NEW YORK (TheStreet) -- Greece's left-wing leader Alexis Tsipras won the snap election Greece held on Sunday, but his worries might have just worsened. He is caught between the promises his party has made to domestic voters and the commitments he made to the country's creditors.
However much Alexis Tsipras may want stability in Greece, he is wedded to the agreed terms in the memorandum of understanding, which he previously signed in exchange for a third bailout. Here's everything you need to know.
The Story of Greece and the Eurozone
The Eurozone was formed in 1999, with Greece joining as its 12th member.
In 1999, investors started financing Greece at low interest rates leading to extensive borrowing, which eventually led to huge imbalances. Once fiscal crisis hit Europe in 2009, markets panicked, imposing higher interest rates. Countries like Greece found it difficult to repay debts at these higher interest rates.
Interestingly, Greece had received the highest number of debt ratings upgrades between January 1998 and December 2008. But the global financial meltdown of 2007 and 2008 made the underlying structural discrepancies in the Eurozone quite visible. Lack of liquidity and unsustainable deficits along with public debts higher than GDP became evident. Following this, 2010 witnessed the financial fall of the Eurozone's first country, Greece.
After the financial crisis in the U.S., Greece's economy shrank by 25% and matters started worsening for the country, which has since then lived under strict capital controls as it has suffered a financial crisis for more than five years, with unemployment remaining around 25% (as of this past May). According to Bloomberg, Greek unemployment has doubled, since it joined the Eurozone, while Germany halved its unemployment rate.
The Third Bailout
After a number of meetings, concessional talks and three bailouts, it is quite evident that neither Greece nor the Eurozone wants Greece to exit the political and economic group.
The country got its third bailout with the total due debt in 2015, accounting for roughly 173% of GDP. The third bailout approval came at a time when a press release by IMF head, Christine Lagarde termed Greece's debt as "unsustainable." The International Monetary Fund had said it would only be a part of the bailout if there were an "explicit and concrete" agreement on debt relief for Greece.