Rutte and his cabinet resign in protest against the new austerity measures.

May 6: Popular resistance against austerity take a sharp left-turn in the Greek election, as voters shift their support from pro-austerity to anti-austerity parties such as the radical left party SYRIZA (16.8%). After several days of negotiations, the parties fail to form a coalition and another election is called for June 17. On the same day, François Hollande, Socialist Party candidate, wins the second round of the French presidential election, defeating the conservative former president, Nicolas Sarkozy.

May 25: Despite efforts of the Spanish government to resolve its banking crisis, Bankia (Spain’s 4th largest bank) requests for a bailout worth €19bn, after it was partially nationalized two weeks earlier.

May 31: In the northern Spanish province of Asturias, 8,000 coalminers go on an indefinite strike in opposition to cuts in subsidies for the mining sector (by 64%),16 setting up barricades and later marching to Madrid.

June 9: Spain formally requests a €100bn bailout to recapitalize its banks.

June 17: The New Democracy party in Greece win 29.7% (129 seats), closely followed by SYRIZA with 26.9% (71 seats) – a clear sign of growing popularity of the radical left.

July 11: The Spanish government passes another harsh austerity package worth €65bn; in response, more than 100,000 protesters come out against the measures in 80 cities.

July 27: Assurances ECB president Mario Draghi — “the EBC is ready to do whatever it takes to preserve the Euro. And believe me, it will be enough”17 – ease the market tension temporarily after Cyrus becomes the newest Eurozone member to request a bailout at the end of June. However, the market starts to fall in July as Italian and Spanish bond yields grow and an increasing number of Spanish regional governments ask for bailout from the central government.

September 11: The Eurozone shows more leniency as it grants Spain and Portugal an additional year to meet their deficit targets.

September 15: Tens of thousands of people participate in anti-austerity rallies in cities across Spain and Portugal.

October 9: A few days after the Greek parliament unveils the 2013 budget (which at the time of the bill’s passage on November 11 amounts to €13.5bn),18 in a symbolic display of solidarity, German Chancellor Angela Merkel visits Athens to discuss the Greek bailout terms, even though Germany and France had repeatedly rejected Greece’s request for an extension. She is welcomed by 50,000 anti-austerity protesters who clash with riot police.

November 14: In a coordinated day of action across Europe, millions of people take part in actions against austerity.

November 27: Despite growing disagreement between the IMF and EU regarding sustainability of the Greek debt, they finally agree to cut the debt by €40bn.

November 28: The Eurozone bails out four failing Spanish banks with €37bn, in exchange for which the banks lay off more than 10,000 of their workers, despite an unemployment rate of 26.1%.

December 13: An important step toward creating a European banking union is taken as the European finance ministers reach an agreement on rules of direct supervision over about 200 European banks by the ECB.19

December 25: Portugal puts airports, utilities, and broadcasting companies up for auction to fulfill the troika’s demand for privatization of state companies worth €5bn.

2013:

January: The month is filled with optimistic messages from the heads of the troika, of course always from the perspective of the market as opposed to ordinary people, that the European debt crisis will soon be over. This is just after Cyprus’s request for a €17bn bailout from the Eurozone to recapitalize its troubled banks is rejected by Germany, and at a time of growing political instability in Spain and Italy.

February 7: A ‘historic’ moment comes when Ireland reaches an agreement with the ECB to restructure its bank debt.20 As the periphery countries are fighting for survival, statistics show Germany’s trade surplus of €188bn, a record high since the 1950s.21

February 18: Workers at the Spanish airline, Iberia, go on a five-day strike to protest the company’s decision to cut its workforce by 20% (3,800 jobs), resulting in violent clashes with riot police. Another general strike two days later brings the country to a standstill.

February 23: Tens of thousands of students and union members gather in many cities in Spain to show their defiance against austerity measures and the government.

February 24: In Cyprus, Nicos Anastasiades, the conservative Democratic Rally candidate wins the runoff for the presidency. In Italy, the center left coalition led by Pier Luigi Bersani defeats Berlusconi’s People of Liberty party in the legislative election.

March 2: Hundreds of thousands of Portuguese protesters in several cities (500,000 in Lisbon alone)22 demonstrate against austerity measures, which have brought widespread misery.

March 14: As EU leaders gather in Brussels for a summit focusing on economic growth, tens of thousands of protesters demand that they address the growing unemployment and precarious work in Europe, chanting “Abolish austerity” and “Education cuts never heal”.23

March 19: After several days of uncertainty and protests, the Cypriot parliament overwhelmingly rejects the proposal to impose a levy on all bank savings24 as part of the bailout deal with the troika. The government orders the banks to remain closed as the ECB threatens to cut the emergency lending to Cypriot banks by March 25 if a deal is not reached.25

March 22: After failing to reach a deal with Russia, the government of Cyprus commits a taboo in the eyes of the European elite, as it engages in severe capital control, limiting daily cash withdrawals, placing tough restrictions on money transfers, etc. The troika provides a €10bn bailout, however, after the government agrees to close down its second largest bank (the Laiki Bank), impose significant losses on private investors, cut pensions, and ‘reform’ the welfare system.26

April 9: Amid growing fear that the sovereign debt crisis might reach the Central European member states, Slovenia’s Prime Minister assures that her government is committed to fixing the banking system and will not seek a bailout.

