June 16, 2011
With the Greek government on the verge of collapse, and financial markets sliding, we look at the causes of a crisis that could threaten the stability of the eurozone.
Q: Greece has already received a rescue package, so why is there still a crisis?
Greece was handed a €110bn (£95bn) bailout deal just over a year ago. That was agreed after the financial markets lost faith in the country's ability to repay its debts, forcing European leaders and the International Monetary Fund (IMF) to step in and guarantee funding for the next few years. In return, Greece committed to wide-ranging public-sector cutbacks to bring its deficit into line.
But, just a year on, the picture has turned bleak: the austerity programme has hurt economic growth and sent unemployment up sharply. Greece has missed some of the financial targets agreed in return for the bailout, triggering another round of cuts.
Q: But can't it simply borrow from the financial markets?
Greece had originally hoped to borrow from international investors again in 2012, but with its bond yields at record levels this looks impossible. With tens of thousands of Greek citizens protesting on the streets, and the government on the brink of collapse, a full-blown default is now a realistic possibility.
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