Timeline: Greece's economic crisis

(Reuters) - Greece’s cabinet approved a sweeping new austerity program on Wednesday. Following is a timeline of key economic events in Greece since George Papandreou’s socialist PASOK party won 2009 snap elections.

November 2009 - The new government pledges in its 2010 draft budget on November 5 to save Greece from bankruptcy by cutting the 12.7 percent of GDP budget deficit -- more than double the previously announced figure -- while keeping electoral promises to help the poor.

-- A final budget draft on November 20 shows Greece aims to cut the deficit to 8.7 percent of GDP in 2010 to show EU partners and markets it is serious about restoring fiscal health.

-- It also sees public debt rising to 121 percent of GDP in 2010 from 113.4 percent in 2009. EU forecasts on Greece for 2010 are worse, with the deficit seen at 12.2 percent of GDP and national debt rising to 124.9 percent, the highest ratio in the EU.

December 2009 -- S&P on December 7 puts the country’s A- sovereign rating on negative watch.

-- On Dec 8, Fitch Ratings, which had cut Greece to A- when the government revealed the higher deficit, cuts Greek debt to BBB+ with a negative outlook, the first time in 10 years a ratings agency has put Greece below the A investment grade.

-- The next day, Papandreou says he is determined to win back the country’s lost credibility.

-- On December 14, Papandreou outlines policies to cut the country’s ballooning budget deficit and try to regain the trust of investors and EU partners. Papandreou pledges a 10 percent cut in social security spending in 2010. Says he will abolish bonuses at state banks and slap a 90 percent tax on private bankers’ bonuses. Promises a serious fight against corruption and tax evasion, calling them the country’s biggest problems.

-- He announces a drastic overhaul of the pension system in six months and a new tax system that will make the wealthier carry more of the burden.

-- Standard & Poor’s cuts Greece’s rating by one notch on December 16, to BBB-plus from A-minus, saying austerity steps announced by Prime Minister Papandreou are unlikely to produce a sustainable reduction in the public debt burden.

-- Yield spreads between Greek and benchmark German 10-year Bunds widen to an average 272 basis points on December 19, the widest in more than 8 months, as skeptical markets continue to sell Greek government bonds and stocks.

-- Moody’s cuts Greek debt to A2 from A1 on December 22 over soaring deficits, the third rating agency to downgrade Greece, but still two notches above that of Fitch and S&P. The spread between 10-year Greek and German Bunds tightens because the downgrade was less severe than expected.

January 2010 - Greece unveils a stability program on January 14 saying it will aim to cut its budget gap to 2.8 percent of GDP in 2012 from 12.7 percent in 2009. Unions protesting against the austerity plan announce strikes for February.

February 2010 - Papandreou says on February 2 that the government will extend a public sector wage freeze to those making below 2,000 euros a month for 2010, excluding seniority pay hikes.

-- On February 3 the EU Commission says it backs Greece’s plan to reduce its budget deficit below three percent of GDP by 2012 and urges Greece to cut its overall wage bill.

-- Greece must refinance 54 billion euros in debt in 2010, with a crunch in Q2 as 20 billion euros becomes due. A 5-year bond issue in January is five times oversubscribed but the government has to pay a hefty premium.

-- A one-day general strike on February 24 against the austerity measures cripples Greece’s transport and public services but does not halt austerity measures.

-- An EU mission to Athens with IMF experts, deliver a grim assessment of the nation’s economy on February 25, seeing a deeper than expected recession and higher borrowing costs. Together these factors will make it even tougher to meet the targets.

-- A finance ministry official says the inspectors anticipate Greece can cut the deficit by about two percentage points, short of a 4 percentage point target for 2010. This will mean additional economy measures worth 4.8 billion euros.

March 2010 - Visiting EU Economic Affairs Commissioner Olli Rehn asks the Greek government on March 1 to announce further measures to tackle its budget crisis in the coming days.

-- A new package of public sector pay cuts and tax increases is announced by the government and will save an extra 4.8 billion euros ($6.5 billion). The measures include an increase of VAT by 2 percentage points to 21 percent, cutting public sector salary bonuses by 30 percent, increases in tax on fuel, tobacco and alcohol, as well as freezing state-funded pensions in 2010.