Tag Archives: greek economic crisis

Come back to reality

“I won’t commit suicide. I’m not crazy. I’m going to eliminate one of you” said a desperate middle-aged man to Greek Health Minister, Adonis Georgiades during the latter’s visit to the Thessaloniki International Fair.

The Minister is giving him an advise. “Calm down. Come back to reality. Problems do not get solved in one day”. And Rome wasn’t built in one but that’s irrelevant. The man had used his life savings to buy Greek bonds which have recently been severely cut because of the Greek “haircut”. Thousands like him are desperate, having trusted their life savings to a betraying State that is now calming them down and calls them back to reality. Blend despair with injustice and you have anger.

Some other thousands have been less angry, they have only been desperate. Extremely desperate. Fresh reports quantitatively show a dramatic rise in suicides. The Greek Statistical Authority announced that suicides have gone up in 2011 – 26,5% compared to 2010 and 43% compared to 2007, the year before the Greek crisis broke out. At the same time, NGO Klimaka, that deals with suicides and runs a 24-hour hotline, added that the actual number of suicides is much higher than this.

According to an EU-wide study researching data for the period 1970-2007, every 1% of rise in unemployment results in a 0,79% rise in suicides. The projection is geometric. If unemployment rises by 3%, suicides rise as a result by 4,45%.

Unemployment in Greece was below 10% before the crisis. It is now about to reach 30% without any visible prospect of recovery on the ground. Now do the math.

Souvlaki is still king

Here’s an excerpt of “Souvlaki is still king despite crisis”, an article I read  recently at ekathimerini.com . Another example of an industry which turns this crisis into an opportunity (another example is the porn industry and Johnnie Walker whiskey). Anyway, here’s the excerpt.

Souvlaki with pitta bread

Souvlaki, the undisputed king of Greece’s street food, has yet to feel the bite of the debt-wracked nation’s financial crisis.

Despite a steady drop in the country’s fast-food business since 2009, when the debt crisis started to unfold, the number of souvlaki joints, known among locals as “souvlatzidika”, has actually grown, Kathimerini understands.

Greeks reportedly consume an estimated 3 billion souvlakia, comprising small pieces of meat grilled on a skewer, every year. Greeks reportedly spend a total 2.5 billion euros on souvlakia per year.

Between 1992 and 2008, the local fast-food industry grew at an average of 15.2 percent each year as souvlaki, pizza and snack/sandwich shops proliferated and armies of food delivery bikes roamed city streets.

You can read the full article here.

Alter(native) tv

Two weeks ago I had a coffee with a Dutch photographer who visited Athens for a photo workshop. We had a chat about what’s happening in Greece and he asked me about the story of Alter TV. I was surprised that he knew and he was surprised to find out that such things can happen are happening in a European country. A week later I visited the tv station with another Dutch journalist who is based here in Athens. Both thought that this was a story worth told and were puzzled that we Greeks don’t see it as “extremely interesting”, but rather as a normality. This is the story of Alter TV, one of the 6 private free-to-air channels in Greece.

Alter TV's offices (Photo: Kostas Kallergis)

The station is in a state that we call is “epischesi ergasias” (επίσχεση εργασίας), a phenomenon of the Greek job market I presume. So what is it? It’s something like a strike. When an employee owes several salaries to his employees, they have the right to proceed to an “epischesi ergasias”, which means that they still go to work, but are refusing to work because of the employer’s arrears. The difference with the strike is that they are not losing their wages while practicing it. They go to thei posts to show their readiness to work (though refusing to produce) and, in some cases, to protect the company’s personal (movable) property in case of bankruptcy. But let’s take the story from the beginning.

According to its employees, Alter TV got into financial trouble last year but managed to re-emerge as the second (and at times first) most popular news channel (based on the main news bulletins’ ratings). The channel is mainly owned by three men, the father and son Kouris and Kostas Giannikos who was also responsible for the day-to-day running of the place (the Kouris family had 51% of the shares, Giannikos had 25% and the rest was free floating on the market). In the past years he went on a borrowing spree, getting loans in the name of the Alter TV and then using them to create a network of sister companies which were totally depended  on Alter. A music company, Legend, which produced music CDs that were advertised solely on Alter. Modern Times was a publishing house whose books were also heavily advertised by Alter. At a time when publishing houses could not afford to advertise books on TV, Modern Times could advertise any piece of junk they wanted on prime time and see them easily in the Top-10 list. The employees of the channel were employed not only to produce the channel’s programs but a series of tv ad clips which were done for the sister companies at a dirt cheap cost. The station also sold great parts of its advertising time slots in advance without securing a constant cash flow. As a result, when the Greek financial crisis became a fact in this country the station went into trouble. The employers started owing a month’s salary at the beginning and were paying their employees at an increasingly unpredicted way. A salary after 1,5 month, another one after 2 and so on.

