Global PersPectives
Monetary Fund for bailouts. In return for bail-
outs, the Greek government was obligated to
take multiple steps to slash public spending by
cutting ser vices and laying off workers, improv-
ing tax collection by going after delinquent
taxpayers and increasing tax rates, and rene-
gotiating labor contracts (including cutting
social welfare benefits) and ending subsidies.
In the view of the international economists of
the EU, IMF, and ECB, those painful mea sures
were necessary to get Greece’s financial house
in order.
These mea sures resulted in a dramatic
decline in the standard of living for the Greek
population. Public opposition and antigovern-
ment and anti- EU demonstrations escalated,
just as they had in Ireland, Spain, and Italy. But
the conditions in Greece proved the most
dire. Despite several EU– IMF bailouts, domes-
tic opposition grew as government spending
was slashed, taxes increased, pensions were
cut, and government employment fell by 25
percent.
In 2015, the left wing Syriza party won elec-
tion on a platform of opposing the austerity
mea sures and standing up to the EU and the
IMF. Midway through the year, the prime min-
ister closed banks and the stock exchange
and imposed controls limiting how much
capital could be moved. ATMs emptied. While
the immediate crisis was alleviated, Greece,
the EU, the Eu ro pean Central Bank, and theIn 2001, Greece joined the Eurozone, hoping
that membership would promote liberalization
of the economy and modernization of state
institutions. But, as is now widely acknowledged,
leaders at the time misrepresented the coun-
try’s financial condition: its bud get deficit was
still well above the 3 percent of GDP ceiling
required for membership in the EU and its
debt level was above 100 percent of GDP. By
the time Greece hosted the Olympic Games
three years later, its deficit had risen to
6.1 percent of GDP. However, the early years
of the new millennium brought what seemed
like a stronger economy. Both the Greek gov-
ernment and the private sector went on a bor-
rowing binge. The country grew, but it was
debt- fueled growth.
The 2008 global financial crisis exacer-
bated Greece’s economic prob lems. The cost
of borrowing escalated, and financing by inter-
national banks dried up. Greece strug gled to
ser vice its debt. By 2009, its bud get deficit
had risen to 15.4 percent, as public- sector bor-
rowing was fueled by a bloated government
bureaucracy, high public- sector wages, and
exorbitant pension costs. But it was not just a
debt prob lem. Greece’s worsening balance- of-
payments prob lems and its high wages and low
productivity made its exports uncompetitive,
and earnings from trade dropped precipitously.
Greece was forced to turn to the EU, the
Eu ro pean Central Bank, and the International
The economic prob lems in Greece have historical origins. Although the country has
been a member of the Eu ro pean Economic Community since 1981, Greece was unable
to adopt the euro in 1999 when 11 other members implemented the Maastricht Treaty and
agreed to use the euro as a common currency. The country did not meet the fiscal
criteria— inflation rates, its bud get deficit, and its debt to GDP ratio were all too high.