When Did It Go Wrong? The Case of Greek Sovereign Debt



This chapter analyses the fiscal stance of the Greek public sector over the period 2001–2016. It distinguishes between three periods: 2001–2006, during which the Greek economy attained much larger growth rates than most EU countries but despite that the general government primary deficit was on average about 2 percentage points higher than the EU-28 average; 2007–2009, during which the primary fiscal deficit soared, reaching a record value of 10.1% in 2009; finally, 2010–2016, during which the Greek economy entered a long phase of fiscal consolidation and by 2014 the fiscal budget even experienced a small primary surplus. What factors contributed to more-than-average (relative to the EU countries) fiscal imbalances during the first phase, in spite of high economic growth? Was the 2009 fiscal deficit revenue or expenditure driven? How was fiscal consolidation achieved during the last phase? What implications does this bear for future economic growth rate and the ability of Greece to pay back its debt? The chapter concludes by providing some recommendations for future fiscal policy making and the way ahead.


  1. Adamczyk, G., and B. Windisch. 2015. State Aid to European Banks: Returning to Viability. Occasional Papers by the Competition Directorate-General of the European Commission, No 1.Google Scholar
  2. Alesina, A., and R. Perotti. 1997. Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects. Staff Papers (International Monetary Fund) 44: 210–248.CrossRefGoogle Scholar
  3. Angelopoulos, K., and A. Philippopoulos. 2007. The Growth Effects of Fiscal Policy in Greece 1960–2000. Public Choice 131: 157–175.CrossRefGoogle Scholar
  4. Attinasi, M.G., and L. Metelli. 2016. Is Fiscal Consolidation Self-defeating? A Panel-VAR Analysis for the Euro Area Countries. ECB Working Paper Series No. 1883.Google Scholar
  5. Brender, A., and A. Drazen. 2004. Political Budget Cycles in New Versus Established Democracies. NBER Working Paper Series No. 10539.Google Scholar
  6. Colasanti, F. 2016. Financial Assistance to Greece: Three Programmes. Discussion Paper Series, European Policy Centre.Google Scholar
  7. de la Fuente, A. 1997. The Empirics of Growth and Convergence: A Selective Review. Journal of Economic Dynamics and Control 21 (1): 23–73.CrossRefGoogle Scholar
  8. Demekas, D., and Z. Kontolemis. 1998. Unemployment in Greece: A Review of the Problem. Athens: Economic and Industrial Research Institute.Google Scholar
  9. ESM. 2016. Factsheet: ESM/EFSF Programmes for Greece.
  10. European Commission. 2012. The Second Economic Adjustment Programme for Greece: First Review—December 2012, Occasional Papers 123.Google Scholar
  11. Eurostat Report. 2004. Revision of the Greek Government Deficit and Debt Figures.
  12. Eurostat Report. 2010. Report on the EDP Methodological Visits to Greece in 2010.
  13. Hondroyiannis, G. 1999. The Causality between Government Spending and Government Revenue in Greece. Bank of Greece, Economic Bulletin 13: 27–42.Google Scholar
  14. Hondroyiannis, G., and E. Papapetrou. 1996. An Examination of the Causal Relationship between Government Spending and Revenue: A Cointegration Analysis. Public Choice 89: 363–374.CrossRefGoogle Scholar
  15. IMF. 2016. Greece: Preliminary Debt Sustainability Analysis—Updated Estimates and Further Considerations (Country Rep. No. 16/130).Google Scholar
  16. Maddison, A. 1995. Monitoring the World Economy, 1820–1992. Paris: OECD Development Studies.Google Scholar
  17. Manessiotis, V., and R.D. Reischauer. 2001. Greek Fiscal and Budget Policy and EMU. In Greece’s Economic Performance and Prospects, Ch. 2, ed. C. Bryant, N. Gargans, and G. Tavlas. Athens, Greece: Bank of Greece and The Brookings Institution.Google Scholar
  18. OECD. 2005. Economic Surveys: Greece, Volume 2015/12—September 2005.Google Scholar
  19. Provopoulos, G., and A. Zambaras. 1991. Testing for Causality between Government Spending and Taxation. Public Choice 68: 277–282.CrossRefGoogle Scholar
  20. Reuters. 2017. Greece on Track for 2018 Primary Surplus Target: EU. Accessed 10 Feb 2017.
  21. von Hagen, J., and R. Strauch. 2001. Fiscal Consolidations: Quality, Economic Conditions and Success. Public Choice 109: 327–346.CrossRefGoogle Scholar
  22. Xafa, M. 2014. Sovereign Debt Crisis Management: Lessons from the 2012 Greek Debt Restructuring. CIGI Papers, No. 33.Google Scholar

Copyright information

© The Author(s) 2017

Authors and Affiliations

  1. 1.Monash UniversityMelbourneAustralia
  2. 2.University of MacedoniaThessalonikiGreece

Personalised recommendations