The crisis in Greece and the EU-IMF rescue package: Determinants and pitfalls

Anna Visvizi ()
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Anna Visvizi: DEREE — The American College of Greece, 6 Gravias Street, 153-42 Aghia Paraskevi, Athens, Greece

Acta Oeconomica, 2012, vol. 62, issue 1, 15-39

Abstract: The sovereign debt crisis in Greece represents a very interesting case in which the Greek government succeeded in transforming domestic fiscal deficit problem, overspending and fear of free market reforms into a European challenge consistent with justifiable concerns about the sustainability of the euro-project and its likely future. In this paper, the roots of the crisis and the way of addressing it are discussed. In particular the features, drawbacks, missed opportunities and pitfalls of the €110 billion EU/IMF rescue package granted to Greece are examined. It is argued that the government’s focus on taxation rather than on politically costly privatization and cutbacks in the public sector undermined economic activity in the country, decreased the government’s revenue, and spawned disincentives for investment, without generating growth and without improving competitiveness. In brief, rather than contributing to economic recovery, the opposite was achieved as a result of the measures implemented by the government.

Keywords: Greece; crisis; Eurozone; IMF adjustment programme; currency union (search for similar items in EconPapers)
JEL-codes: E65 F42 H11 H63 O19 (search for similar items in EconPapers)
Date: 2012
Note: Paper presented at the 17th Annual Conference of the Hungarian Political Science Association (Budapest), titled “Structures and Futures of Europe”, held at the Central European University, 20–21 May 2011. Warm thanks go to László Csaba for his comments on an earlier version of this paper. I am also grateful to two anonymous reviewers for their ideas and suggestions. While writing this paper, I have benefited from my conversations with Brigitte Young and Katarzyna Yukrowska. Usual disclaimers apply.
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