Greece achieved independence from the Ottoman Empire in 1830. During the second half of the 19th century and the first half of the 20th century, it gradually added neighboring islands and territories, most with Greek-speaking populations. In World War II, Greece was first invaded by Italy (1940) and subsequently occupied by Germany (1941-44); fighting endured in a protracted civil war between supporters of the king and other anti-communist and communist rebels. Following the latter's defeat in 1949, Greece joined NATO in 1952. In 1967, a group of military officers seized power, establishing a military dictatorship that suspended many political liberties and forced the king to flee the country. In 1974, democratic elections and a referendum created a parliamentary republic and abolished the monarchy. In 1981, Greece joined the EC (now the EU); it became the 12th member of the European Economic and Monetary Union in 2001. In 2010, the prospect of a Greek default on its euro-denominated debt created severe strains within the EMU and raised the question of whether a member country might voluntarily leave the common currency or be removed.
Greece has a capitalist economy with a public sector accounting for about 40% of GDP and with per capita GDP about two-thirds that of the leading euro-zone economies. Tourism provides 15% of GDP. Immigrants make up nearly one-fifth of the work force, mainly in agricultural and unskilled jobs. Greece is a major beneficiary of EU aid, equal to about 3.3% of annual GDP. The Greek economy grew by nearly 4% per year between 2003 and 2007, due partly to infrastructural spending related to the 2004 Athens Olympic Games, and in part to an increased availability of credit, which has sustained record levels of consumer spending. But the economy went into recession in 2009 as a result of the world financial crisis, tightening credit conditions, and Athens' failure to address a growing budget deficit. The economy contracted by 2.3% in 2009, 3.5% in 2010, 6.9% in 2011, and 6.0% in 2012. Greece violated the EU's Growth and Stability Pact budget deficit criterion of no more than 3% of GDP from 2001 to 2006, but finally met that criterion in 2007-08, before exceeding it again in 2009, with the deficit reaching 15% of GDP. Austerity measures reduced the deficit to about 8% in 2012. Deteriorating public finances, inaccurate and misreported statistics, and consistent underperformance on reforms prompted major credit rating agencies to downgrade Greece's international debt rating in late 2009, and has led the country into a financial crisis. Under intense pressure from the EU and international market participants, the government adopted a medium-term austerity program that includes cutting government spending, decreasing tax evasion, overhauling the health-care and pension systems, and reforming the labor and product markets. Athens, however, faces long-term challenges to push through unpopular reforms in the face of widespread unrest from the country's powerful labor unions and the general public. In April 2010 a leading credit agency assigned Greek debt its lowest possible credit rating; in May 2010, the International Monetary Fund and Euro-Zone governments provided Greece emergency short- and medium-term loans worth $147 billion so that the country could make debt repayments to creditors. In exchange for the largest bailout ever assembled, the government announced combined spending cuts and tax increases totaling $40 billion over three years, on top of the tough austerity measures already taken. Greece, however, struggled to meet 2010 targets set by the EU and the IMF, especially after Eurostat - the EU's statistical office - revised upward Greece's deficit and debt numbers for 2009 and 2010. European leaders and the IMF agreed in October 2011 to provide Athens a second bailout package of $169 billion. The second deal however, calls for Greece's creditors to write down a significant portion of their Greek government bond holdings. In exchange for the second loan Greece has promised to introduce an additional $7.8 billion in austerity measures during 2013-15. However, these massive austerity cuts are lengthening Greece's economic recession and depressing tax revenues. Greece's lenders are calling on Athens to step up efforts to increase tax collection, privatize public enterprises, and rein in health spending, and are planning to give Greece more time to shore up its economy and finances. Many investors doubt that Greece can sustain fiscal efforts in the face of a bleak economic outlook, public discontent, and political instability.