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The Pitfalls of External Dependence: Greece, 1829-2015

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  • Reinhart, Carmen M.

    (Harvard University)

  • Trebesch, Christoph

    (University of Munich)

Abstract

Two centuries of Greek debt crises highlight the pitfalls of relying on external financing. Since its independence in 1829, the Greek government has defaulted four times on its external creditors - with striking historical parallels. Each crisis is preceded by a period of heavy borrowing from foreign private creditors. As repayment difficulties arise, foreign governments step in, help to repay the private creditors, and demand budget cuts and adjustment programs as a condition for the official bailout loans. Political interference from abroad mounts and a prolonged episode of debt overhang and financial autarky follows. We conclude that these cycles of external debt and dependence are a perennial theme of Greek history, as well as in other countries that have been "addicted" to foreign savings.

Suggested Citation

  • Reinhart, Carmen M. & Trebesch, Christoph, 2015. "The Pitfalls of External Dependence: Greece, 1829-2015," Working Paper Series 15-065, Harvard University, John F. Kennedy School of Government.
  • Handle: RePEc:ecl:harjfk:15-065
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    References listed on IDEAS

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    Cited by:

    1. Lefteris Tsoulfidis & Michel Zouboulakis, 2016. "Greek Sovereign Defaults in Retrospect and Prospect," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 14(2), pages 141-157.
    2. repec:spr:weltar:v:154:y:2018:i:2:d:10.1007_s10290-017-0301-5 is not listed on IDEAS
    3. Sergio Cesaratto, 2017. "Alternative interpretations of a stateless currency crisis," Cambridge Journal of Economics, Oxford University Press, vol. 41(4), pages 977-998.
    4. Penet, Pierre, 2018. "Rethinking odious debt in the age of predatory lending: Old ideas for new problems," Working Papers unige:102988, University of Geneva, Paul Bairoch Institute of Economic History.
    5. Cavallo, Eduardo & Eichengreen, Barry & Panizza, Ugo, 2016. "Can Countries Rely on Foreign Saving for Investment and Economic Development?," CEPR Discussion Papers 11451, C.E.P.R. Discussion Papers.
    6. Platon Yvantopoulos & John Yvantopoulos, 2015. "The Greek Tragedy in the Health Sector: Social and Health Implications," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 84(3), pages 165-182.
    7. repec:spr:izalpo:v:7:y:2018:i:1:d:10.1186_s40173-017-0093-1 is not listed on IDEAS
    8. Seunghoon Na & Stephanie Schmitt-Grohe & Martin Uribe & Vivian Z. Yue, 2014. "A Model of the Twin DS: Optimal Default and Devaluation," Emory Economics 1404, Department of Economics, Emory University (Atlanta).
    9. Sergio Cesaratto, 2017. "The nature of the eurocrisis. A reply to Febrero, Uxò and Bermejo," Department of Economics University of Siena 752, Department of Economics, University of Siena.
    10. Tryphon Kollintzas & Dimitris Papageorgiou & Efthymios Tsionas & Vanghelis Vassilatos, 2018. "Market and political power interactions in Greece: an empirical investigation," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-43, December.
    11. Yu-Fu Chen & Michael Funke, 2017. "Greece’s Three-Act Tragedy: A Simple Model of Grexit vs. Staying Afloat inside the Single Currency Area," Open Economies Review, Springer, vol. 28(2), pages 297-318, April.
    12. Julian Schumacher & Beatrice Weder di Mauro, 2015. "Greek Debt Sustainability and Official Crisis Lending," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 279-305.
    13. repec:aea:aecrev:v:108:y:2018:i:7:p:1773-1819 is not listed on IDEAS
    14. Eduardo Cavallo & Barry Eichengreen & Ugo Panizza, 2018. "Can countries rely on foreign saving for investment and economic development?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(2), pages 277-306, May.
    15. Matthias Morys, 2016. "Any lessons for today? Exchange-rate stabilisation in Greece and South-East Europe between economic and political objectives and fiscal reality, 1841-1939," Working Papers 16017, Economic History Society.
    16. Gabriel Mihalache, 2017. "Sovereign Default Resolution Through Maturity Extension," Department of Economics Working Papers 17-08, Stony Brook University, Department of Economics.
    17. repec:eee:riibaf:v:43:y:2018:i:c:p:22-33 is not listed on IDEAS
    18. Matthias Morys, 2016. "Financial supervision to fight fiscal dominance? The gold standard in Greece and South-East Europe between economic and political objectives and fiscal reality, 1841-1939," Discussion Papers 16/05, Department of Economics, University of York.
    19. repec:oup:ereveh:v:21:y:2017:i:2:p:236-257. is not listed on IDEAS
    20. Seunghoon Na & Stephanie Schmitt-Grohé & Martín Uribe & Vivian Yue, 2018. "The Twin Ds: Optimal Default and Devaluation," American Economic Review, American Economic Association, vol. 108(7), pages 1773-1819, July.

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • G01 - Financial Economics - - General - - - Financial Crises
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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