Introduction

AuthorAndersen, Benny
Pages8-9
8 | D i s c u s s i o n P a p e r S e r i e s | J u n e 2 0 2 0
Introduction
This paper describes and analyses the bumpy route leading up to and during the first years of
the devastating Greek economic and financial crisis that erupted in 2009. It identifies the
macroeconomic, structural, and financial market developments that explain the crisis. The paper
also describes the underlying political, cultural, and social forces, prevalent for decades, which
drove developments and hindered sustainable growth and convergence within the European
Union (EU).
It surveys the way unsustainable internal and external imbalances accumulated in Greece and
the part played by weak institutional foundations, repeated data misreporting, a frail business
climate, and widespread co rruption. These issues remained fundamentally unaddressed
throughout the 19812012 period covered by this paper despite closer integration within the
EU and the euro area, and targeted conditions under international financial support
programmes. The paper documents and discusses weak internal governance and strong links
between corruption and poor fiscal outcomes.
The study also addresses issues that underlay weak traction and other shortcomings in the
comprehensive surveillance by the EU, the Organisation for Economic Co -operation and
Development (OECD), and the International Monetary Fund (IMF), including during periods o f
financial support, as well as design and governance imperfections in the 2010 international
support programme.
The analysis is divided into key sub-periods to discuss what went wrong in Greece: after
accession to the European Economic Community (EEC)/EU in 1981; then the period between the
M T            
euro entry; and then during the 2010 international support programme before the first
European Financial Stability Facility (EFSF) programme with Greece was approved in March
2012.
T             
three decades of professional involvement in international monetary and financial affairs across
Europe and at the IMF. It draws on key surveillance, programme, and evaluation documents
from the European Central Bank (ECB), the European Commission, the IMF, and the OECD,
together with numerous political economy sources.
Chapter 1 describes the general economic developments since EEC membership was achieved
in 1981, dividing the period into the following sub-periods: 19811993; 19942000; 20012009;
and 20102012. This perspective underscores the overall stop-go approach in economic policy,
with the goal of integrating Greece with her European partners serving as an incentive and driver
of progress, only for Greece to experience significant policy shortcomings and economic
weaknesses soon after the goals were achieved. Chapter 2 discusses underlying reasons for the
   G   EU IMF OECD   
traction. Chapter 3 looks at the first international financial support programme from 2010 and
the reasons for limited, short-lived successes. Chapter 4 details the data misreporting that
 G           
with Greece de facto never fulfilling the entry criteria for euro area membership or complying
with the budget deficit threshold under the EU Stability and Growth Pact (SGP). Chapter 5
discusses political economy issues of the crisis, including widespread and largely unaddressed
corruption, weak institutions, and other cultural and social shortcomings hindering sustainable
progress. These aspects generally received little attention in macroeconomic literature covering

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT