Euro Crises Timeline – AJ SMITH
Timeline: The unfolding eurozone crisis An elderly protester shouts slogans during a rally against the government’s latest austerity measures The current situation in Greece and beyond is the biggest test the euro has ever faced Continue reading the main story Global Economy Crisis jargon buster Charting Europe’s economic woes What caused the eurozone crisis? Q&A: EU treaty to control budgets The euro, the dream of many a politician in the years following World War II, was established in Maastricht by the European Union (EU) in 1992. To join the currency, member states had to qualify by meeting the terms of the treaty in terms of budget deficits, inflation, interest rates and other monetary requirements. Of EU members at the time, the UK, Sweden and Denmark declined to join the currency. Since then, there have been many twists and turns for the countries that use the single currency.
1999
On 1 January, the currency officially comes into existence. 2001 Greece joins the euro.
2002
On 1 January, notes and coins are introduced. 2008 Malta and Cyprus join the euro, following Slovenia the previous year. In December, EU leaders agree on a 200bn-euro stimulus plan to help boost European growth following the global financial crisis.
2009
Slovakia joins the euro. Estonia, Denmark, Latvia and Lithuania join the Exchange Rate Mechanism to bring their currencies and monetary policy into line with the euro in preparation for joining. In April, the EU orders France, Spain, the Irish Republic and Greece to reduce their budget deficits – the difference between their spending and tax receipts. In October, amid much anger towards the previous government over corruption and spending, George Papandreou’s Socialists win an emphatic snap general election victory in Greece. In November, concerns about some EU member states’ debts start to grow following the Dubai sovereign debt crisis. In December, Greece admits that its debts have reached 300bn euros – the highest in modern history. Greece is burdened with debt amounting to 113% of GDP – nearly double the eurozone limit of 60%. Ratings agencies start to downgrade Greek bank and government debt. Mr Papandreou insists that his country is “not about to default on its debts”.
2010
In January, an EU report condemns “severe irregularities” in Greek accounting procedures. Greece’s budget deficit in 2009 is revised upwards to 12.7%, from 3.7%, and more than four times the maximum allowed by EU rules. The European Central Bank dismisses speculation that Greece will have to leave the EU. In February, Greece unveils a series of austerity measures aimed at curbing the deficit. Concern starts to build about all the heavily indebted countries in Europe – Portugal, Ireland, Greece and Spain.
On 11 February, the EU promises to act over Greek debts and tells Greece to make further spending cuts. The austerity plans spark strikes and riots in the streets. In March, Mr Papandreou continues to insist that no bailout is needed. The euro continues to fall against the dollar and the pound. The eurozone and IMF agree a safety net of 22bn euros to help Greece – but no loans. In April, following worsening financial markets and more protests, eurozone countries agree to provide up to 30bn euros in emergency loans. Greek borrowing costs reach yet further record highs. The EU announces that the Greek deficit is even worse than thought after reviewing its accounts – 13.6% of GDP, not 12.7%.
Finally, on 2 May, the eurozone members and the IMF agree a 110bn-euro bailout package to rescue Greece. The euro continues to fall and other EU member state debt starts to come under scrutiny, starting with the Republic of Ireland. In November, the EU and IMF agree to a bailout package to the Irish Republic totalling 85bn euros. The Irish Republic soon passes the toughest budget in the country’s history. Amid growing speculation, the EU denies that Portugal will be next for a bailout. 2011 On 1 January, Estonia joins the euro, taking the number of countries with the single currency to 17. In February, eurozone finance ministers set up a permanent bailout fund, called the European Stability Mechanism, worth about 500bn euros.
In April, Portugal admits it cannot deal with its finances itself and asks the EU for help. In May, the eurozone and the IMF approve a 78bn-euro bailout for Portugal. In June, eurozone ministers say Greece must impose new austerity measures before it gets the next tranche of its loan, without which the country will probably default on its enormous debts. Talk abounds that Greece will be forced to become the first country to leave the eurozone. In July, the Greek parliament votes in favour of a fresh round of drastic austerity measures, the EU approves the latest tranche of the Greek loan, worth 12bn euros. A second bailout for Greece is agreed. The eurozone agrees a comprehensive 109bn-euro ($155bn; £96.3bn) package designed to resolve the Greek crisis and prevent contagion among other European economies. In August, European Commission President Jose Manuel Barroso warns that the sovereign debt crisis is spreading beyond the periphery of the eurozone. The yields on government bonds from Spain and Italy rise sharply – and Germany’s falls to record lows – as investors demand huge returns to borrow.
