History of Greece’s Debt Crisis and the Banking Policy

Bela Balassa's Theory of Economic Integration, published fifty years ago, is a remarkable, yet little known book. This essay reviews developments in the economic literature and in the process of European integration since the book's publication, showing that it was incredibly prescient. It anticipated by more than twenty years the modern literature on economic integration that emphasizes scale economies, imperfect competition, and economic geography. It also predicted that monetary union cannot function properly without political unification, a condition well illustrated by the recent euro-debt crisis that is likely to be a watershed in the history of European integration. (JEL B31, F15, F36, G01)

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The Politics of Europeanization

The Oxford Handbook of Modern Greek Politics ◽

10.1093/oxfordhb/9780198825104.013.5 ◽

2020 ◽

pp. 69-85

Author(s):

Kevin Featherstone ◽

Dimitris Papadimitriou

Keyword(s):

Political Development ◽

Sovereign Debt ◽

Debt Crisis ◽

Future Research ◽

The European Union ◽

Eu Legislation ◽

Current State ◽

European Dimension ◽

History Of ◽

Domestic Reform

‘Europe’, ‘Europeans’, and ‘Europeanness’ have been crucial themes in the history of modern Greece, from the creation of the new state in 1832 to the sovereign debt crisis of 2010. As elsewhere, these notions have served as référentiels in questions of national identity, progress, capability, legitimation and strategic interest. In the Greek case, the European dimension to these questions has been felt acutely. This chapter considers Greece’s political development in the context of its membership of the European Union, assessing the extent to which the latter has prompted domestic reform. A general theme that emerges from the scholarly literature in this area is of Greece’s uneven adaptation across different sectors, a feature that provokes interesting research contrasts, but also challenges of interpretation. To understand how EU pressures for adaptation have been received domestically, the chapter opens with a discussion of the changing images and meanings of ‘Europe’ in Greece. This is followed by an assessment of the range and significance of the domestic adaptation of policies and regulations to EU legislation, as established by existing academic studies and policy papers. We note the current state of knowledge of Europeanization impacts on Greece, the implications of the findings, and pointers for future research. The unevenness of adaptation is an essential lens for analysis.

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The European Central Bank

The EU Law of Economic and Monetary Union ◽

10.1093/oso/9780198793748.003.0018 ◽

2020 ◽

Author(s):

Michael Ioannidis

Keyword(s):

Central Bank ◽

Sovereign Debt ◽

European Central Bank ◽

Debt Crisis ◽

Central Banking ◽

Defining Moment ◽

European Central ◽

Economic Constitution ◽

Rules And Principles ◽

History Of

The European Central Bank (ECB) is the only central bank governed by supranational constitutional law. As such, it is not only the most important institution of the Economic and Monetary Union (EMU), but it also marks a new stage in the history of central banking in general. Historically, the tasks and functions of the ECB have reflected the different stages of development of the EMU. The basic principles governing its function were set out in Maastricht, reflecting the interests and ideas about Europe’s economic constitution prevailing at that time. The sovereign debt crisis that hit Europe in 2010 was the second defining moment for the ECB after Maastricht. It posited the ECB–like the rest of the EMU–to challenges that some of the drafters of the Maastricht Treaty had not fully anticipated. These new challenges led to the adoption of novel instruments and the further clarification of fundamental rules and principles. Most important of these developments was the entrustment of the ECB with a new task, banking supervision, and the adoption of unconventional measures, which proved necessary to fulfil its monetary-policy mandate. Ultimately, not only did the ECB withstand the crisis but it emerged as a protagonist in securing the unity and integrity of the EMU.

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Coping with Global Debt Crises: Debt Settlements, 1820 to 1986

Comparative Studies in Society and History ◽

10.1017/s001041750001803x ◽

1992 ◽

Vol 34 (4) ◽

pp. 645-678 ◽

Cited By ~ 10

Author(s):

Christian Suter ◽

Hanspeter Stamm

Keyword(s):