Right now the owners owe between 8 and 12 salaries to their employees who have been in a state of “epischesi ergasias” for more than 2 months. Kostas Giannikos left the company and focused on his other companies which also ran into financial troubles. The employees at his financial newspaper “Investor’s World” are also in a state of “epischesi ergasias” now. Alter TV’s new Board of Directors has told the employees that there is a possible investor who is willing to take over the channel but they can’t mention his name. According to their plan, out of 650 employees about one third (286 employees) will have to be laid off. They’ll get 70% of what is owed to them and will receive their compensations after 12-24 months. The ones who’ll stay will get 60% of what is owed to them, they’ll have to work for free for the coming months until the company officially enters the protection of Article 99 (Bankruptcy Law which protects about-to-bankrupt companies from creditors). Oh yes, there will also be a renegotiation (sic) of their salaries with 10%-30% cut according to their previous salaries.

The employees did not accept this proposal and are waiting for another solution. In the meantime they have been using the station’s frequency to broadcast messages against the owners, the Kouris family.

As they told us, it was their reply to a cheap and dirty propaganda war launched by the Kouris family against its own employees. This can best be depicted by a front page of Avriani newspaper (owned by the Kouris family) which, at an attempt to blame and shame the employees, gathered all salary expenses in the past two years, including the salaries of celebrity tv presenters, changed the amount to drachmas and published this:

Avriani (28-12-2011): The employees of Alter have pocketed 81.903.196.293 drachmas

Right now the employees of Alter TV are going to their offices every day. They are there to meet up with their colleagues and at the same time protect the facilities as there have been attempt by the employer and by creditors to extract part of the equipment (which, in case of bankruptcy, must be sold to fund their compensations). There has also been a widespread solidarity towards them by trade unions and single citizens, who are bringing foodstuff and other goods of need. The studio where they used to record the weather bulletins, the so-called Virtual Studio, is now turned to a warehouse where they gather all these goods.

Akrivi Kyrikou, one of Alter TV's camerawomen, shows the list of goods whic were donated to them (Photo: Kostas Kallergis)

Another studio, where cooking celebrity Vefa Alexiadou once produced her gastronomy show, is now used by the employees to cook for themselves.

Alter TV employees cook in the studio formerly used for a cooking show (Photo: Kostas Kallergis)

Apart from messages against the owner, the employees also produced a daily short news bulletin with news about their struggle, informing about other strikes (e.g. the strike at of the workers at Halyvourgia steel factory) and lately they included in their broadcasts documentaries (e.g. Aris Chatzistefanou’s Debtocracy) which have a critical point to the current Greek financial crisis, its causes and its possible solutions. Last week Alter TV’s transmitters were shut down. So all you can now see is this

No budget graffiti

"Without money" (Themistokleous & Panepistimiou street, Athens)

PSI Athens

An illustration by Manos Symeonakis for ekathimerini and Inside Greece blog.

"CSI ... PSI Athens" by Manos Symeonakis

Did the trial of Papandreou begin?

It seems that the investigation on the alteration of Greek Statistics (in 2010) has bumped into some sort of political involvement. The case began last September after the complaint of Zoe Georganta, a professor of Econometry at the University of Macedonia (Thessaloniki) & a member of ELSTAT (the Greek Statistical Authority), who said that the 2009 deficit was artificially augmented. She underlined that in November 2010 ELSTAT accepted pressures from Eurostat and produced a higher number for the country’s 2009 deficit, at 15,4% instead of 12-13% which was the real number. The goal was to make it politically more feasible to pass further economic reforms (cuts in salaries & pensions as well as taxes).

Financial prosecutor Grigoris Peponis

Financial prosecutor Grigoris Peponis has collected testimonies from 17 people who were involved in the case. His conclusion was included in the letter accompanying the case file on its way to Greece’s Supreme Court (Areios Pagos, the descendant of ancient Areopagus). In this letter Peponis says that there is evidence concerning criminal offences (under the Law on Ministerial Responsibility) by members of the the Greek government. He also wrote that in the testimonies there is explicit reference to an augmentation and an arbitrary determination of the 2009 public debt. The blame for this, according to the testimonies submitted to Mr. Peponis, is targeting the then Prime Minister, members of his government and the respective Finance Ministers.

