Greek Crisis Analyzed

To most observers, the current Greek crisis has primarily been a fiscal one. There is by now an impressive number of accounts about the deficits and public debt accrued by successive Greek governments, the conditions of the bailout package offered the country, the bond spreads in Greece and elsewhere. Such a focus is of course understandable when taking into account both the enormity of the problem the Greek economy is faced with and the possibility of a spill-over in other Eurozone economies or, indeed, the world economy. But what has caused the crisis? Was that a matter of disastrous economic management or did the crisis originate in the malfunctioning of the country’s political system? The question is not inconsequential. For, if the crisis were simply due to economic mismanagement, then an economic prescription, no matter how bitter the pill, should be enough for putting the house in order. But if, as I am going to submit, the crisis has its origins in grave pathologies of the political system over the last three decades, recovery will require much more than wise economic management. It will in fact require the remaking of Greece’s whole political and institutional system.
http://www.opendemocracy.net/openeconomy/takis-s-pappas/causes-of-greek-crisis-are-in-greek-politics

The impact of the global economic crisis on Greece has been devastating. Greece would have defaulted on its debt back in May 2010 had it not been for the joint EU-IMF-ECB (the so-called troika) bailout of 110 billion euro. The bailout itself came with a long list of prerequisites relating to the adoption of strict austerity measures.

This regime proved to be a failure as the Greek economy went into a deeper recession while the fiscal situation of the Greek state never improved. Thus the Greek government was forced to adopted a second pack of stricter austerity measures coupled with a massive plan of privatizations of state property. The privatizations would include ports, roads, tax collection powers and others that are essential for the well-being of a state. With respect to the privatizations plan Jean-Claude Juncker, the Eurogroup's chairman, said that Greece will have limited sovereignty.

After the adoption of the second pack of stricter austerity measures, the so-called medium-term programme, the markets reacted positively. However as I explained in an article, market relief would be short-lived over the new measures which proved to be the case.

Now Greece is in need of a second bailout from the troika otherwise default or restructuring of the debt will be the natural consequence. The EU stuck in its complex bureaucracy, has so far failed to reach a consensus over this issue.

The factors that have shaped the Greek crisis in this way are four as I explained in my article about the four dimensions of the Greek crisis. In short those dimensions are the global economic crisis, the systemic flaws of the euro, the endogenous factors that made the internalization of the crisis very severe and last the nature of the policies to deal with the crisis (the bailout with its austerity regime).

Adding to these four dimensions of the Greek crisis, I explained the reasons why Greece cannot avoid default as things currently stand (if course the EU does not come up with another "safety" pack) in my article about the dual nature of the Greek crisis, where I explain that Greece faces two crises in one. On the one hand it has to deal with a non-sustainable sovereign debt together with a non-viable budget deficit and on the other hand it has an uncompetitive, non-expanding economy. To cope with these issues, measures towards different directions need to be adopted. http://protes-stavrou.blogspot.com/2011/07/full-review-of-greek-crisis-video.html#.TrrZ3_TnP1g