Beyond Nemesis and Salvation: A Reorientation of the Debate on the Greek Economic Crisis

Abstract

The Greek economic crisis has imperilled the stability of the eurozone, generating much global anxiety. Policymakers, analysts, and the media have daily debated the course of the Greek economy, prescribing ways to move forward. While many European decision makers have expressed faith in the country’s recovery, on the basis of the Second Economic Adjustment Programme and its merits, an increasing number of commentators have questioned the programme’s fundamental assumption—the indispensability of austerity measures amidst the economic recession (Krugman, 2012a; Stiglitz, quoted in Moore, 2012). Some economists have insisted on the need for a European-wide approach to the crisis, with greater institutional steps towards a fiscal union (e.g. Varoufakis, in an interview, Sales, 2012). Others (predominantly German analysts and decision makers) have suggested that, at present, each country should assume primary responsibility for its own problems, so as not to encourage or reward fiscal imprudence and profligacy (e.g. Dieter, 2012). Another strand of the debate concerns Greece’s future in the eurozone. Although most European decision makers tirelessly affirm that the country’s membership in the European Monetary Union is not in question, some analysts have predicted (and recommended) Greece’s exit from the European common currency (Rogoff, in an interview, Böll & Sauga, 2012; Sinn, in an interview, Kaiser, 2012; Roubini, 2012). A few commentators even assert that the country is a ‘lost cause’ or ‘beyond repair’ (Krugman, 2012b; Feldstein, quoted in Michelson, 2012). Apparently, most pessimistic economic analyses refer to the main deficiencies of the Greek economy, namely, low competitiveness and productivity, red tape, large-scale corruption, an extensive shadow economy, and a bloated and inefficient public sector. More importantly, they direct attention towards the country’s insufficient progress in implementing certain structural reforms.