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The Greek case
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The book examines the European debt crisis with particular reference to the case of Greece. It investigates its spillover from a Greek-specific problem to a Eurozone-wide crisis and chronicles the policy responses to combat it. The central argument of the book is that the principal cause of the Eurozone’s problems was, and still remains, the indecisiveness of European elites to tackle its underlying deficiencies. Leading Eurozone countries have been unwilling to commit to a common long-term plan which could deal convincingly with complex and inter-related problems affecting both its ‘core’ and its ‘periphery’. The guiding principle of policy responses thus far has been the pursuit of permanent fiscal discipline. Yet, fiscal discipline alone would not provide the long-term solutions required; a steady course towards economic governance and political unification is necessary.

Through the detailed tracing of the evolution of the crisis, the book provides valuable insights into the crucial interconnection between Greece’s own economic troubles and the wider European search for macroeconomic stability and sustainable economic growth. As such, the book appeals well beyond those with a narrow academic interest in Greece. This is very much a discussion about the future of the Eurozone and the European Union as a whole.

A new beginning?
Costas Simitis

The chapter discusses the June 2012 election and the increasing fluidity of the Greek political scene. It is argued that the election result made it imperative that pro-European parties should form a new coalition government. Domestically calls for a renegotiation of Greece’s bailout terms grew louder, although the maximalist tone of these demands met with an outright opposition by Germany and the ECB. Amidst intra-coalition disagreements over how best to deal with the intransigence of Greece’s creditors, the PM decided to stick to the deficit reduction commitments previously undertaken by the Greek government.

in The European debt crisis
Costas Simitis

The chapter provides an assessment of the two Memoranda that accompanied Greece’s bailouts. It is argued that initial assessments over the sustainability of the Greek debt were overly optimistic and based on projections that did not account for the realities of the Greek economy. The same is also true for some of the assumptions of the second Memorandum. The severe austerity paradigm that underpinned the two programmes was based on a defensive reading of the crisis and a high degree of moralism. Fiscal discipline, although necessary, does not, on its own, constitute a credible exit strategy from the crisis.

in The European debt crisis
Costas Simitis

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.

in The European debt crisis
Implementing the second Memorandum
Costas Simitis

The chapter discusses the implementation of the provisions surrounding Greece’s second bailout package. It is argued that the successful completion of the PSI programme offered important breathing space to both Greece and the Eurozone, but did not fully dispel concerns over the sustainability of Greece’s debt. At the European level a network of provisions were now in place as ammunition against the crisis, but their suitability to provide a holistic response to the root causes of the crisis was contested.

in The European debt crisis
Euro or drachma?
Costas Simitis

The chapter discusses the election of 6 May which brought a seismic change to the party system of Greece. It is argued that New Democracy’s underperformance in the election was due to the inconsistencies of its leadership which had initially opposed the Memorandum and subsequently made an embarrassing u term. PASOK too was punished by its traditional power base for not defending the pre-crisis status quo. Anti systemic parties, on the other hand, made significant gains. The electoral impasse that followed necessitated another general election, causing widespread uncertainty over the future of Greece in the Eurozone.

in The European debt crisis
Change of course on 29 June
Costas Simitis

The chapter discusses the handling of the crisis over the Spanish banking sector in June 2012.It is argued that this marked an important turning point in the evolution of the Eurozone crisis, as the German policy prescription came under concerted criticism. The decisions of the European Council of 29 June 2012 offered a new paradigm in the management of the crisis, not least because of the decision to allow the recapitalisation of European banks directly through the EFSF and the ESM. This also paved the way for a banking union within the Eurozone.

in The European debt crisis
Abstract only
Costas Simitis

The chapter discusses developments in the Eurozone during the early months of 2012. It is argued that in Greece the Papademos government was fatally undermined by the unwillingness of the coalition partners to endow it with a longer-term mission. Yet, the prospect of a new election halted the domestic reform momentum. At the European level, hopes for the containment of the crisis did not materialise as both Italy and Spain remained under severe pressure from the markets. The prospect of an imminent Lehman Brothers moment for the European economy alarmed the US which pressed Germany for a relaxation of austerity in the Eurozone, but to no avail. The election of Hollande in France raised expectations in Greece that the German policy was about to be reversed. Such expectations, however, proved rather unrealistic.

in The European debt crisis
Costas Simitis

The chapter discusses the spreading of the Eurozone crisis to Italy, leading to the formation of the Monti government in November 2011. The uncertainty over Italy was compounded by fears that the firepower of the EFSF would not suffice in case Italy needed rescue. The launch of the Fiscal Pact and the accelerated entry into force of the European Stability Mechanism were meant to calm fears over the ability of the Eurozone to respond to future iterations of the crisis. Yet, the opting out of the UK from the Fiscal Pact and its apparent intergovernmental nature, created sceptism over the institutional design of economic governance in the Eurozone.

in The European debt crisis
Abstract only
Costas Simitis

The chapter discusses the intensification of the Eurozone crisis in the aftermath of the Greek election of May 2012, particularly as concerns over the health of the Spanish economy put pressure on the value of the Euro. The ECB warned that the very design of EMU was no longer sustainable, but the building of consensus over the reform of the Eurozone’s architecture proved elusive.

in The European debt crisis