On 7 August, the European Central Bank says it will buy Italian and Spanish government bonds to try to bring down their borrowing costs, as concern grows that the debt crisis may spread to the larger economies of Italy and Spain. The G7 group of countries also says it is “determined to react in a co-ordinated manner,” in an attempt to reassure investors in the wake of massive falls on global stock markets. During September, Spain passes a constititional amendment to add in a “golden rule,” keeping future budget deficits to a strict limit. Italy passes a 50bn-euro austerity budget to balance the budget by 2013 after weeks of haggling in parliament. There is fierce public opposition to the measures – and several key measures were watered down. The European Commission predicts that economic growth in the eurozone will come “to a virtual standstill” in the second half of 2011, growing just 0.2% and putting more pressure on countries’ budgets. Greek Finance Minister Evangelos Venizelos says his country has been “blackmailed and humiliated” and a “scapegoat” for the EU’s incompetence. On 19 September, Greece holds “productive and substantive” talks with its international supporters, the European Central Bank, European Commission and IMF. The following day, Italy has its debt rating cut by Standard & Poor’s, to A from A+. Italy says the move was influenced by “political considerations”. That same day, in its World Economic Outlook, the IMF cuts growth forecasts and warns that countries are entering a ‘dangerous new phase’. The gloomy mood continues on 22 September, with data showing that growth in the eurozone’s private sector shrank for the first time in two years. The sense of urgency is heightened on 23 October, when IMF head Christine Lagarde urges countries to “act now and act together” to keep the path to economic recovery on track. On the same day, UK Prime Minister David Cameron calls for swift action on the debt crisis. The next day US Treasury Secretary Timothy Geithner tells Europe to create a “firewall” around its problems to stop the crisis spreading. A meeting of finance ministers and central bankers in Washington on 24 September leads to more calls for urgent action, but a lack of concrete proposals sparks further falls in share markets. After days of intense speculation that Greece will fail to meet its budget cut targets, there are signs of a eurozone rescue plan emerging to write down Greek debt and increase the size of the bloc’s bailout fund. But when, on 28 September, European Union head Jose Manuel Barroso warns that the EU “faces its greatest challenge”, there is a widespread view that the latest efforts to thrash out a deal have failed. The sense that events are spinning out of control are underlined by Foreign Secretary William Hague, who calls the euro a “burning building with no exits”. On 4 October, Eurozone finance ministers delay a decision on giving Greece its next instalment of bailout cash, sending European shares down sharply. Speculation intensifies that European leaders are working on plans to recapitalise the banking system.
On 6 October the Bank of England injects a further £75bn into the UK economy through quantitative easing, while the European Central Bank unveils emergency loans measures to help banks. Financial markets are bolstered by news on 8 October that the leaders of Germany and France have reached an accord on measures to help resolve the debt crisis. But without publication of any details, nervousness remains. Relief in the markets that the authorities will help the banking sector grows on 10 October, when struggling Franco-Belgian bank Dexia receives a huge bailout. On 10 October, an EU summit on the debt crisis is delayed by a week so that ministers can finalise plans that would allow Greece its next bailout money and bolster debt-laden banks.
On 14 October G20 finance ministers meet in Paris to continue efforts to find a solution to the debt crisis in the eurozone.
On 21 October eurozone finance ministers approve the next, 8bn euro ($11bn; £7bn), tranche of Greek bailout loans, potentially saving the country from default. On 26 October European leaders reach a “three-pronged” agreement described as vital to solve the region’s huge debt crisis. After marathon talks in Brussels, the leaders say some private banks holding Greek debt have accepted a loss of 50%. Banks must also raise more capital to protect them against losses resulting from any future government defaults.
On 9 December, after another round of talks in Brussels going through much of the night, French President Nicolas Sarkozy announces that eurozone countries and others will press ahead with an inter-governmental treaty enshrining new budgetary rules to tackle the crisis. Attempts to get all 27 EU countries to agree to treaty changes fail due to the objections of the UK and Hungary. The new accord is to be agreed by March 2012, Mr Sarkozy says. 2012 On 13 January, credit rating agency Standard & Poor’s downgrades France and eight other eurozone countries, blaming the failure of eurozone leaders to deal with the debt crisis. Three days later, the agency also downgrades the EU bailout fund, the European Financial Stability Facility.
Also on 13 January, talks between Greece and its private creditors over a debt write-off deal stall. The deal is necessary if Greece is to receive the bailout funds it needs to repay billions of euros of debt in March. The talks resume on 18 January. The “fiscal pact” agreed by the EU in December is signed at the end of January. The UK abstains, as does the Czech Republic, but the other 25 members sign up to new rules that make it harder to break budget deficits. Weeks of negotiations ensue between Greece, private lenders and the “troika” of the European Commission, the European Central Bank and the IMF, as Greece tries to get a debt write-off and make even more spending cuts to get its second bailout. On 10 February, Greece’s coalition government finally agrees to pass the demands made of it by international lenders. This leads to a new round of protests. But the eurozone effectively casts doubt on the Greeks’ figures, saying Athens must find a further 325m euros in budget cuts to get the aid.
On 12 February, Greece passes the unpopular austerity bill in parliament – two months before a general election. Coalition parties expelled more than 40 deputies for failing to back the bill. On February 22, a Markit survey reports that the eurozone service sector has shrunk unexpectedly, raising fears of a recession. The next day the European Commission predicts that the eurozone economy will contract by 0.3% in 2012. March begins with the news that the eurozone jobless rate has hit a new high. However, the economic news takes a turn for the better just days later with official figures showing that the eurozone’s retail sales increased unexpectedly in January by 0.3%, and the OECD reports its view that the region is showing tentative signs of recovery. On 13 March, the eurozone finally backs a second Greek bailout of 130bn euros. IMF backing was also required and was later given. The month ends with a call from the OECD for the eurozone rescue fund to be doubled to 1tn euros. The German chancellor, Angela Merkel says she would favour only a temporary boost to its firepower.
On 12 April, Italian borrowing costs increase in a sign of fresh concerns among investors about the country’s ability to reduce its high levels of debt. In an auction of three-year bonds, Italy pays an interest rate of 3.89%, up from 2.76% in a sale of similar bonds the previous month. Attention shifted to Spain the next day, with shares hit by worries over the country’s economy and the Spanish government’s 10-year cost of borrowing rose back towards 6% – a sign of fear over the country’s creditworthiness.
On 18 April, the Italian government cut its growth forecast for the economy in 2012. It was previously predicting that the economy would shrink by 0.4%, but is now forecasting a 1.2% contraction. On 19 April, there was some relief for Spain after it saw strong demand at an auction of its debt, even though some borrowing costs rose. The 10-year bonds were sold at a yield of 5.743%, up from 5.403% when the bonds were last sold in February.
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