2010 Year in Review - Greece

The euro Related Links Greece Country Profile Ireland Country Profile 2010 Year in Review 2010 News of the Nation 2010 People in the News 2010 Places in the News Quiz Country Profiles

Greece and Ireland Battered by Financial Crisis

Both Countries Bailed Out by IMF

The financial crisis took its toll on Europe, with Greece and Ireland among the hardest hit. The International Monetary Fund and the European Union stepped in to rescue both countries on the brink of financial collapse to both shore up their economies and prevent a similar fate in other European countries mired in debt.

Greece Leads in the Fall

George Papandreou was elected prime minister in October 2009 and immediately faced a public debt that caused fears that the country might default on its debt. He acknowledged that Greece's deficit had risen to 12.7% of GDP, much higher than the 3.7% reported by the previous administration, and called for stark austerity measures, including deep spending cuts, a crackdown on tax evasion, and an increase in fuel prices.

In April, shortly after Papandreou requested a $60 billion bailout package from the European Union and the International Monetary Fund, Standard & Poor's downgraded Greece's bond rating to junk status, a move that caused further fear that the country would default on its debt. Germany balked at the aid package without promises of further spending cuts from Greece. While Germany stalled, the needed amount of assistance ballooned. In early May, Greece agreed to implement deep cuts to its social services, crack down on corruption, increase the retirement age, and other measures in exchange for $146 billion in aid, which will be distributed over three years. Protests broke out over the cuts, and three people were killed when a bank was set on fire. The protests quickly waned, and by the end of the summer Greece had met the economic benchmarks set by the IMF and thus qualified for the next round of aid.

Celtic Tiger Loses Its Teeth

Ireland's economic decline began during the global financial crisis of 2008. The country slipped into recession in 2008, and unemployment hit 11% in February 2009, the highest rate in 13 years. By the end of 2009, Ireland's economy had contracted by 10%. The economic malaise was largely due to a housing bubble that burst, which in turn saddled banks with bad loans, causing the financial sector to nearly collapse under the weight of the bad debt. Indeed, the Celtic Tiger suffered endured a stunning revearsal of fortune.

In November 2010, Ireland sought and received a $113 billion (85 billion euro) bailout package from the European Union and the International Monetary Fund to shore up its banks. The rescue took its toll on Prime Minster Cowen, who rejected demands to call for new elections, opting instead to set them for 2011 after a new budget, with deep spending cuts and other austerity measures, passed.