Anatomy of a crisis

HOW GREECE SLIPPED INTO ECONOMIC MELTDOWN:From November 2009 to Friday April 23 2010

NOVEMBER 2009– Greece's new government pledges to save Greece from bankruptcy by cutting the budget deficit of 12.7 per cent of GDP – more than double the previously announced figure – while keeping electoral promises to help the poor.

DECEMBER 2009– A series of credit rating agencies cut Greece's rating. Fitch Ratings 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. Heavy selling of Greek stocks and bonds ensues amid concerns that the countrys financial decline is irrevocable.

Prime minister George Papandreou outlines policies to cut its budget deficit, including a reduction in public spending and a crackdown on corruption.

JANUARY 2010– The International Monetary Fund announces it is to send a mission to Athens to advise the government on budgetary controls and pension reforms, but insists it will have no role in vetting the country's fiscal plan. Greece is condemned by the European Commission for falsifying data on its public finances.

JANUARY 15th– Greece unveils an ambitious three-year stability programme, saying it will aim to cut its budget gap to 2.8 per cent of GDP in 2012, from 12.7 per cent in 2009.

Alarm over the financial health of the country appears to be abating towards the end of the month as international investors flock to buy the government’s first bond issue of the year. However, the government has to pay a hefty premium.

FEBRUARY 2nd– Papandreou announces the government will extend a public sector wage freeze to those making below €2,000 a month for 2010, excluding seniority pay hikes.

Meanwhile, leaders of euro-zone countries commit to helping Greece if needed. A one-day general strike is held in Greece on February 24th. The following day markets are knocked on the back of warnings of further downgrades by rating agencies.

MARCH 2010– Once again investors snap up the government's bond issue, although the interest rate is one of the highest Greece has paid for a 10-year bond since it joined the euro.

EU Economic Affairs Commissioner Olli Rehn (above) pushes Greece to announce further measures to tackle its budget crisis. A new package of public sector pay cuts and tax increases is passed by the government, with the aim of saving and extra €4.8 billion.

MARCH 11th– Public and private sector workers strike.

MARCH 15th– Euro-zone finance ministers agree a mechanism that will allow them to help Greece financially if needed, but reveal no details. Three days later 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. European Commission president José Manuel Barroso (left) urges EU member states to agree a standby aid package for Greece.

APRIL 2010– Euro-zone finance ministers approve a €30 billion emergency aid mechanism for Greece, but stress Athens had not requested the plan be activated yet. Ahead of a meeting of European finance ministers in Madrid, 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.

European and IMF officials due in Athens to discuss details of the aid package are delayed by the volcanic ash cloud across Europe, adding to investor uncertainty and pushing Greek debt spreads over German bonds to a euro-era record of 482 basis points.

Investors continue to dump Greek assets on a lack of clarity about a potential aid deal. The Greek 10-year bond rises to 8.4 per cent, the highest since at least 1998.

APRIL 22nd– As an IMF delegation visits Athens, the EU's statistics office reveals Greece's budget gap in 2009 was worse than feared, triggering a fresh slide in Greek asset prices. Two- year government bond yields soar four percentage points to 12.26 per cent.

APRIL 23rd– Papandreou seeks activation of EU/IMF package.