June 1: As unemployment throughout Europe continues to reach record highs, some 2,500 protesters from the anti-capitalist “Blockupy” movement march in Frankfurt and block the access to the EBC, chanting “Block the ECB – Fight Capitalism and Austerity” and “Humanity before Profit”.27

June 11: In a remarkably militant action, the 2,500 workers of the Hellenic Broadcasting Corp. (ERT), defy the government order – after the troika leaders’ visit to Athens – to close the station as an economy move; they have kept the station running ever since.

June 27: Nationwide general strikes are held in Portugal in the midst of growing instability within the government over the bailout terms and a shrinking economy.

July 1: Croatia joins the European Union, as its 28th member-state.

July 17: The Greek parliament narrowly approves a new set of austerity measures after an intense two-day debate, while large scale street protests and general strikes have become a norm and the country’s economy continues to shrink.

September 16: Tens of thousands of union members gather in Warsaw to oppose the center-right government and demand a minimum-wage increase and better job security.28

September 19: Official announcement comes that Ireland’s economic recession has ended, although the country continues to grapple with high unemployment.

October 19: 70,000 protesters in Rome march against the 2014 austerity budget; tens of thousands of protesters take to the streets in several cities in Portugal; great numbers of protests and strikes take place also in Greece, Spain, and France.

December 15: Ireland becomes the first country to exit the troika bailout program, with a debt at 130.4% of GDP, while warning its citizens that there would be a “tough road ahead”.29

2014:

January 1: Latvia becomes the newest member of the Eurozone. Unemployment is at 25.8% in Spain, 27.8% in Greece, and 24% in Europe as a whole.30 The discontent has strengthened the far right, notably in France.

January 17: Some 17,000 demonstrators, mainly organized by right-wing groups, march in Paris against the president and high unemployment, holding signs such as “The French are angry!” and “You, President, Resign”.31

March 4: The Cypriot parliament approves the plan for privatization of public assets – including major companies such as CYTA (telecommunication), EAC (energy supply), and the Cypriot Port Authority – as a condition for getting bailout funds from the troika.32

May 22 – 25: In European Parliament elections, GUE/NGL makes major gains, amid signs of an overall economic recovery of Europe, albeit asymmetrical as periphery countries (except Ireland) are struggling to stay on track.

December 29: The call for an early election in Greece sparks new hopes that a break from austerity within the Eurozone could be found in the radical left, with SYRIZA.

2015:

January 1: Lithuania joins the Eurozone while speculation over the possibility of Greece becoming the first country to exit the Eurozone is mounting.

January 25: SYRIZA triumphs in the Greek election (with 2 seats short of absolute majority), making for the most left-wing parliament in Europe. It soon forms a coalition government with the national-conservative party ANEL (4.7%).

May 17: Portugal formally exits the bailout program, leaving the country with a €214bn debt and an economy shrunk by 4% compared to 2010.

June 27: After a long period of tense negotiations between the Greek government and the troika, Prime Minister Alexis Tsipras calls for a referendum on the final bailout deal offered by the Eurozone leaders.

July 5: The Greek referendum produces a resounding popular rejection of austerity, with 61.3% of voters saying No to the proposed deal. However, SYRIZA is unable to use this result to get a better deal.

July 16: The Greek parliament approves the bailout deal, with significant austerity measures. 39 SYRIZA MPs vote against the bill.

August 20: Prime Minister Tsipras, submits his resignation to trigger a snap election in September, seven months after he took office.

August 21: A group of 25 dissident SYRIZA MPs break away from the party and announce the formation of a new anti-austerity Popular Unity party, headed by the former energy minister Panagiotis Lafazanis.

September 12: Jeremy Corbyn is elected as leader of the British Labour Party in a landslide victory with 59.5% of the vote on a progressive platform which includes fighting against government’s austerity programs, nationalizing the railways, and abolishing university fees.

September 20: SYRIZA wins the Greek election with 35.5% of the vote (145 seats), followed by the New Democracy party with 28.1% (75 seats). SYRIZA is expected to form a coalition government with ANEL. Popular Unity receives 2.9%, short of the 3% needed to get a seat in parliament.

Notes

1. Multiple sources have been used here to assure accuracy. They include: ‘Timeline: The unfolding eurozone crisis’, BBC (13 June 2012);
http://www.theguardian.com/business/debt-crisis; http://www.bruegel.org/blog/eurocrisistimeline; https://www.stratfor.com/topics/economics-and-finance/europes-economic-crisis; D. Whitfield, Opposing Austerity: Organising and Action Strategies, Australian Workplace Innovation and Social Research Centre (University of Adelaide, 2014); C. Laskos, and E. Tsakolatos, Crucible of Resistance: Greece, the Eurozone & the World Economic Crisis (New York: Pluto Press, 2013), 148-59; M. Baimbridge and P. B. Whyman, Crisis in the Eurozone: Causes, Dilemmas and Solutions (London and New York: Palgrave, 2015), viii-xx.

