This situation originated with the tenuous integration of the periphery countries of the European Union into the eurozone and was made worse by the Great Recession.
It emerged after a promise by the Greek prime minister in the World Economic Forum of Davos, Switzerland [2] to take measures to reduce the country's deficit.
On 5 March 2010, amid new fears of bankruptcy, the Greek parliament passed the "Economy Protection Bill", which was expected to save another €4.8 billion.
[10] Shortly after, the European Commission, the IMF and ECB set up a tripartite committee (the Troika) to prepare an appropriate programme of economic policies underlying a massive loan.
The Troika was led by Servaas Deroose, from the European Commission, and included also Poul Thomsen (IMF) and Klaus Masuch (ECB) as junior partners.
[37] The new tax, which was paid through the owner's electricity bill,[37] affected 7.5 million Public Power Corporation accounts[37] and ranged from 3 to 20 euros per square meter.
These new measures would allow Greece to get an extra instalment of international loans, forming a second bailout package that would prevent a sovereign default and would allow the partial write-off of Greek debt, the so-called private sector involvement (PSI).
[52][53] German chancellor Angela Merkel and French prime minister Nicolas Sarkozy then issued an ultimatum declaring that, unless the referendum approved the measures, they would withhold an overdue €6bn loan payment to Athens, money that Greece needed by mid-December.
[52] On 10 November Papandreou resigned following an agreement with the New Democracy party and the Popular Orthodox Rally to appoint a new prime minister to promulgate laws implementing the new measures that were agreed with the EU.
[56] By contrast, three separate polls taken when Papademos assumed office revealed that around 75% of Greeks thought that temporary, emergency technocratic rule was "positive".
[57] It thus demanded that Greek party-political leaders sign legally binding letters to this effect, as well as to any additional measures that might be required in future as part of the second rescue-package.
[57] It was announced that the general election to replace Papademos' administration was to be delayed until April, or even May 2012 because more time was needed to finalise plans, as well as to complete negotiations over debt reduction.
[58][59] Finalising the deal on the 50% PSI debt write-off, required by the Troika as a condition for extending more aid, proved difficult in early 2012, given objections primarily from hedge funds.
[64][65][66] In February, facing sovereign default, Greece needed more funds from the IMF and EU by 20 March, and was negotiating over a €130 billion lending package.
[74] The vote was a major precondition for the EU and IMF to jointly release the funds, which are supposed to cover all financial needs in 2012 and 2013, with the hope that Greece can start lending again at the private capital markets in 2014.
Because of this uncertainty, Eurozone finance ministers demanded that Greek main politicians sign a written assurance for their continued support to implement the austerity package, both before and after any elections.
Initially, the package only dealt with those €13.5bn of measures (comprising €10bn spending cuts and €3.5bn tax hikes) for implementation in fiscal year 2013 and 2014.
Subsequent political calls prompted by a worsened recession asked for a 2-year extension of the bailout programme, and for the politicians to settle the exact content of the measures.
According to earlier Troika statements, the report would depend on the level of ambition and seriousness of the government's measures and on the progress on structural reforms and privatisation.
Another point of disagreement was whether 20,000 civil servants should be simply laid off (recommended by the Troika) or placed in a so-called "labor reserve scheme" at a reduced wage for two years before having their status re-evaluated (preferred by the government).
[78] On 3 October sources from the Greek Ministry of Finance revealed that the Troika had asked the government to frontload the austerity package with measures of €9.3bn in 2013 with the remaining €4.2bn to be implemented in 2014.
The Troika expected a slightly worse GDP decline in 2013 compared to the government forecast and that the economy subsequently would recover faster if the austerity package frontloaded its savings for 2013.
[79] The government attempted to sign a final deal with the Troika about the content and size of the austerity package and 2013 fiscal budget before the scheduled Eurogroup meeting on 8 October.
[81] As the exact content of the package needed to be revealed before the Troika can reach its conclusion about the sustainability of the Greek economy, it was expected this important report appear in the first half of November.
[84][85] At the EU summit on 19 October, it was announced the Eurogroup would arrange a conference call on 29 October to approve the final version of the austerity package, and provided this package subsequently was passed by the Greek parliament before 11 November, the Eurogroup was ready to make the decision at their ordinary meeting at 12 November to accept the release of the bailout funds.
On 7 November amidst protests of tens of thousands of people, the Greek parliament narrowly approved another austerity package worth €13.5 billion.
[120] On 17 July, the Greek Parliament approved an eighth austerity package to secure payment of its next €2.5 billion credit tranche.
[123] The next day, a general ban on demonstrations was enacted and 4,000 police officers mobilized to avoid larger protests in the Greek capital during Schäuble's visit.
[134][135] The eleventh austerity package was voted by the Greek Parliament as part of the agreement between the Tsipras Government and the 'quartet' of creditors (the IMF, ECB, ESM and EU) for a third loan.
[137] The Government tabled the Bill containing the measures and the loan agreement in the afternoon of August 13 and requested that it be discussed under the extremely urgent Parliamentary procedure.