Greek Crisis in Perspective: Causes, Illusions and Failures
Soon after the 2008 global crisis, the euro faced its toughest challenge since its introduction as several of the participating Member States faced unprecedented financial problems. Greece was the most severe case, requiring intervention from the EU and IMF to stabilise its economy and repay debt obligations. This article explains the debt process in Greece from the 1980s to date, and describes its main causes and episodes. It also assesses the impact of the IMF/EU austerity programmes and shows that its failure to control recession inhibited the prospects of debt stabilisation. Five years after the bailout agreement, Greece is in a deep contraction, with socially explosive unemployment rates, while public debt is alarmingly higher than the level that triggered the crisis. An alternative scenario is discussed, showing that stabilisation can become more effective and realistic if recession is tackled first and reforms follow on a steadier path.
KeywordsDebt Fiscal deficits External balances Crisis Eurozone Greece
JEL ClassificationsH60 H61
I have benefited from various comments by V. Sarantides and A. Ntantzopoulos and I am thankful to participants in a LSE seminar on an earlier version of this article.
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