Greek debt crisis

The Greek debt crisis erupted in October 2009 when the newly elected PASOK government, led by George Papandreou, revealed that the country's budget deficit was far larger than previously reported — eventually revised to roughly 15% of GDP for 2009. Yields on Greek government bonds spiked, credit rating agencies downgraded Greece to junk status in April 2010, and Athens lost market access.

To prevent contagion in the eurozone, the European Commission, European Central Bank, and International Monetary Fund (the "Troika") arranged three successive rescue packages:

• First bailout (May 2010): roughly €110 billion in bilateral eurozone loans and IMF funds, conditional on austerity and structural reforms.
• Second bailout (2012): around €130 billion, accompanied by the Private Sector Involvement (PSI) deal, in which private bondholders accepted a haircut of more than 50% on Greek debt — one of the largest sovereign restructurings in history.
• Third bailout (2015): up to €86 billion through the European Stability Mechanism, agreed after the SYRIZA-led government of Alexis Tsipras held a referendum rejecting creditor terms, only to accept a tougher package days later. Greece also imposed capital controls and bank closures in summer 2015.

Conditionality required sharp cuts to pensions and public wages, tax increases, labor-market liberalization, and privatizations. The social cost was severe: GDP contracted by roughly a quarter between 2008 and 2016, and unemployment peaked above 27% in 2013, with youth unemployment exceeding 50%.

Greece formally exited its bailout program in August 2018, though it remained under enhanced surveillance until 2022. The crisis reshaped EU economic governance, prompting creation of the European Stability Mechanism (ESM), the European Semester, the Fiscal Compact (2012), and the early steps toward Banking Union. It also intensified debates over austerity, democratic legitimacy of Troika conditionality, and the architecture of monetary union.