The chapter reviews the record of economic reform implemented in Greece during 2010. It is argued that confidence in the Greek economy began to erode further as a result of the government’s inconsistencies, but also due to the fact that many of the fundamental assumptions of the Memorandum proved erroneous. These uncertainties fuelled speculation about a possible restructuring of Greece’s debt.
This chapter discusses the strategy of the Greek government in its efforts to avert an escalating economic crisis during the first months of 2009. It is argued that the message sent by Athens over the nature of its economic troubles was unclear. So was its preference over who should lead a potential rescue of the Greek economy, with both the EU and IMF receiving conflicting signals from Athens.
The chapter discusses the Troika report on the sustainability of Greece’s debt, published in October 2011. In there, the country’s creditors acknowledged that support for the Greek economy should be extended beyond the provisions of the July 2011 package. This admission of failure undermined the credibility of the programme and created a widespread impression amongst public opinion in Greece that the government had lost control. In the EU, much of the discussion centred around the financing of the EFSF, where France and Germany openly disagreed, thus further aggravating fears that the Eurozone could not speak with one voice on the crisis.
The chapter discusses the negotiation of Greece’s second Memorandum which accompanied the country’s additional financing, worth 130 billion Euros. It is argued that the three parties supporting the government were excessively preoccupied with partisan self-interest, thus undermining the credibility of the country’s negotiating strategy with its creditors. Mistrust towards Greece was epitomised by German suggestions that the EU should appoint a Commissioner with executive powers over the drafting of the Greek budget.
The chapter discusses the economic record of the New Democracy government in Greece during 2004-2009. It argues that much needed structural reforms were abandoned during that time and that the government lost control of macroeconomic policy, leaving Greece perilously positioned during the onset of the global financial crisis.
The chapter discusses the way in which the European Union has sought to resolve the Eurozone crisis. It is argued that the crisis revealed major shortcoming in the architecture of Economic and Monetary Union which did not attract sufficient attention early on. The response to the crisis was also coloured by the dominance of centre right political forces in the EU as well as by the weakening of the European Commission in recent years. In this context a radical overhaul of economic governance within the Eurozone is required, based on the empowering of European institutions and on greater solidarity, rather than retreat to economic nationalism.
The chapter discusses the negotiations leading up to the Eurozone Summit of 26 October 2011. It highlights the prominent role of Germany and France in the negotiations and the inability of the Greek government to make a substantial contribution to them. The decision to trigger the Private Sector Involvement (PSI) clause and the corresponding haircut in the value of Greek debt held by private investors did not dispel all doubts over the sustainability of public finances in Greece. The agreement over the financing of the EFSF also raised doubts on whether its firepower was sufficient to deal with a potential spreading of the crisis.
This chapter discusses the economic programme of PASOK in the run up to the 2009 election. It argues that the party failed to realise the seriousness of Greece’s economic peril and did not communicate to the electorate the hard choices ahead.
The chapter discusses the decision of the Greek Prime Minister, George Papandreou, to call for a referendum on the decisions of the Eurozone Summit of 26 October 2011. It argues that the referendum call was a mistake that undermined the credibility of the government both domestically and abroad. It also severely endangered the position of Greece as a member of the Eurozone and the European Union. The referendum call was reflective of a wider lack of leadership that plagued Greece’s response to the crisis from its very outset.
The chapter discusses the attempts of the Greek government to improve the country’s profile amongst its partners as speculation grew that Greece’s might be pushed out of the Eurozone as a means of restoring confidence in the Euro and applying pressure on Spain and Italy to pursue further reforms. Owing to a number of concessions by the Greek government in the Eurogroup meeting of October 2012, the climate towards Greece began to change for the better. Yet disagreements between the EU and the IMF over the sustainability of the Greek debt, raised fears that the latter may opt out of the Greek programme. These differences were resolved in a compromise stuck at the Eurogroup meeting of November 2012, which allowed for the partial restoration of confidence in the Greek economy.