Interest Rates ◽

Debt Crisis ◽

Empirical Studies ◽

The United States ◽

The Past ◽

The North ◽

Unique Event ◽

History Of ◽

Capitalist World Economy ◽

Brady Plan

The settlement of the external debt of insolvent sovereign borrowers has become one of the most important issues in relations between the north and south since the outbreak of the global debt crisis in the early 1980s. For the past eight years representatives of governments and international organizations, bankers, and scientists have suggested several proposals and plans to solve the present debt crisis. The most prominent schemes in this respect are the Baker Plan of 1985, which suggested massive new credits for the most highly indebted developing countries, and the recently adopted Brady Plan, which proposes partial debt discounts and reductions in interest rates. Both of these debt settlement proposals were initiated by the United States and are supported by the other principal creditor countries. However, despite the ten years of crisis management, world leaders have not yet agreed upon a longterm solution to the current debt problems. In the history of the capitalist world economy, the current problems of coping with a global debt crisis do not represent a unique event. Rather, recent empirical studies demonstrate that sovereign borrowers have experienced many instances of debt-servicing difficulties during the past 150 years (Eichengreen and Portes 1986; White 1986; Eichengreen and Lindert 1989; Marichal 1989; Suter 1989).

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Historical Research on International Lending and Debt

The Journal of Economic Perspectives ◽

10.1257/jep.5.2.149 ◽

1991 ◽

Vol 5 (2) ◽

pp. 149-169 ◽

Cited By ~ 25

Author(s):

Barry Eichengreen

Keyword(s):

World War Ii ◽

Capital Markets ◽

Debt Crisis ◽

Developed Countries ◽

Policy Debate ◽

Social Scientists ◽

International Lending ◽

History Of ◽

Debt Crises ◽

Foreign Lending

The parallels between debt crises past and present have attracted a large number of social scientists to the history of foreign lending and default. In this article, I describe the findings of the recent literature on the subject. The questions posed have obvious relevance to the current policy debate over the debt of less-developed countries. What features of international capital markets have long rendered them vulnerable to generalized crisis? What events tend to spawn debt-servicing difficulties and to provoke default? What have been the consequences of default for lenders and borrowers? What approaches historically have proven most effective at clearing away the residue of debt crises? I concentrate on 20th century experience: on the lending of the 1920s, on the debt crisis of the 1930s, and on the recovery of capital markets after World War II.

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The Euro And The European Debt Crisis

International Business & Economics Research Journal (IBER) ◽

10.19030/iber.v13i1.8360 ◽

2013 ◽

Vol 13 (1) ◽

pp. 103

Author(s):

Douglas Castleberry ◽

Balasundram Maniam ◽

Geetha Subramaniam

Keyword(s):

Financial Crisis ◽

Monetary Union ◽

European Monetary Union ◽

European Central Bank ◽

Debt Crisis ◽

Domino Effect ◽

European Monetary ◽

European Central ◽

History Of ◽

Set Up

This paper studies the history of the Euro leading up to its inception, what happened after the Euro was introduced into circulation and implications for its future. The Euro was set up to accommodate a unified currency while preserving sovereignty among nations who, less than a century ago, were mortal enemies. Preserving sovereignty weakened the ability to respond to crisis by design, and it wasnt long before the limits of the European Monetary Union were tested after a series of financial crisis threatened the very existence of the Euro. The Euro held together, yet the inability of the European Central Bank to assist member nations control subsequent debt following the financial crisis may wound the ability of the Euro to replace the dollar as the dominant world currency or even prove fatal. Greece is on the verge of collapse, and is so entangled with other Euro nations; a systemic domino effect will occur should any of the troubled member Eurozone nations collapse uncontrollably. Three options remain for the European Monetary Union, banding together and preserving the currency, grossly indebted countries exiting to preserve the health of countries which are more fiscally responsible, or the Euro may land inconsequentially between success and failure, never challenging the power of the dollar as the dominant world currency.

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Supervisors against regulation? The Basel Committee and country risk before the International Debt Crisis (1976–1982)

Financial History Review ◽

10.1017/s0968565020000050 ◽

2020 ◽

Vol 27 (2) ◽

pp. 210-233

Author(s):

Alexis Drach

Keyword(s):

World War Ii ◽

Debt Crisis ◽

Banking Regulation ◽

Country Risk ◽

International Banking ◽

Banking Supervision ◽

Market Mechanisms ◽

International Debt ◽

Basel Committee ◽

History Of

While the International Debt Crisis of the early 1980s was the most severe financial crisis since World War II and while national and international banking supervision was developing at that time, little is known about the response of supervisors to the deteriorating financial environment in the years preceding the crisis. Complementing the political and business history of the international debt situation, this article aims to unravel the international banking supervision side of the question. Based on archival material from the Bank for International Settlements (BIS) and various central banks, the article examines how the Basel Committee on Banking Supervision (BCBS), then emerging as the leading forum on international banking supervision, anticipated the International Debt Crisis through the prism of ‘country risk’. The article shows that the Committee refused to recommend strict regulations in this area. It argues that members adopted this position because of the lack of good information and the difficult position of banking supervision between macroeconomic issues and individual banks’ own responsibilities, but also because of somewhat excessive faith in market mechanisms. Their discussions on country risk shed light on critical challenges of banking supervision and, thereby, on the history of banking regulation and prudential thinking.

