Greece Under the Spell of the Debt Crisis (Since 2010)

In 2010, K. Papulias was re-elected President. After years of misrepresentation about the national budget, it turned out that Greece was more affected by the global financial crisis than other countries. The high budget deficit increased the risk of uncontrolled national bankruptcy. On April 23, 2010, the country applied for financial aid from the euro countries and the IMF. On May 2, 2010, loans of € 110 billion were committed (1st rescue program), of which € 30 billion from the IMF. In return, the government committed to strict austerity measures. There were massive protests in connection with the government’s austerity policies. Strikes, v. a. in the public service, repeatedly paralyzed traffic and school and university operations. Three people died when Molotov cocktails were thrown into a bank branch on May 5, 2010 on the sidelines of a demonstration in Athens. On December 16, 2010, Parliament passed the budget for 2011, which once again provided for drastic savings. Nevertheless, the risk of national bankruptcy increased. For further disbursements from the rescue package passed in 2010 and new support measures, the EU, ECB and IMF therefore demanded even more intensive savings efforts. With this in mind, G. formed Papandreu the cabinet changed on June 17, 2011. With a narrow majority, 155 parliamentarians voted for him, he won a vote of confidence on June 22nd, 2011. Before the vote on a new austerity program, the trade unions tried to put pressure on the government with a general strike on June 28-29, 2011. Violent clashes broke out in Athens. Numerous demonstrators and police officers were injured. Despite this resistance, the parliament voted on June 29, 2011 with a majority (155 members) in favor of new cost-cutting measures. On July 21, 2011, a special EU summit decided on a second rescue package for Greece in the amount of around 109 billion euros (including voluntary contributions from the private sector and the IMF). The decision included lower interest rates and longer maturities on Greek loans to improve the country’s debt sustainability, and the call for a growth and investment strategy for Greece. In a session on October 20, 2011, which was overshadowed by another general strike, as well as by large demonstrations and violent riots, the Greek parliament decided to take further harsh austerity measures. After this G. Papandreu had announced a referendum on EU decisions and the progress of the austerity policy, he came under strong international pressure. Thereupon he broke away from the referendum plans and agreed with the opposition ND on the formation of a transitional cabinet. At the same time he renounced the office of head of government. The former ECB Vice-President L. Papademos became the new Prime Minister on 11/11/2011. In addition to PASOK and ND, the right-wing party LAOS also took part in the government. Papademos initiated negotiations with the »Troika« consisting of the EU, ECB and IMF on the design of further aid measures. In February 2012, LAOS withdrew from the cabinet to protest against new austerity decisions. On February 21, 2012, an agreement was finally reached on a second rescue program worth around € 164 billion (in addition to IMF funds, around € 144.6 billion in loans from the European financial stabilization mechanism, the EFSM) Billion euros were transferred from the 1st rescue package. In March 2012, Greece was able to reach an agreement with most of its private creditors on a haircut that relieved the country of around € 107 billion.

In early parliamentary elections on May 6, 2012, the traditional parties ND and PASOK suffered heavy losses. Left and right-wing extremist groups were able to record significant gains in votes. The formation of a government failed, so that new elections were scheduled for June 17, 2012, in which the ND won 29.7% of the votes and 129 seats. The left-wing socialist alliance SYRIZA got 26.9% and 71 seats, PASOK got 12.3% and 33 seats. The ND chairman A. Samaras formed a coalition of ND, PASOK and DIMAR. SYRIZA, led by A. Tsipras, remained in the opposition.

In September 2012, a new savings program of around € 12 billion was passed, which was required as a prerequisite for the payment of a first tranche from the second rescue program. Another savings package worth € 13.5 billion followed in November 2012. This included an increase in the retirement age and the elimination of vacation and Christmas bonuses for government employees and child benefit for middle and higher incomes. Negotiations on both programs were accompanied by violent public protests and a nationwide general strike. At the end of November 2012, the euro countries and the IMF granted Greece a two-year postponement of the austerity requirements and further aid pledges. In the following month, the first tranche from the 2nd rescue program was paid out. After a dispute over the planned closure of the state broadcaster ERT, DIMAR withdrew from the government coalition in June 2013. In February, June and November 2013, 24-hour general strikes paralyzed the country. In July 2013, Parliament approved the transfer of 12,500 civil servants to a mobility reserve. In September 2013, the Greek judiciary arrested the leadership of the right-wing extremist party “Golden Dawn” (XA). The party was confronted with investigations into various violent crimes. The trigger was the murder of a left-wing musician by a party member. In November 2013, the parliament lifted the immunity of all MPs of the party. The murder of the musician led to violent clashes between left and right groups. In early November 2013, two party members were killed outside an XA office; Left-wing extremists confessed to the act. The state broadcaster ERT was finally closed and cleared by the police on November 7, 2013. As a result, the coalition of the radical left (SYRIZA) tabled a motion of no confidence in the government, but it failed. In March 2014, Parliament passed another reform program (including liberalization of the labor market). Greece then received additional funds from the existing aid packages. In response to the government’s strict austerity policy, nationwide strikes broke out again in April 2014. For the first time in 4 years, Greece was able to place a government bond on the international financial markets in the same month. In the elections to the European Parliament on May 25th

