Political Economy of the Greek Crisis

Abstract

The Greek turmoil commenced as a balance of payments, or “sudden stop,” crisis induced by large current account and primary government deficits. It became an economic and social disturbance of historic proportions. Its proximate cause was loss of competitiveness within the Eurozone due in large part to domestic German wage policies. The bailout policies, imposed by the lenders primarily for reasons of Eurozone stability and adopted by Greece, have had disastrous effects on both economy and society. The “historical bloc” that dominates Greek society willingly submitted to the bailout strategy, losing sovereignty, for reasons including fear and identity. JEL Classification: E66, F00, F02, F34