Updated: May 3, 2010
Over the last decade, Greece went on a debt binge that came crashing to an end in 2010, provoking the biggest crisis yet seen in the move toward European integration that began more than half a century ago.
In December 2009, a new prime minister announced that his predecessor had disguised the size of the country's ballooning deficit. After rounds of deep budget cuts and months of vague pledges of support from the rest of Europe failed to stop the steady rise of the interest rates, Prime Minister George A. Papandreou in April 2010 formally requested a promised $60 billion aid package, calling his country's economy "a sinking ship.''
But global investors, who had seen Greece's bonds downgraded to junk status, were not reassured, forcing the the International Monetary Fund and Greece's European partners to hastily prepare a far larger package. The new plan, announced May 2, calls for 110 billion euros, or $146 billion, in loans over the next three years to avoid a debt default. In exchange, Greece had to accept deep cuts that will lead to years of sacrifice.
Mr. Papandreou, the scion of a Socialist dynasty whose father helped erect the sprawling Greek welfare state when he was prime minister in the 1980s, sought to prepare Greeks for proposed cost-cutting measures, which included freezing public-sector salaries, raising taxes and slashing pensions.
The proposals met angry resistance in a country where one out of three people is employed in the civil service, which until now has guaranteed jobs for life. The shake-up of Greece's bloated public sector represents one of the biggest overhauls of the country's welfare state in a generation. Fears are growing that once Greek society begins to feel the effects of the austerity measures, social unrest could unhinge a potential recovery or force the government to dilute some changes.
photo:European Pressphoto Agency
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