2010-2018 Greek Debt Crisis and Greece's Past: Myths, Popular Notions and Implications
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A Decade of Crisis in the European Union: Lessons from Greece*
JCMS: Journal of Common Market Studies
Introduction: How Greece Became the Black Sheep of the Eurozone In 2004 few could imagine Greece on the brink of state bankruptcy. Greece featured in the global news as the proudly successful host of the Olympic Games, it had successfully joined the Euro and was enjoying economic growth. This euphoria would end with the global financial crisis that followed the 2008 Lehman Brothers' collapse. When the private rating agency Standard & Poor's downgraded Greek government bonds to junk status in 2010 the eurozone was ill-prepared to deal with it. Eurozone membership had given countries with high inflation records, like Greece, the opportunity to borrow at a favourable interest rate to fund their current account deficits. Eurozone members initially perceived Greece's troubles not as 'European' but as 'domestic' (Lefkofridi and Schmitter, 2015). The Greek crisis was diagnosed as being caused by domestic factors, such as low competitiveness, low revenues, high government spending and rent-seeking (Axt, 2010). Dismissing both the role played by governments and banks in countries other than Greece and the global context (Flassbeck, 2012; Krugman, 2012), discussions raged about lending to 'lazy' and 'corrupt' Greeks, who had been living 'beyond their means' (Endres, 2010; Jonker-Hoffrén, 2013). When market confidence in the bonds of other eurozone members (Irish, Italian, Portuguese and Spanish) started declining as well, these countries were quick to reassure both markets and their eurozone partners that they were not 'another Greece' (Wachman, 2010). In this context, country differences were reduced to 'cultural characteristics and habits', as reflected in stereotypes of laziness, non-productivity, corruption, wasteful spending and lying (Van Vossole, 2016). A new acronym for a group of troubled countries-Portugal, Ireland, Italy, Greece and Spainentered public discourse: 'PIIGS'. In the meantime, a huge market of credit default swaps had developed, in which speculators treated sovereign public debt as if it were equivalent to private corporate debt. In denial of their interdependence that necessitated solidarity, eurozone leaders opted to attribute blame to minimize electoral costs at home. By 2011, the eurozone had become deeply divided and the Eurothe second strongest currency in the worldfell hostage to the domestic politics of its member states. A potential Greek bankruptcy was dangerous for the European banks that held most of the Greek debt, which would then need to be bailed out with taxpayers' money. Given power asymmetries, however, non-indebted eurozone members had more space for * The authors would like to thank Yevhen Voronin for his invaluable help as research assistant at GESIS and the enriching feedback of the editors of the Annual Review.
Greek Debt Crisis A Counter-Intuitive outcome for the Greek Government
Introduction This article describes how the reckless external borrowing done by the Greek Government in the hopes of boosting economic growth & funding its social welfare programs backfired spectacularly with the advent of the Great Recession of 2007. Since then, despite numerous aid packages from the troika, the Greek economy is yet to recover & its citizens are still suffering due to unsustainable levels of national debt. We use a Causal Loop Diagram to explain this & find out the important factors that led to this crisis.
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The past Greek crisis experience is more or less terra incognita. In all historical empirical studies Greece is systematically neglected or included only sporadically in their cross-country samples. In the national literature too there is little on this topic. In this paper we focus on the Greek experience of the Great Depression and use it as a benchmark against which to assess the policy choices and constraints that Greece faces today, with the ultimate aim to draw policy lessons from history and warn against a repeat of the same outcome. The 1930s crisis episode is used as a useful testing ground to compare the two crises episodes, 'then' and 'now'; detect differences and similarities, discuss the policy facts and assess the impact of policy pursued on output. To the best of our knowledge, this paper is the first attempt to study the Greek crisis experience over the two historical episodes and detect similarities and differences. Comparisons with the interwar period show that the current crisis of the Greek economy should be classified a great depression rather than a great recession and that the inability of the national authorities to credibly adhere to their commitment to a nominal anchor was at the root of the country's failure.
The Greek Crisis: Causes and Consequences
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Greece has reached a point where, under any plausible macroeconomic scenario, public debt will continue growing faster than GDP. Fiscal consolidation alone cannot close the solvency gap. A substantial reduction in the stock of debt is needed. Even post-debt restructuring, there is no guarantee that the government will succeed in its dual goal of restoring fiscal solvency and closing the competitiveness gap. Yet we think Greece stands a better chance of accomplishing these goals from inside the EMU rather than outside it. This chapter takes stock of the factors that led to the explosion of public debt, the loss of competitiveness, and the failure of the first EU-IMF programme. We also present our views on the likely debt restructuring (and post-restructuring) scenarios.
2011
As default on the Greek debt looms on the horizon, and the repercussions are likely to resonate throughout Europe and into worldwide financial markets. But the potential national bankruptcy did not rise out of a vacuum, and analysts who have been observing Greek financial policy for decades are not surprised. In this PERI research brief, C.J. Polychroniou explores the history of Greece’s joining the Eurozone, and examines the factors—economic, political, and social—that have led to this moment of crisis.
A Failure by Any Other Name: The International Bailouts of Greece
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Research Associate and Policy Fellow C. J. Polychroniou argues that a political solution based on a new economic vision is needed to bring an end to the Greek crisis. Polychroniou observes that what began as a financial crisis has been transformed into a full-fledged economic and social crisis by the neoliberal policies of the International Monetary Fund and the European Union (EU). Instead of growth, these policies have destroyed Greece's economy, divided the eurozone states, and hobbled a fragile global recovery. The past six years have seen Greece's descent into economic and social ruin. Exiting the current crisis, for Greece and countries throughout the eurozone, requires more than an end to austerity. Broadly, EU institutions must be radically restructured around the principles of sustainable, equitable growth. Specifically, Greece needs a comprehensive development plan, with massive public spending and investment.