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Open Access Publications from the University of California

Restraints on European Recovery Structural and Ideological Impediments to Reviving Greece and the Eurozone After the Crisis

  • Author(s): Potts, Shaina
  • Montero, Sergio
  • et al.

Since October 2009, the Greek sovereign debt problem has spiraled into crisis. By the end of last year, Greek national debt stood at 115% of GDP, and the deficit had been revised up from 6-8% to 13.6%. On April 27, 2010, international ratings agencies decreased Greek bonds to junk status. On May 1, Greece agreed to a series of austerity measures that convinced the previously reluctant Germany to support a bailout package for Europe but also set off massive strikes throughout Greece. An initial 110 billion euro bailout was replaced days later with a 750 billion euro ($100 trillion) bailout of which IMF will provide 250 billion euros and EU institutions the rest. Even this news did not prevent stock market drops worldwide. Spain too lost its AAA credit rating at the end of May, further fanning fears that the crisis could spread to the rest of Europe.

Unfortunately, Greece faces two major obstacles to taking a truly proactive approach to recovering productivity. First, as a member of the Eurozone, which takes monetary policy out of national hands, Greece is unable to use monetary and fiscal measures in ways traditionally applied in such a situation. Second, this structural difficulty has been further exacerbated by the prevailing ideological approach to the European debt crisis, which has been framed in terms of restoring international creditworthiness and protecting foreign creditors, rather than in terms of ensuring employment and basic social needs for citizens.

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