The Euro Area Crisis Five Years After the Original Sin

33 Pages Posted: 21 Oct 2015

See all articles by Athanasios Orphanides

Athanasios Orphanides

Massachusetts Institute of Technology (MIT) - Sloan School of Management; Asia School of Business

Date Written: October 19, 2015


Why did Europe fail to manage the euro area crisis and what lessons can be drawn from this failure for Europe’s future? Studying the EU/IMF program that was imposed on Greece in May 2010 — the original sin of the crisis — highlights both the nature of the problem and the difficulty in resolving it. The mismanagement can be traced to the flawed political structure of the euro area that permitted governments of some member states to exploit problems in other member states that share the common currency. Undue influence of key euro area governments compromised the IMF’s role to the detriment of other member states and the euro area as a whole. Rather than help Greece, the May 2010 program was designed to protect specific political and financial interests in other member states. The ease with which the euro was exploited to shift losses from one member state to another and the absence of a corrective mechanism render the current framework unsustainable. In its current form, the euro poses a threat to the European project.

Keywords: IMF lending, Greece, Germany, European Union, euro, austerity, debt sustainability, systemic exemption, contagion

JEL Classification: D72, E32, E65, F34, G01, H12, H63

Suggested Citation

Orphanides, Athanasios, The Euro Area Crisis Five Years After the Original Sin (October 19, 2015). MIT Sloan Research Paper No. 5147-15, Available at SSRN: or

Athanasios Orphanides (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States


Asia School of Business ( email )

Jalan Kuching, Kuala Lumpur, Wilayah Persekutuan K
Kuala Lumpur, MA

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