Totally delusional..
History of the Crisis
The debt crisis began in 2008 with the collapse of Iceland's banking system, then spread primarily to Portugal, Italy, Ireland, Greece, and Spain in 2009, leading to the popularization of a somewhat offensive moniker (PIIGS).1 It led to a loss of confidence in European businesses and economies.
The crisis was eventually controlled by the financial guarantees of European countries, who feared the collapse of the euro and financial contagion, and by the International Monetary Fund (IMF). Rating agencies downgraded several Eurozone countries' debts.
Greece's debt was, at one point, moved to junk status. Countries receiving bailout funds were required to meet austerity measures designed to slow down the growth of public-sector debt as part of the loan agreements.3
Debt Crisis Contributing Causes
Some of the contributing causes included the financial crisis of 2007 to 2008, the Great Recession of 2008 to 2012, the real estate market crisis, and property bubbles in several countries. The peripheral states’ fiscal policies regarding government expenses and revenues also contributed.
By the end of 2009, the peripheral Eurozone member states of Greece, Spain, Ireland, Portugal, and Cyprus were unable to repay or refinance their government debt or bail out their beleaguered banks without the assistance of third-party financial institutions. These included the European Central Bank (ECB), the IMF, and, eventually, the European Financial Stability Facility (EFSF).41
Also in 2009, Greece revealed that its previous government had grossly underreported its budget deficit, signifying a violation of EU policy and spurring fears of a euro collapse via political and financial contagion.3
Seventeen Eurozone countries voted to create the EFSF in 2010, specifically to address and assist with the crisis. The European sovereign debt crisis peaked between 2010 and 2012.5
With increasing fear of excessive sovereign debt, lenders demanded higher interest rates from Eurozone states in 2010, with high debt and deficit levels making it harder for these countries to finance their budget deficits when they were faced with overall low economic growth. Some affected countries raised taxes and slashed expenditures to combat the crisis, which contributed to social upset within their borders and a crisis of confidence in leadership, particularly in Greece.
Several of these countries, including Greece, Portugal, and Ireland had their sovereign debt downgraded to junk status by international credit rating agencies during this crisis, worsening investor fears.66