In December of 2009 the new Greek government
revealed that its budget deficit for the year would be
12.7% of GDP, not the 3.7% forecast.
Investors sold off Greek government bonds and the
ratings agencies downgraded them to “junk.”
While Greece represents only 2.5% of euro-zone GDP,
the crisis became a Europe-wide debt crisis.
The challenge remains that fiscal indiscipline of one
euro-zone country can escalate to a Europe-wide crisis.