Effects of austerity on Greece: Financing of government debt and troika intervention

In 2001, Greece entered the Economic and Monetary Union (EMU).  Part of the conditions of entry required adhering to the 1997 Stability and Growth Pact, which set limits on government spending and debt of not more than 3% GDP.  EU Member States who joined this Pact effectively forfeited their financial independence.  This immediate impact of this loss of independence was not obvious until the 2008/9 global financial crisis, when global banks were in crisis and national governments had to bail them out. Greek banks lacked capital and faced liquidity problems.   By 2010, Greece was unable to repay or re-finance its government debt without help.

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