Debt crisis: How we got here

 

2009

December: Greece’s debts shown to have reached €300 billion, or 113 per cent of GDP. Ratings agencies start to downgrade Greek banks and government debt.

2010

January: EU highlights “severe irregularities” in Greek accounts.

February: Greece starts to apply austerity measures and its people start to take to the streets. Other euro zone periphery countries, including Ireland, fall into the spotlight.

March: IMF and euro zone allocate a €22 billion “safety net” for Greece, but no bailout is yet awarded.

May: Conditions have worsened. A €110 billion euro zone/IMF bailout package for Greece is agreed. The €250 billion European Financial Stability Facility (EFSF), a special purpose vehicle to facilitate this and other bailouts, is established by member states. The euro keeps falling and contagion fears build.

November: The Irish bailout becomes an inevitability. An €85 billion package is agreed, as attention turns to Portugal. The European Stability Mechanism, a permanent replacement for the EFSF from 2013, is also agreed.

2011

January: Euro zone finance ministers discuss enlarging the EFSF and drawing up stress tests for banks. Markets had hoped for more.

February: EU government heads meet as Germany and France try to gain support for a plan to make euro zone economy stronger. Other countries not so keen.

March 4th: EU leaders meet again, aiming to come up with an effective response to continuing turmoil. Finland, the host, says the will is there to reach agreement.

March 12th: Leaders agree EFSF’s lending capacity should be raised to €440 billion, still not enough to bail out Italy or Spain if required.

April: Portugal asks for a bailout. A €78 billion deal is agreed in May.

May: EU finance ministers admit Greece may need to restructure its debts. A second Greek package looms, while rumours circulate about Greece preparing to leave the euro zone.

July 21st: EU leaders agree a new €109 billion bailout for Greece which includes participation from private bondholders. They also allow for EFSF reform, meaning the Republic will pay a lower interest rate. Precautionary lending by the EFSF will be allowed too, in the hope that full bailouts can be avoided in the future.

August: Spanish and Italian bond yields soar amid fears of greater contagion and irreparable damage to the euro zone. The ECB says it will buy them and the G7 tries to reassure markets.

September: EU finance ministers and Central Bank governors meet in Poland, with US treasury secretary Tim Geithner turning up to encourage progress. None came. Meanwhile, Spain and Italy adopt internal measures designed to reassure markets.

October 3rd: Euro zone finance ministers, Central Bank heads and commissioners meet in Luxembourg as it emerges that Belgo-French bank Dexia needs to be saved. Doubts have developed about whether a planned second bailout for Greece will proceed.

October 23rd: EU leaders approach agreement on an updated strategy involving bank recapitalisation and leveraging the EFSF. Greek debt-holders expected to take huge writedown, causing disquiet among banks.

October 26th: New ECB head Mario Draghi says the bank will continue to buy the bonds of states in difficulties, thus throwing support behind the latest efforts to solve the crisis at an emergency European summit.