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Crisis Management and the Institutions of Austerity: A Comparison of Latin American and Greek Experiences

Comparative Sociology ◽

10.1163/15691330-12341349 ◽

2015 ◽

Vol 14 (3) ◽

pp. 301-327 ◽

Cited By ~ 1

Author(s):

Steven Panageotou ◽

Jon Shefner

Keyword(s):

Latin American ◽

Debt Crisis ◽

Historical Analysis ◽

The Political ◽

Political Actors ◽

Comparative Historical Analysis ◽

History Of ◽

Debt Crises ◽

Neoliberal Restructuring ◽

Austerity Policy

The proliferation of debt crises around the world since the 1980’s has generated debt-repayment negotiations prioritizing austerity in debtor countries. This forty-year history of debt crises in the Global South and North now allows comparison of these negotiations and their impacts. We examine the distinct and historically specific trajectories in Latin American and Greece, highlighting the foundations of each experience of debt crisis. We focus on the institutions responsible for managing crisis and their reliance on similar austerity strategies to compel debtor countries into a neoliberal restructuring of their economies. This paper examines the similarities and differences in austerity policy through a comparative-historical analysis of Latin American and Greek experiences of debt crisis. The results of such policies and the political actors involved in implementing austerity are also examined.

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Deindustrialization and Unsustainable Debt in Middle-Income Countries: The Case of Puerto Rico

Journal of Globalization and Development ◽

10.1515/jgd-2017-0009 ◽

2017 ◽

Vol 8 (2) ◽

Cited By ~ 2

Author(s):

Jose Caraballo-Cueto ◽

Juan Lara

Keyword(s):

Puerto Rico ◽

Debt Crisis ◽

Sharp Decrease ◽

Municipal Bond ◽

Federal Programs ◽

Middle Income ◽

Middle Income Countries ◽

Weak Evidence ◽

History Of ◽

The Subject

Abstract Puerto Rico recently became the largest bankruptcy case in the history of the U.S. municipal bond market. This debt crisis has not been the subject of significant scrutiny in the economic literature, though many researchers focus on case studies, such as Greece and Argentina, to analyze a country’s indebtedness. The underlying economic factors that influence unsustainable debt in upper middle-income countries are generally understudied. We attempted to contribute to filling these gaps in the related literature. Using econometric analysis, we found that Puerto Rico’s government indebtedness is, to a large extent, connected to a sharp decrease in manufacturing employment (i.e. deindustrialization) suffered by this economy, and weak evidence that it was caused by an excessive government payroll or overgenerous federal programs. In light of our empirical results, we discussed how the consequences of deindustrialization ultimately led to increase government borrowing.

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Book Reviews

Journal of Economic Literature ◽

10.1257/jel.53.2.360.r6 ◽

2015 ◽

Vol 53 (2) ◽

pp. 367-370

Keyword(s):

Euro Area ◽

Default Risk ◽

Sovereign Debt ◽

Debt Crisis ◽

Policy Implications ◽

Debt Restructuring ◽

Government Bonds ◽

Fiscal Adjustment ◽

History Of

Assaf Razin of Tel Aviv University reviews “Managing the Euro Area Debt Crisis”, by William R. Cline. The Econlit abstract of this book begins: “Addresses the recent debt crisis in Europe and the European Central Bank's commitment to preserve the euro area with purchases of government bonds, and explores the history of the Euro Area debt crisis and makes projections of future debt sustainability. Discusses policy implications, leading policy issues, and model projections; fiscal adjustment, growth, and default risk; the bank-sovereign debt nexus; external adjustment and breakup costs; eurobonds, firewalls, outright monetary transactions, and debt restructuring; European debt simulation model projections─Ireland, Italy, Portugal, and Spain; and debt restructuring and economic prospects in Greece.” Cline is Senior Fellow with the Peterson Institute for International Economics.

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