Click through the timeline below to see how Europe's debt crisis began and evolved.
ECB buys Italian and Spanish bonds after Italian bond yields rise precipitously
On Jan. 6, 2012, as part of the Securities Markets Program, the ECB stepped in to purchase Italian and Spanish bonds after yields jumped as high as 7.12 percent on 10-year Italian bonds, The Wall Street Journal reported.
Treaty signed that would make the ESM effective by July 2012
On Feb. 2, 2012, following a decision made in December, European leaders sign a second treaty on the European Stability Mechanism, this time moving up the effective date to July 2012. The beginning of the permanent bailout fund would be delayed by a lawsuit in Germany questioning the legality of the country's participation in the ESM. The hearing would be held Sept. 12.
Greek debt deal is reached; S&P considers it a default
On Feb. 21, 2012, eurozone finance ministers hammered out the final details of writing down Greek debt.
On Feb. 27, 2012, ratings agency Standard & Poor's dropped the Greek credit rating to Selective Default. In May, the rating was upgraded to CCC, three notches up from default.
On March 9, 2012, one of the conditions of the debt write-down was that enough of Greek's creditors had to agree to the loss, and they did: 85.8 percent agreed to the haircut of 53.5 percent, "a real loss of 74 percent when the loss in future interest payments is taken into account," the Christian Science Monitor reported in March 2012.
Hungary fails to hit budget targets; EU finance ministers vote to suspend payments
On March 13, 2012, Hungary became the first country to be rebuked for failing to fall in line with the EU's budget requirements -- the convergence criteria that all the countries agreed to before joining the monetary union. European finance ministers voted to stop the payment of 495.2 million euros to be made in 2013 as part of Cohesion Fund commitments. Payments from the Cohesion Fund are available to countries in the European Union with a lower-than-average gross national income in order to speed up their progress toward joining the monetary union.
In January, Hungary's prime minister had been accused of trying to nudge the government toward a more authoritarian bent. The European Commission began legal proceedings against the government for trying to pass measures that would have curtailed the independence of the central bank and the judiciary in Hungary.
In June, the payment to Hungary was reinstated after the government produced plans to institute permanent measures that would push the budget deficit below 3 percent of GDP.
Spain requests bailout for banks only, to avoid all the strings that came with bailouts to other countries
On June 9, 2012, Spain announced that it would take a bailout in order to help the flailing financial sector. As the funds would only go to banks, there would be no austerity requirements attached to the 100 billion euro loan.
Cyprus requests bailout
On June 25, 2012, due to exposure to Greek debt, Cyprus became the fifth eurozone country to request a bailout following Spain's bank bailout request. As negotiations between the island's government and the troika dragged on into September, it was widely estimated that Cyprus would need a loan of up to 10 billion euros, which represents more than half of its 17 billion euro economy.
ECB cuts interest rates to 0.75 percent
On July 5, 2012, the European Central Bank met and dropped a key interest rate to 0.75 percent, which lowered the cost of borrowing for banks in the eurozone. The central bank also dropped the rate paid on deposits to zero, giving banks little incentive to keep surplus funds on deposit with the central bank outside of the amount that must be kept on reserve. Instead, the money could be used for loans to other banks or businesses.
ECB announces new sterilized bond-buying program
On Sept. 6, 2012, following an August meeting that hinted at the plan, the ECB announced that it would launch an unlimited but sterilized bond-buying program. Sterilizing the purchases means that the central bank would offset bond purchases by taking money out of circulation to avoid increasing the money supply. The new program known as Outright Monetary Transactions will replace the Securities Markets Program.
Under the new plan, the ECB will buy sovereign debt from countries that formally request bailouts. Continued aid will be conditional on adherence to strict budget requirements.
German court OKs participation in the permanent bailout fund, the ESM
On Sept. 12, 2012, the permanent bailout fund, the European Stability Mechanism, got the go-ahead from a German court. The ESM was set to roll out in July 2012 but it was held up by a lawsuit brought by the German citizenry questioning the legality of the fund and Germany's participation in it. As the primary contributor to the 500 billion euro fund, Germany is slated to kick in 190 billion euros. In March, finance ministers voted to combine the bailout funds committed to by the EFSF with the ESM for a combined capital base of 700 billion euros.
The court hearing was big news around the globe. In a make-it-or-break-it decision, a German judge ruled that there was no reason to block the ESM. The first meeting of the ESM's board of governors was held Oct. 8.
Following a summit of European Union leaders Oct. 18, 2012, it was announced the European Central Bank would lead supervision of the eurozone's 6,000 banks
The legislative framework for tying the region's banks together will be in place by January 2013, and implementation will take place throughout the year.
With that decision in the bag, the European Stability Mechanism can move ahead with plans to directly recapitalize banks, rather than lending money to sovereigns that would then lend to financial institutions.
Protests over austerity measures span Europe
On Nov. 14, 2012, unions went on strike in Spain, Portugal, Greece and Italy to protest austerity measures. The protests didn't stop with Europe's southern periphery. Some 50 trade unions in 28 countries participated by striking or protesting.
Euro-area recession deepens
Gross domestic product in the euro area fell 0.1 percent in the third quarter of 2012, Eurostat announced Nov. 15. Growth was positive in the 27 countries that make up the European Union, at 0.1 percent. According to Eurostat, GDP in the second quarter for both areas was -0.2 percent.
Moody's downgrades French credit rating
France's government bond rating was downgraded one notch by Moody's Investor Services, from Aaa to Aa1 on Nov. 19, 2012. The reasons for the downgrade included structural challenges and a loss of competitiveness as a result of rigidities in the labor market. Moody's also cited a diminishing resilience to future euro-area shocks as a result of France's large exposure to peripheral Europe through trade and banking. Then there was this assessment: "Unlike other non-euro-area sovereigns that carry similarly high ratings, France does not have access to a national central bank for the financing of its debt in the event of a market disruption."