Timeline: Greece’s debt crisis

(BestGrowthStock) – European finance ministers discussed Greece’s debt crisis on Friday but said Athens was seeking to clarify how an emergency aid mechanism would work, rather than requesting it.

Here is a timeline of events in Greece leading to the emergency aid deal.

November 2009 – The new government pledges in its 2010 draft budget on November 5 to save Greece from bankruptcy by cutting the budget deficit of 12.7 percent of GDP — more than double the previously announced figure — while keeping electoral promises to help the poor.

— A final budget draft on November 20 shows Greece aims to cut the deficit to 8.7 percent of GDP in 2010 to show EU partners and markets it is serious about restoring fiscal health.

— It also sees public debt rising to 121 percent of GDP in 2010 from 113.4 percent in 2009. EU 2010 forecasts on Greece are worse, with the deficit seen at 12.2 percent of GDP and national debt rising to 124.9 percent, the highest ratio in the EU.

— December 8 Fitch Ratings, which had cut Greece to A- when the government revealed the higher deficit, cuts Greek debt to BBB+ with a negative outlook, the first time in 10 years a ratings agency has put Greece below the A investment grade.

— December 14 Greek Prime Minister George Papandreou outlines policies to cut the budget deficit and try to regain the trust of investors and the EU.

— December 16 S&P cuts Greece’s rating to BBB+ from A-, saying austerity steps announced by Papandreou are unlikely to produce a sustainable reduction in the public debt burden.

— December 22 Moody’s cuts Greek debt to A2 from A1, the third agency to downgrade Greece, but still two notches above that of Fitch and S&P. The spread between 10-year Greek and German Bunds tightens because the downgrade is less severe than expected.

— January 14, 2010 Greece unveils a stability program, saying it will aim to cut its budget gap to 2.8 percent of GDP in 2012 from 12.7 percent in 2009. Unions protesting against the austerity plan announce strikes for February.

— February 2 Papandreou says the government will extend a public sector wage freeze to those earning below 2,000 euros a month for 2010, excluding seniority pay hikes.

— February 3 The EU Commission says it backs Greece’s plan to reduce its budget deficit below 3 percent of GDP by 2012 and urges Greece to cut its overall wage bill.

— Greece must refinance 54 billion euros in debt in 2010, with a crunch in the second quarter as more than 20 billion euros becomes due. A 5-year bond issue in January is five times oversubscribed but the government has to pay a hefty premium.

— February 24 A one-day general strike against the austerity measures cripples Greece’s transport and public services.

— February 25 An EU mission to Athens with IMF experts delivers a grim assessment of the nation’s economy.

— Finance Ministry official says the inspectors anticipate Greece can cut the deficit by about 2 percentage points, short of a 4 percentage point target for 2010.

March 2010 – EU Economic Affairs Commissioner Olli Rehn asks Greece to announce further measures to tackle its budget crisis.

— March 5 A new package of public sector pay cuts and tax increases is passed by the government to save an extra 4.8 billion euros. The measures include raising VAT by 2 percentage points to 21 percent, cutting public sector salary bonuses by 30 percent, increases in tax on fuel, tobacco and alcohol, and freezing state-funded pensions in 2010.

— March 11 Public and private sector workers strike.

— March 15 Euro zone finance ministers agree on a mechanism that will allow them to help Greece financially if needed, but reveal no details.

— March 18 Papandreou warns Athens will not be able to make deficit cuts if its borrowing costs remain high and may have to call in the IMF.

— March 19 European Commission President Jose Manuel Barroso urges EU member states to agree a standby aid package for Greece. Barroso says the 16 countries that share the euro currency should be ready to make coordinated bilateral loans.

— March 25 European Central Bank President Jean-Claude Trichet says that the ECB will extend softer rules on collateral, easing the risk of Greek institutions being cut off from funding at the end of this year.

— Euro zone leaders agree to create a joint financial safety net, with the IMF, to help Greece and to try to restore confidence in the euro. Under the accord, Athens will receive coordinated bilateral loans from other countries that use the euro and money from the IMF, but only if all states agree to the bailout and if it has exhausted its borrowing options. — April 6 A top finance ministry denies that Greece is seeking an amendment to the safety net agreement. Investors batter Greek assets before and after the denial.

April 11 – Euro zone finance ministers approve a giant 30-billion-euro ($40 billion) emergency aid mechanism for debt-plagued Greece but stress Athens had not requested the plan be activated yet.

April 13 – European Central Bank policymakers give the thumbs-up to the euro zone’s rescue package as the country passed a key test of its ability to raise fresh funds.

April 15 – EU monetary chief Olli Rehn says there is no possibility that Greece will default on its debts and no reason to doubt Germany’s commitment to an EU pledge to help.

— An International Monetary Fund official says that Greece has expressed interest in a three-year precautionary IMF agreement, which will only be tapped when Greece requests the funding.

— Parliament adopts a tax reform bill, backing government moves to tackle tax evasion and shift the fiscal burden to higher-income earners as Athens looks for ways to slash its massive budget deficit.

April 16 – European finance ministers, meeting in Madrid, discuss Greece’s debt crisis but say Athens was seeking to clarify how an emergency aid mechanism would work, rather than requesting it.

Penny Stocks

(Writing by David Cutler, London Editorial Reference Unit and Renee Maltezou, Athens bureau; Editing by Susan Fenton)

Timeline: Greece’s debt crisis