The Political Economy of the Greek Crisis

After half a decade of austerity based crisis management by international lenders, Greece is still caught up in a debt trap. Two thirds (!) of its youth is out of work and forty per cent of its population lives below the poverty line. Even the IMF has had to admit that stabilisation of the country has failed. Is Greece hopelessly corrupt and lazy as a matter of national character? This book starts out by refuting these widespread cultural stereotypes with hard empirical data. It then offers a more refined and complex explanation for Greece’s troubled present by taking a scientific, international political economy based approach in a language that is accessible even to non economists. Hard data and graphs are used to illustrate arguments, as opposed to subjective opinions. The author takes a longer term perspective, reminding readers that in the post war decades Greece was the super high growth star economy of the time, posting solid 7-9% per cent growth rates annually for three continuous decades, with almost do debt. After the change to democracy in 1974, Greece decided to enter the European Communities, at which point its growth rate immediately dropped to almost zero, and the country deindustrialised in the face of fierce competition from Northern member states. Left wing populist prime minister Andreas Papandreou is often blamed for this collapse, but the author uses hard evidence to challenge the view that the original sin of reaching a debt level of above 100% of GDP in this period could be blamed squarely on him. The book then describes how, by the early nineties Greece was already in a state of sovereign debt crisis, twenty years prior to the present disaster. Participation in the Eurozone enabled Athens to avoid the impeding default. The critical (and still not corrected) birth defects of the Eurozone construction even fuelled a long decade of artificial boom, hiding from a generation of Greeks the fact that the economy of their country has severe structural weaknesses in an international economic context that turned increasingly unfavourable. A corrupt political class allowed special interests to capture the Greek state against the wishes of uninformed voters. The bubble burst in 2009, after which the EU and the IMF attempted to cure Greece’s troubles by causing even more harm with austerity and a debt ‘haircut’. They shifted the burden to ordinary citizen, but failed to address crucial issues that play a critical role in the Greek crisis, such as offshore tax havens, untaxed shipping, excessive military spending, one sided economic structure and inadequate investment into human capital.