After the Supreme Court, the case file will be transferred to the Greek Parliament which will decide on possible political responsibilities. In other words, this could be the beginning of a Special Investigative Committee and, if responsibilities are found, a Special Court for George Papandreou and his administration.

The names of those who testified were also made publicly available. Mr. Peponis had also invited current ELSTAT chairman, Andreas Georgiou, to testify but the latter did not provide a sworn testimony. In addition, George Papaconstantinou, Finance Minister during the examined period, rejected any claims against himself. In a public statement, he concluded that “there is an attempt to penalize the truth about the grave situation Greece was in 2009“. Mr Papaconstantinou is now Greece’s Minister for the Environment.

Days of Strike

Here’s a short doc I produced with my colleague Giannis Vakrinos about the workers’ strike at Halyvourgia Ellados steel industry. The story goes like this.

In mid-October, the owner of the company called the workers to sign an alteration in their contracts. Due to the financial crisis and the company’s losses, he asked them to reduce what in the rest of the world is common sense. They wouldn’t work 8 hrs per day and for 5 days a week anymore. The new working hours plan was 5hrs per day, 5 days a week and a 40% cut in their salaries which would mean that they’d earn around 500 euros.

As you can also see in the doc, there is a widespread belief that if the company’s proposals are passed in this factory, they’ll then spread all around the heavy industry with consequences even in the retail sector. The immense solidarity that you can see is owed to this fact. Workers of nearby factories and people from all around Greece are sending food and money to the strikers who have managed to last for more almost 2,5 months. The story is continuing and I will update on any developments of future posts.

Credits:

Script – Interviews: Kostas Kallergis, Giannis Vakrinos
Director of Photography: Alexandros Theofylaktou
Editors: Theodora Katrimpouza, Ilias Tsiampouris
Music: Andreas Koulouris (from the soundtrack of “To Rodi” by Christos Karteris)

Mindmapping Greece’s tax evaders

One of the biggest problems of the Greek economy is tax evasion. If you ask any ordinary Greek he’ll tell you several cases of tax avoidance that he knows. I recently read the story of Professor Diomidis Spinellis of Athens University of Economics and Business. In 2009, the Greek Ministry of Finance hired Spinellis in an attempt to organize the approach to tackle the problem.

Spinellis tackled the problems like it was programming challenge. He made something called a mind map. A mind map looks like a tree, and it maps how your brain works. And Spinellis’s mind map illustrated in a precise, clean manner why Greece is missing so much of its tax revenue.

An example of a mind map (By Paul Foreman)

First on the mind map. Locate the tax evaders, he thought, and improve tax collection. It should be easy, because wherever he looked in the data, he saw tax evasion.

Spinellis’s program found hundreds of thousands of cases of potential tax fraud.

Greece has three hundred regional tax offices. Spinellis thought the solution was simple. Share the data with all of them and wait for the revenues to come flowing in.

Nothing.

Most Greeks will tell you there is widespread corruption in the tax offices. Collectors take bribes. So Spinellis added a new item to the mind map. Management issues at regional tax offices.

Spinellis wrote a small program that would extract each day’s performance data from every single tax office. It recorded information on how much revenue was collected, how many cases were closed, the number of days it took to close a case, etc. It also kept a list of the tax offices that had not closed a single case that day. There were hundreds of them.

The program sent an email every single afternoon to the finance minister and every tax collection office, reporting which offices did absolutely nothing that day. And still, days passed with no action.

The whole idea behind Spinellis’ project was so simple that one can wonder why the Greek Finance Ministry hasn’t thought of it until now. Why wait until 2009 to organize the country’s tax income? And why hire someone outside the Ministry for something so simple when the Ministry and the Tax Offices employ several thousands of people?

It is around this point, two years in, that Spinellis had a disturbing thought. A new item on his mind map. Fixing Greece’s tax system, and ultimately making the Greek economy work, was not a matter of tweaking his computer programs. It was not an information problem. It was a culture problem.

If the people don’t want to pay taxes, the collectors don’t want to collect, and the politicians don’t want to punish them, perhaps Greece needs more than a mind map.

At the end of 2011, Spinellis resigned from his government job. He’s back to teaching.

