EMU and the Greek Crisis: Are There Lessons to Be Learnt?

17 Pages Posted: 7 Jan 2012

See all articles by Margarita Katsimi

Margarita Katsimi

Athens University of Economics and Business - Department of International and European Economic Studies; CESifo (Center for Economic Studies and Ifo Institute)

Thomas Moutos

Athens University of Economics and Business - Department of International and European Economic Studies; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: 2010

Abstract

We describe the political-economic environment that precipitated the Greek crisis. Involved were nocuous collaborations between private interests and the formally appointed custodians of the public interest, and a captured politicized bureaucracy. The confluence of these forces aided in the pilfering of public funds, allowed rampant tax evasion, and sanctioned the deterioration in the quality of publicly provided goods. From a macroeconomic perspective, the failure of successive Greek governments to reverse the decline in the national saving rate, and not the government budget deficit per se, is the main reason for the crisis. The inability of EMU authorities to react to portents of Greek failure, such as ongoing large current account deficits that were not hidden by “Greek statistics,” expose a major fault line in EMU’s design and implementation through the Stability and Growth Pact.

Suggested Citation

Katsimi, Margarita and Moutos, Thomas, EMU and the Greek Crisis: Are There Lessons to Be Learnt? (2010). European Journal of Political Economy, Vol. 26, No. 4, p. 568, 2010. Available at SSRN: https://ssrn.com/abstract=1981034

Margarita Katsimi

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

76, Patision Avenue
GR-10434 Athens
Greece

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Thomas Moutos (Contact Author)

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

76 Patission Street
GR-10434 Athens
Greece

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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