In December 2014, the attempt to elect the former EU Commissioner Stavros Dimas (* 1941) as the new state president failed in three ballots. This made early elections necessary according to the constitution. SYRIZA, led by A. Tsipras , won these elections, which took place on January 25, 2015, with a clear majority. The party received around 36.3% of the vote and entered the National Assembly with 149 members (2012: 26.9% and 71 seats). It benefited from the rule that the strongest party receives a bonus of 50 additional mandates. The ND of Prime Minister A. Samaras lost 1.9% of the votes compared to the last election and came up with 27.8% of the votes to 76 parliamentary seats. PASOK suffered a devastating election defeat with around 4.7% of the votes and 13 seats (2012: 12.3% and 33 seats). On January 26, 2015, Tsipras reached an agreement with Panos Kammenos (* 1965), the chairman of the right-wing populist party Independent Greeks (ANEL), about 4.8% of the votes and 13 parliamentary seats (2012: 7.5% and 20 seats) had won on the formation of a coalition government. On the same day, Tsipras was sworn in as the new Prime Minister. On February 18, 2015, the parliament elected the constitutional lawyer and ND politician Prokopis Pavlopoulos to the new president. He received 233 of 300 votes.

The debt crisis in Greece worsened when the Tsipras government terminated its cooperation with representatives of the EU Commission, IMF and ECB on January 30, 2015. In order to gain time, the country finally agreed with the Eurogroup on February 20, 2015 to extend the current second rescue program until June 30, 2015. In numerous rounds of negotiations, however, the government failed to come to an agreement with the creditors on a reform and austerity program that was accepted by both sides. With the resolution of parliament to reopen the public broadcaster ERT, Prime Minister Tsipras resolvedmade one of his election promises on April 28, 2015. On June 26, 2015, he announced that a referendum would be held on the donors’ demands for savings and reform. He recommended that the population vote against the proposals. On June 28, 2015, Greece introduced capital controls. The country owed a loan payment of € 1.54 billion to the IMF. In the referendum on July 5, 2015, a majority of 61.3% of those who voted rejected the creditors’ savings and reform plans. The finance minister Giannis Varufakis (* 1961), who was controversial among the Greek negotiating partners, announced his resignation one day after the referendum.

On 8 July 2015, Greece submitted an application for a new aid program from the European Stability Mechanism (ESM). In this context, put that of Tsipras The Athens government led a new austerity and reform program, which was approved by the Greek parliament on July 11, 2015 with 251 votes in favor, despite the outcome of the referendum as the basis for new negotiations with the donors. Finally, the heads of state and government of the Eurogroup agreed with Greece on July 12/13, 2015 in Brussels on the implementation of a comprehensive austerity and reform plan as a condition for the start of negotiations on a third rescue program. The Greek side undertook, inter alia, to to apply for support to the IMF, to change the VAT system and to reform the pension system. The implementation of the EU Directive on the restructuring and resolution of credit institutions, a reform of the civil law system and the creation of a trust fund with € 50 billion from privatization proceeds. In a vote accompanied by demonstrations and riots in Athens on July 16, 2015, 229 out of 300 MPs voted for the package of measures and the implementation of the first reform steps. 32 of the 149 SYRIZA MPs voted no, making it Prime Minister Tsipras could only enforce his course with the help of the opposition. On July 17, 2015, Tsipras dismissed those ministers who had voted against the reforms and formed a new cabinet. Until the negotiations on a new aid program were concluded, Greece had received bridge financing of € 7.16 billion from the EU states. This enabled the country to repay loan installments to the ECB and the IMF. On July 23, 2015, the Athens Parliament voted with 230 votes in favor of a second reform package (judicial reform, adoption of the EU directive on bank restructuring). The Tsipras government was again dependent on the votes of the opposition. By approving the two reform packages, the Greek parliament created the prerequisites for starting negotiations.

Greece Under the Spell of the Debt Crisis (Since 2010)