Now I know what they did last summer

I just read a detailed account of the backstage negotiations during last Spring and the dramatic, for the EU and especially for Greece, months that followed. It’s a must read for anyone interested. It is the product of a Wall Street Journal investigation, based on more than two dozen interviews with euro-zone policy makers. It reveals how the currency union floundered in indecision—failing to address either the immediate concerns of investors or the fundamental weaknesses undermining the euro. The consequence was that a crisis in a few small economies turned into a threat to the survival of Europe’s common currency and a menace to the global economy. Enjoy the reading. It’s long, even though slightly reduced by me, so go get some coffee and a couple of cigarettes.

At a closed-door meeting in Washington on April 14, Europe’s effort to contain its debt crisis began to unravel.

Inside the French ambassador’s 19-bedroom mansion, finance ministers and central bankers from the world’s largest economies heard Dominique Strauss-Kahn, then-head of the International Monetary Fund, deliver an ultimatum.

Greece, the country that triggered the euro-zone debt crisis, would need a much bigger bailout than planned, Mr. Strauss-Kahn said. Unless Europe coughed up extra cash, the IMF, which a year earlier had agreed to share the burden with European countries, wouldn’t release any more aid for Athens.

The warning prompted a split among the euro zone’s representatives over who should pay to save Greece from the biggest sovereign bankruptcy in history. European taxpayers alone? Or should the banks that had lent Greece too much during the global credit bubble also suffer?

The IMF didn’t mind how Europe proceeded, as long as there was clarity by summer. “We need a decision,” said Mr. Strauss-Kahn.

The dispute at the Washington meeting divided two of the Continent’s grand old men, both of them born in 1942 and both among the fathers of the euro.

Wolfgang Schäuble, Germany’s ascetic and irascible finance minister, understood the IMF’s ultimatum. The euro zone would have to draw up a second bailout package for Greece by summer, just a year after a loan deal for €110 billion, or $140 billion.

But this time, Mr. Schäuble said, “We cannot just buy out the private investors” with taxpayer money. That would reward reckless lending, he said, and it would never get through an increasingly impatient German parliament. Greece’s bondholders would be required to lend more money, Mr. Schäuble proposed, rather than take payment for their bonds at maturity.

Jean-Claude Trichet, the urbane French head of the European Central Bank, warned against forcing bondholders to put in more money, which would effectively delay repayment. “This is not a good way to go in a monetary union,” Mr. Trichet said. “Investors would avoid all euro-area bonds.”

Mr. Trichet, in the twilight of a 36-year career as a finance official, feared that if Greece didn’t honor its bond debts on time, the implicit trust that kept credit flowing to many weak euro-zone governments would shatter. More countries and their banks would lose access to capital markets, in a chain reaction with incalculable consequences.

The April meeting ended inconclusively.

Meanwhile, the cost for fixing Greece was rising. The Athens government’s budget deficit was stuck at a stubbornly high level.

Italian and Spanish borrowing costs were still affordable and stable. The yield on Spain’s 10-year bonds hovered around 5.3%; on Italy’s, around 4.6%.

The debate over making bondholders contribute to the new funding package for Greece—known as private-sector involvement, or PSI—divided euro-zone countries.

Germany had allies. In the Netherlands and Finland, new governments had promised voters they wouldn’t pay for problems in less-frugal Mediterranean countries. Breaking those promises would risk rebellions in parliament.

But France joined the ECB in resisting burden-sharing by bondholders. France’s banks had lent more heavily than Germany’s to Greece and other indebted euro nations, and France fretted about a Lehman Brothers-style banking-system meltdown. Italian officials also feared that a precedent for losses in Greece would scare investors away from Italy’s bonds.

Three weeks after the Washington gathering, on Friday, May 6, panic erupted. German news weekly Der Spiegel reported that Greece was thinking of leaving the euro zone, with policy makers heading to a secret meeting that night in Luxembourg.

The report was half-right. There was a meeting, but Greece was staying put.

Inside a country chateau, top euro-zone officials told Greece’s finance minister they expected deeper austerity and faster reforms in return for a new aid package.

Then Mr. Schäuble said he wanted to discuss how bondholder burden-sharing would work. The usually smooth-mannered Mr. Trichet lost his patience. “I want to put my position on the record,” he said: “I don’t agree with private-sector involvement, so I won’t take part in a discussion about the practicalities.” He stormed out.

