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How to Damage an Already Fragile Economy

Author

Listed:
  • Palaiologos, Yannis
  • Pelagidis, Theodore

Abstract

After years of high growth driven by debt-fueled consumption1, Greece suffered a catastrophic loss of investor confidence beginning in late 2009. This led the Greek government to lose market access in the spring of 2010 and to apply for a bailout from its partners in the Eurozone and the International Monetary Fund. The initial bailout program, based on overly optimistic projections about the public sector’s capacity to reform and the resilience of the economy in the face of a major contraction of domestic demand, collapsed within months. The second program, which included a deep restructuring of the country’s debt, also failed to resolve the issue of debt sustainability and structural weakness, and involved fiscal targets that – though not as demanding as those of its predecessor – were widely disparaged as inconsistent with a robust recovery.

Suggested Citation

  • Palaiologos, Yannis & Pelagidis, Theodore, 2017. "How to Damage an Already Fragile Economy," MPRA Paper 107147, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107147
    as

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    File URL: https://mpra.ub.uni-muenchen.de/107147/1/MPRA_paper_107147.pdf
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    References listed on IDEAS

    as
    1. Bryan Kelly & Ľuboš Pástor & Pietro Veronesi, 2016. "The Price of Political Uncertainty: Theory and Evidence from the Option Market," Journal of Finance, American Finance Association, vol. 71(5), pages 2417-2480, October.
    2. Funke, Manuel & Schularick, Moritz & Trebesch, Christoph, 2016. "Going to extremes: Politics after financial crises, 1870–2014," European Economic Review, Elsevier, vol. 88(C), pages 227-260.
    3. R?diger Bachmann & Steffen Elstner & Eric R. Sims, 2013. "Uncertainty and Economic Activity: Evidence from Business Survey Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 217-249, April.
    4. Theodore Pelagidis & Michael Mitsopoulos, 2021. "Who’s to Blame for Greece?," Springer Books, Springer, edition 3, number 978-3-030-64081-1, January.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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