Munich Personal RePEc Archive

How to Damage an Already Fragile Economy

Palaiologos, Yannis and Pelagidis, Theodore (2017): How to Damage an Already Fragile Economy. Published in: Georgetown Journal of International Affairs , Vol. 18, No. 2 (2017)

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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.

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