Mr. Trichet’s assent was vital. If the ECB were to stop accepting Greek bonds as collateral for its lending to banks on the grounds that the bonds were in default, then Greece’s banks, which were stuffed full of their government’s bonds, would quickly run out of cash and collapse. That would radically drive up the cost of a rescue.

In Greece, a new wave of mass strikes and demonstrations was starting. Protesters, angry about Europe’s imposition of extra spending cuts and tax hikes, clashed with police in front of the Athens parliament in the biggest and most violent protests in a year.

Spanish and Italian bond prices remained stable. But Europe was at a dangerous impasse over Greece.

Many euro-zone governments hoped Mr. Strauss-Kahn could find a way to relax the IMF’s summer deadline. The IMF chief was due to discuss the matter with German Chancellor Angela Merkel in Berlin on May 15, and with euro-zone finance ministers in Brussels the next day.

Mr. Strauss-Kahn couldn’t attend. Police in New York pulled him off his Paris-bound flight and charged him with sexually assaulting a hotel chambermaid. (The charges were later dropped, and prosecutors said they doubted the maid’s reliability.) An aide phoned Ms. Merkel at her central-Berlin home that Saturday and told her the news. The astonished chancellor responded with a German idiom that translates roughly as: “You couldn’t make this up.”

The IMF sent a lower-ranking official to Brussels in his place who had no latitude to deviate from the IMF’s deadline.

In Athens, meanwhile, a tent city of the “Indignant” protest movement—a groundswell of anger at the country’s impoverishment—sprang up outside parliament. Spain’s bond prices began to wobble as investors worried that other countries might also face debt restructuring.

On June 1, Mr. Schäuble’s deputy, Jörg Asmussen, presented a German plan at a meeting of finance officials in Vienna, at the Hofburg palace of the former Habsburg emperors. It involved pressuring Greece’s bondholders to swap their Greek debt for new IOUs that would come due far in the future. That would cut the amount of European taxpayer funding Greece would need.

After a meal in a palace banquet hall, the officials quarreled into the wee hours.

For the ECB, Mr. Trichet’s deputy Vitor Constâncio, of Portugal, denounced the German plan as “dangerous.” Credit-rating agencies would declare Greece to be in default on some of its debts—a so-called selective default. In that case, Mr. Constâncio warned, the ECB would refuse to accept Greek government bonds as collateral, dealing a death blow to Greek banks. France, Italy and Spain all supported Mr. Constâncio.

Germany’s Mr. Asmussen shot back with a threat of his own. Europe needed Germany’s money to fund a new program of Greek loans. “Without private-sector involvement,” he said, “there will be no program.”

Greece was descending into chaos. Embattled premier George Papandreou’s slender majority in parliament was fraying. On June 15, a swelling demonstration in Athens’s central square veered out of control.

Alone in his office, Mr. Papandreou phoned the parliamentary opposition leader and offered to make way for a national-unity government. Talks broke down, and the Greek government limped on badly wounded.

Even Ms. Merkel had some doubts about her finance ministry’s hard-line insistence that Greece’s bondholders take a loss. On June 17, she discussed a softer plan with French President Nicolas Sarkozy: a gentleman’s agreement under which Greek bonds would be honored but the bondholders would volunteer to buy new ones.

Mr. Schäuble pushed back. The veteran conservative politician was Berlin’s biggest supporter of the European dream, but he was also the keeper of Germany’s purse. He was determined to make banks share the burden with German taxpayers, and he didn’t trust them to keep a gentleman’s agreement.

When finance ministers met again on June 20, Mr. Schäuble pushed harder. Greece’s bondholders should be told not merely to accept a delay in repayment, he said, but also to forgive some Greek debt—a so-called haircut.

As Greece’s economy moved toward free fall, its debts were soaring beyond the country’s ability to pay, the Germans and their northern allies argued. Mr. Trichet and the southern countries resisted. Talks dragged on for hours. The ministers knew they couldn’t leave without some agreement.

They tried to please everyone: Greece would get more aid. Bondholder losses would be substantial, to placate the Germans, Dutch and Finns. But as the ECB insisted, they would avoid pushing Greece into selective default.

Investors knew you couldn’t have it both ways. As the threat of a Greek debt restructuring sank in, Southern Europe’s bond markets grew volatile. Spain’s 10-year bond yield rose above 5.6%. Italy’s reached 4.9%.

Greece’s parliament debated the extra austerity measures that Europe demanded. Central Athens erupted in violent protests. Anarchist youths tore up chunks of paving stone and threw them at riot police, who fired back with tear gas and stun grenades. Café parasols burned.