2. The credit rating of a country matters because it affects the borrowing cost for that country and, consequently, for its banks and companies. On the role of credit agencies in fueling the crisis, see P. Bartholomew, ‘Credit rating agencies and the sovereign debt crisis: performing the politics of creditworthiness through risk and uncertainty’, Review of International Political Economy, 20(4), 788-818.

3. This is much higher than the limitations outlined in the Stability and Growth Pact, with government deficit at 3% of GDP and public debt level at 60% of GDP.

4. European Commission, Report on Greek Government Deficit and Statistics, COM (2010) 1 final, (Brussel, January 8 2010), 4.

5. H. Smith, ‘Greek bailout: Athens burns – and crisis strikes at heart of the EU’, The Guardian (May 5 2010).

6. The treaty was officially signed on July 11, 2011.

7. On November 28, it is announced that €35bn of the bailout package would be allocated to the Irish banks. The government is given an additional year until 2015 to meet the deficit requirement of 3%. ‘Irish Republic €85bn bailout agreed’, BBC (November 28 2010).

8. ‘Austerity Measures: Where the Axe Will Fall in Greece’, Spiegel (June 29 2011).

9. This very modest proposal for burden-sharing is enough for Fitch Rating to put Greece into “restricted default” (RD) rating.

10. A. Khalip, ‘Protesters in Lisbon surround parliament’, Reuters (October 15 2011).

11. Some of the largest gatherings include 200,000 in Rome (RT), 60,000 in Barcelona (The Guardian), 50,000 in Madrid, 25,000 in Santiago (The Guardian), and 20,000 in Rome (RT).

12. G. Gall, ‘30 November: who’s striking and why’, The Guardian [Online], (18 November 2011).

13. Other countries include Austria, Slovakia, Slovenia, and Malta.

14. K. Hope, ‘Greek parliament debates austerity bill’, Financial Times (February 12 2012).

15. Euro area: $200bn; Japan: $60bn; South Korea $15bn; UK: $15bn; Sweden: $10bn; Norway: $9.3bn; Poland: $8bn; Australia: $7bn; Denmark: $7bn; Singapore: $4bn. ‘IMF doubles its lending firepower’, BBC (20 April 2012).

16. P. Mitchell, and V. Short, ‘Miners strike escalates in Spain’, World Socialist Website [Online] (June 14 2012).

17. D. Milliken, ‘Draghi sends strong signal that the ECB will act’, Reuters (July 27 2012).

18. This comes despite numerous large-scale protests and after a two-day general strike (November 6-8).

19. Details of the agreement at
www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/134265.pdf

20. This plan allows Ireland to replace the €28bn in promissory notes (IOUs) that it used to stabilize its banks in 2010 with long-term government bond, pushing back its repayment to 2043. This would save Ireland the massive annual payment (including the interest) of €3.1bn that it had to pay on its debt. However, the plan involves the liquidation of the public bank Irish Bank Resolution Corporation, which entails a loss of 1,000 jobs. J. Smyth and M. Steen, ‘Dublin hails ‘historic’ debt restructure’, Financial Times (February 7 2013); H. McDonald, ‘Ireland secures deal to reduce Anglo Irish Bank debt repayments’, The Guardian (February 7 2013).

21. J. Moulds, ‘Germany’s trade surplus rises to second highest level since 1950’, The Guardian (February 8 2013).

22. A. Khalip, ‘Portuguese march against austerity, want government out’, Reuters (March 2 2013).

23. T. Nykiel, ‘”Abolish austerity” Brussels protesters tell EU leaders’, Reuters (March 14 2013).

24. The rate is 6.75% for those who have less than €100,000 and 9.9% for those with more than that amount. ‘Shock in Cyprus as savers face bailout levy’, BBC (16 March 2013).

25. The deal is contingent on Cyprus finding a way to raise €6bn.

26. Savings of less than €100,000 are exempt from these losses.

27. ‘Anti-Capitalist Protest: ‘Blockupy’ Surrounds ECB in Frankfurt’, Spiegel Online (May 31 2013).

28. ‘March for jobs: Thousands of anti-govt protesters rally in Poland’, RT (September 14 2013).

29. H. McDonald, ‘Enda Kenny thanks Irish people after exit from IMF-EU bailout programme’, The Guardian (December 15 2013).

30. A. Monaghan, ‘Biggest fall in eurozone unemployment since 2007’, The Guardian (January 31 2014).

31. ‘Day of Anger: Thousands rally in Paris to protest Hollande’s policies’, RT (January 26 2014).

32. J. Shilton, ‘Cyprus parliament passes privatisation programme’, World Socialist Website [Online] (March 20 2014).

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