2 - Who were vulnerable to the Greek debt crisis in 2010-2011?

     1) The Greek (Greece citizens)

Austerity measure

Between 2010 and 2011 there were five austerity packages that had been launched by Greece parliament. Each package involves the policies that were severely affect the Greek lives. For example, poverty.

First austerity package is includes a freeze in the salaries of all government employees, a 10% cut in bonuses, and cuts in overtime workers.

Second austerity package includes a freeze in pensions; an increase in VAT from 19% to 21%; rises in taxes on fuel, cigarettes, and alcohol; rises in taxes on luxury goods; and cuts in public sector pay.

As we can see, the Greek were truly suffered from these measures because they needed to pay more tax and the good prices was continually rises. However, Greece is indeed need austerity measure for two main reason. First, its aim is to reestablish Greece strength and recover their debt. Second, it was the condition from EU and IMF of the request for bailout that Greece made.

Protests

A consequence of these austerity packages led to a struggle in Greek lives and contribute to number of harshly protests. On 5 May 2010 there was a 48-hour nationwide strike and demonstrations in two major cities. Three people were killed when a group of masked people throw petrol bombs in a Marfin Egnatia Bank branch on Stadiou street.

This trend continued in 2011 as there were daily protests outside the parliament building stated on May. At first, it was peacefully but the protestors finally ended up in a clash with the police as the fourth austerity packages was passed by the parliament. These protests killed lives and made a bad perspective for Greece.

      2) Investor

Credit rating

Greece credit rating was chronologically downgraded by credit ratings agencies between 2010-2011. Finally, in April 2010, Greece credit rating was downgraded to ‘Junk Bond’ status. This fall in rating directly causes the expected rate of return for investor to decline.

Haircut

In 2011, there was a haircut of 50% on Greek debt. This means the creditors are losing a large amount of money that they supposed to receive. However, Mr. Trichet of the European Central Bank was against this idea, "fearing that it could undermine the vulnerable European banking system".