Europe hadn’t resolved how to keep Greece afloat. The IMF—whose demand for a decision had set off the whole argument—softened its ultimatum. IMF officials said they were satisfied that Europe would sort out some kind of new bailout, and wired Greece its summer aid payment on July 8.

It wasn’t enough to calm markets. Spain’s bond yield hit 6.3%. Italy’s rose to over 5.8%. Such borrowing costs, if sustained, would make it hard for both countries to rein in their debts.

The selloff in bond markets forced leaders to call an emergency summit for July 21.

Determined not to let the summit pass without an agreement, Ms. Merkel invited the French president, who objected to the German push for bondholder losses, to Berlin. The pair and their advisers met for dinner in the German chancellery the night before the meeting.

Few of them had time to touch the duck breast and vegetables on their plates as they searched for a compromise. Finally, Mr. Sarkozy said he would accept the private-sector involvement—if Ms. Merkel dropped her resistance to giving the euro-zone bailout fund broad new powers to buy debt of weak countries directly and move to protect such countries as Spain and Italy from bond-market contagion. Ms. Merkel agreed.

One more person needed to sign off. Ms. Merkel phoned Mr. Trichet at his Frankfurt office. He took the last Lufthansa flight to Berlin and arrived at the chancellery around 10 p.m.

Reluctantly, Mr. Trichet gave his OK. But he set conditions. Governments would have to insure Greek bonds against default so that the ECB could continue to accept them as collateral. And they would have to make plain that no other euro country but Greece would have its debts restructured.

The trio’s deal was both complicated and vague. Their staffs had little time to flesh out details before the next day’s summit in Brussels. As leaders trickled into the European Union’s boxy headquarters, Ms. Merkel faced a challenge to placate the euro zone’s south, which thought private-sector involvement was dangerous, and its north, which thought it didn’t go far enough.

When the leaders assembled at the sprawling summit table, Ms. Merkel admitted that the specter of bondholder losses was causing market unrest. But, she said, some Greek debt relief was essential. Without it, the bailout’s tough austerity conditions—made tougher by Greece’s missing its budget goals—would be seen as unbearable.

“If Greece had met its program parameters in April,” she snapped, “that would have helped.”

All 17 euro nations had to agree to private-sector involvement. But presented with a calculation that the plan would reduce Greece’s debt by only about €19 billion out of more than €350 billion total, Dutch Prime Minister Mark Rutte balked. If it’s only €19 billion, he said, “I’m out. I need more.”

Finnish premier Jyrki Katainen also complained. His parliament wanted collateral in exchange for more Finnish lending to Greece. “No collateral, no agreement from me,” he said.

Mr. Sarkozy was peeved. “All our parliaments can cause problems,” he said.

Then it was Slovakia’s turn. Prime Minister Iveta Radičová was fighting to keep her coalition together over aid for Greece—a richer country than her own. Adding more powers to the bailout fund “would be suicide,” she said.

Greece’s Mr. Papandreou pleaded for help. “If we can’t solve even Greece, we won’t be seen as being able to solve anything else,” he said.

Hours later, the leaders had a communiqué. To appease the holdouts, it left key points broad and noncommittal, offering the possibility of collateral to Finland and describing the complex bondholder deal in a few strokes, vague language that would return to haunt the bloc.

Officials struggled to explain the new Greek bailout and the bondholder losses. Amid the confusion, Mr. Rutte dispensed muddled numbers. Bank analysts put out flawed reports.

Investor confidence faltered as it became clear that Europe’s compromise achieved the worst of all worlds. Greece would be pushed into a historic default—the first time in nearly 60 years that a developed, Western country wouldn’t honor its debts. But the default was so small that Greece was still left with a crushing debt burden.

And then official Europe went on vacation: Ms. Merkel to the Italian Alps, Mr. Sarkozy to the French Riviera.

Bondholders didn’t. They went on a rampage.

This article was written by Charles Forelle and Marcus Walker. Stephen Fidler, David Gauthier-Villars, Sudeep Reddy and Brian Blackstone contributed to it.

Wall Street Journal also produced this documentary, called “Europe at the Brink” in which WSJ editors and reporters examine the origins of Europe’s debt crisis and why it spread with such ferocity to engulf much of the continent and threaten the entire world.

Jesus Christ! Here comes the troika!

Jesus Christ! Here comes the troika!

Made by street artist Absent.