The European Union has been in a series of emergency summits all week, trying to persuade Greece to accept a “final offer” from its creditors to avoid a default on a payment to the International Monetary Fund which, according to the terms of the bailout Greece received from its European partners in 2010, will trigger disastrous consequences for the Greek banking system and a likely Greek exit from the Eurozone.
It’s going to take 10 bullet points:
In the spring of 2010, it became clear that the government of Greece was on course to default on its debt, much of which was owed to foreign banks.
At the time, it was feared that a Greek default would trigger a wave of defaults across the continent and precipitate a global financial crisis.
The European Commission (the central bureaucracy of the European Union) stepped into the breach on May 2, 2010, with the backing of the European Central Bank and the International Monetary Fund with a bailout that avoided a disorderly default.
The terms of this bailout required Greece to begin running a primary budget surplus (i.e., a budget surplus if you ignore the cost of interest on old debt) and also various “structural reforms” related to privatizations, public sector layoffs, and changes to Greek law around collective bargaining and hiring and firing of workers.
By the fall of 2013, Greece’s unemployment rate had reached a staggering 28 percent. It subsequently slowly drifted down to just above 25 percent by early 2015.
On January 25, 2015 the far-left political party Syriza swept into office on a platform of reversing many of these unpopular changes and ending austerity.
The new Greek government has not been able to come up with an alternative set of proposals that secure support from any substantial number of other European governments, leading to a deadlock.
By June 4, 2015, the Greek government was running out of cash and resorted to an unusual (but legal) move to delay a payment to the IMF.
The next deadline is Tuesday, when that payment comes due.
Except EU officials say maybe the real deadline is tomorrow, so the German parliament would have time to approve a deal.