The political origins of the Greek crisis: Domestic failures and the EU factor

Abstract

This article argues that the origins of the Greek malaise are primarily political rather than economic and rooted in the delay, postponement, and half-hearted implementation of public policy reforms that preceded the crisis. The 2007-08 global economic crisis triggered market scrutiny over Greece, as it brought to an end a period of abundant liquidity and a relaxed attitude by global markets vis a vis Eurozone members. Greece's impossible fiscal position was brutally exposed, and a downward spiral began. The article also argues that although Greece set itself up for failure, the Eurozone's inability to act swiftly and early, to diagnose the problem correctly and to combine a policy mix consisting of budgetary consolidation and policy reform further exacerbated the problem. Despite the fact that disorderly default has been avoided and a sense of normalcy has returned, Greece has to move swiftly on the reforms front to avoid disaster.