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Greek bailout agreements By Depi Svyrinaki Frini Kollitiri Vasia Nikolopoulou Contents Introduction – Background Causes of the Greek Crisis First Economic Adjustment Program Second Economic Adjustment Program Third Economic Adjustment Program • Greece joined the European Communities on 1 January 1981, adopted the Euro in 2001 and became the 12th member of the Eurozone area. Over the next 7 years the country's GDP per capita nearly tripled, from $12,400 in 2001 to $31,700 in 2008 High living standards… • Widespread investments in industrial enterprises and heavy infrastructure • funds from the European Union • growing revenues from tourism, shipping and a fast-growing service sector In the meantime though… • The Greek government, encouraged by the European Commission, European Central Bank, private banking institutions, and the Greek business community also took out loans • Government deficits were also consistently underreported Causes of the Greek Debt Crisis As the Financial crisis of 2007–08 began to affect Greece's economy, the country's GDP fell by nearly 20% from 2008 to 2010 and the government's capacity to repay its creditors was drastically reduced. • Excessive expenditures • Tax evasion Causes of the Greek Debt Crisis • Unregulated labor market • Corruption • Heavy loans in order to fund government bugdet and current account deficit • Accumulated high levels of debt when the markets were liquid And then in 2010… First Economic Adjustment Programme • On 2 May 2010, the Eurogroup agreed to provide bilateral loans pooled by the European Commission for a total amount of €80 billion to be disbursed over the period May 2010 through June 2013 • The financial assistance, agreed by euro-area Member States, was part of a joint package, with the IMF committing additional €30 billion under a stand-by arrangement (SBA). • In exchange, Prime Minister Papandreou commits to austerity measures, including 30 billion euros in spending cuts and tax increases. Second Economic Adjustment Programme • On February 21 2012 EU agrees to New Greek Bailout. The deal includes a 53.5 percent debt write down—or “haircut"—for private Greek bondholders. • In exchange, Greece must reduce its debt-to-GDP ratio from 160 percent to 120.5 percent by 2020. Greece and its private creditors complete the debt restructuring on March 9. Second Economic Adjustment Programme • The euro area Member States and the IMF committed the undisbursed amounts of the first programme (Greek Loan Facility) plus an additional €130 billion for the years 2012-14. • The second programme would be financed by the European Financial Stability Facility (EFSF), which had been fully operational since August 2010 Between the Second and the Third Programme • EU Adopts Fiscal Compact • ECB Unveils Unlimited Bond-Buying Plan • Eurozone Revises Greek Bailout • Greek Parliament Approves Austerity Measures Between the Second and the Third Programme • Greece Returns to International Bond Market • ECB Announces Quantitative Easing • Syriza Wins the Elections • Greek Bailout Expires • Greek Parliament Supports New Deal Third Economic Adjustment Programme • It started on 19 August 2015 and is scheduled to run until 20 August 2018. • The financial assistance of up to €86 billion is provided by the European Stability Mechanism (ESM). • The conditions for receiving financial assistance include a number of measures and reforms • The overall aim of the programme is to secure a return to sustainable economic growth in Greece. That’ s all folks…