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A brief history of financial crises in Greece

Nicole Goodkind
Nicole Goodkind

Greece has a long history of financial instability -- we're talking thousands of years long. Here's a brief look at the history of Greece's financial woes.

6th century B.C.E.:

In 594 B.C.E. inequality in Athens was so extreme that poor farmers had to sell themselves into slavery to feed their families and revolution seemed unavoidable. Aristocratic philosopher and poet Solon worked to ease class tensions and prevent economic chaos. He lowered the value of the drachma by 25%, outlawed debt bondage, granted citizenship to skilled immigrants and restored political power to landowners.

4th century B.C.E.:

The first recorded default in Greece. Around 377 B.C.E. the 13 city-states that made up the Delian League borrowed funds from the Temple of Delos, only two borrowers paid the debts back in full and Delos ended up losing 80% of the original loan.

The beginning of collateralized loans. Around 330 B.C.E. the city of Cyme pledged its public colonnades to secure a loan. When Cyme defaulted, its citizens were barred from using them for shelter from rain or sun.

1821:

Greece announces its independence and became the sovereign country we know today.

Since becoming an independent nation, Greece has defaulted at least five times:

1826: The first of Greece’s defaults occurred during the Greek War of Independence. The country took two loans from the London Philhellenic Committee totaling 2.8 million pounds, or $4.4 million. Greek independence fighters ended up receiving only 40% of the money and ended up defaulting. This is known as the “debt of independence.”

1843: Greece defaulted on a loan of 60 million drachmas that was guaranteed by the French, Russian and British governments to help the newly-formed country build its economy. The money was mostly spent on the upkeep of military and on Otto, the Bavarian prince who was crowned King of Greece by the Brits.

1860: After this default Greece was shut out of international capital markets and became reliant on the National Bank of Greece. The bank provided funds to the Greek government at interest rates two times higher than the international lending rate.

1894: In 1878 global capital markets opened once more to Greece. Borrowing eventually became unmanageable and the Greek government stopped all payments on international debts. In 1898 the International Committee for Greek Debt Management was created to monitor the country’s monetary policy and tax collection.

1932: Greece wasn’t the only country that was subsumed by the Great Depression and defaulted on its national debt. The country was in default until 1964, the longest default the country experienced.

Greece has spent 90 years of its 194 years as a country in default or debt restructuring, that’s nearly 50%.

2002:

Greece replaces the drachma with euro banknotes and coins.

2004:

The European commission issues a warning to Greece after discovering the country lied about budget deficit data prior to joining the eurozone.

2006:

The government ends life-long job security for public sector workers and intensifies privatization. Workers respond by striking.

2009:

Greece’s credit rating is downgraded by all three major rating firms. Prime Minister George Papandreou begins austerity cuts.

2010:

Eurozone countries approve a $145 billion crisis package for Greece in return for more austerity measures. Trade unions strike once more.

2011:

The EU offers Greece a $109 billion bailout and a write-off of 50% of country’s debt for more austerity. Prime Minister Papandreou fights back and later resigns.

2011:

All three major rating firms downgrade Greece’s credit and say there is a substantial risk of default.

2012:

Greece accepts a $130 billion bailout deal from the EU and manages to halve its debt load through a debt-swap deal.

2013:

Greece raises taxes and cuts pensions. Youth unemployment reaches nearly 60%.

2014:

Syriza, an anti-austerity leftist group wins the Greek election. After some uncertainty Alexis Tsipras is chosen as the new prime minister.

February 2015:

Syriza promises to drop some anti-austerity measures for a 4-month extension of Greece’s bailout.

June 2015:

Greece delays their $1.67 billion IMF repayment until the end of the month. This is the first time a country has done so.

June 2015:

Greece announced that all banks are closed for the next six days.

Info sourced from: The Reformed Broker, Bank of America, Business Insider, BBC, A History of Interest Rates, Investopedia, Yale University, States, Debt & Power.