Nikos Astroulakis, Themis Anthrakidis From the Eurozone Entrance to the Economic Restructuring: A Polical Economy Analysis of the Greek Economic Crisis

From the Eurozone Entrance to the Economic

Restructuring: A Political Economy Analysis

of the Greek Economic Crisis

Da entrada na Zona Euro à reestruturação econômica: uma

análise de economia política da crise econômica grega

Desde la entrada en la Zona Euro hasta la reestructuración

económica: un análisis de economía política de la crisis

económica griega

Nikos Astroulakis1

Themis Anthrakidis2

Enviado: 13 de março de 2024

Aceito em: 19 de março de 2025

ABSTRACT

This paper investigates the trajectory of Greece’s economy from its Eurozone

entrance in 2001 through the Global Financial Crisis (GFC) in 2008 and the

Greek Economic Crisis (GEC) in 2010-2018. The analysis surveys the narrative

of initial optimism of the entry to Eurozone followed by GEC. In the meanti-

me, the GFC unveiled deep-seated scal and competitive weaknesses as well as

domestic political incompetence precipitating the GEC. The ocial response to

the GEC, through the Economic Adjustment Programs (EAPs), aimed at eco-

nomic stability. The discussion focuses on the neoliberal restructuring of Greek

economy that led into socio-economic repercussions, highlighting the political

economy lessons.

Key Words: Eurozone entrance; Greek Economic Crisis (GEC); Global Financial

Crisis (GFC); Economic Adjustment Programs (EAPs); Structural Adjustment

Programs (SAPs); Neoliberal restructuring; Troika.

RESUMO

Este artigo investiga a trajetória da economia grega desde sua entrada na Zona

Euro em 2001, passando pela Crise Financeira Global (CFG) de 2008 e culmi-

nando na Crise Econômica Grega (CEG) entre 2010 e 2018. A análise examina

a narrativa do otimismo inicial com a adesão à Zona Euro, seguida pela CEG.

Nesse ínterim, a CFG revelou fragilidades scais e de competitividade profun-

damente enraizadas, bem como uma incompetência política doméstica que

precipitou a crise grega. A resposta ocial à CEG, por meio dos Programas de

Ajustamento Econômico (PAEs), visava à estabilidade econômica. A discussão

centra-se na reestruturação neoliberal da economia grega, que gerou repercus-

sões socioeconômicas signicativas, destacando as lições da economia política.

1. Adjunct Professor at the Hellenic

Open University and Senior Ofﬁcer at

the Tax and Customs Academy of IAPR,

Greece.

2. Postdoctoral Research Fellow in

Economics, University of Macedonia,

Thessaloniki, Greece.

estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 12, n. 3, (dez. 2024), p. 7-29

Palavras-chave: entrada na Zona Euro, Crise Econômica Grega (CEG), Crise

Financeira Global (CFG), Programas de Ajustamento Econômico (PAEs), Pro-

gramas de Ajustamento Estrutural (PAEs), reestruturação neoliberal, Troika.

RESUMEN

Este artículo investiga la trayectoria de la economía griega desde su ingreso en

la Zona Euro en 2001, pasando por la Crisis Financiera Global (CFG) de 2008 y

culminando en la Crisis Económica Griega (CEG) entre 2010 y 2018. El análi-

sis examina la narrativa del optimismo inicial con la adhesión a la Zona Euro,

seguida por la CEG. En ese período, la CFG reveló debilidades scales y de

competitividad profundamente arraigadas, así como una incompetencia política

interna que precipitó la crisis griega. La respuesta ocial a la CEG, mediante los

Programas de Ajuste Económico (PAEs), tuvo como objetivo la estabilidad eco-

nómica. La discusión se centra en la reestructuración neoliberal de la economía

griega, que produjo importantes repercusiones socioeconómicas, destacando las

lecciones de la economía política.

Palabras clave: ingreso en la Zona Euro, Crisis Económica Griega (CEG), Crisis

Financiera Global (CFG), Programas de Ajuste Económico (PAEs), Programas

de Ajuste Estructural (PAEs), reestructuración neoliberal, Troika.

1 INTRODUCTION

At the time of this publication, the Greek Economic Crisis (GEC)

of the years 2010-2018 may seem like an issue of the past. However, the

aftermath of the GEC, particularly the neoliberal restructuring of the

Greek economy, continues to have profound eects on the country’s

current economic and social reality and its prospects. It would be short-

sighted to examine the Greek economy’s trajectory solely through the

lens of the three Economic Adjustment Programs (EAPs) of 2010-2018, as

many studies have done. Instead, this paper takes a broader view, tracing

the evolution of the Greek economy from its entry into the Eurozone in

2001 through the eruption of the GEC and the completion of the third

EAP in 2018. This time frame was chosen to capture both the structural

developments leading to the crisis and the policy responses implemented

during the adjustment programs. Our research nds a strong correlation

between Greece’s Eurozone entrance in 2001, the Global Financial Crisis

(GFC) of 2008, and the GEC of 2010-2018.

Methodologically, the paper aims to unravel the events leading to

the GEC and provide a comprehensive political economy analysis, along

with key lessons learned. In tackling the subject matter, we have striven

to sidestep personal ideological biases and dogmatism, instead adopting

a balanced perspective. The analysis refrains from framing policy discus-

sions within rigid theoretical binaries, opting instead for a contextualized

political economy approach that integrates institutional, socio-political,

and macroeconomic factors. The mountain we choose to stand on is the

political economy analysis of Greece’s protracted crisis. Written in acces-

sible language, this paper targets not only economists but also scholars in

development studies, politics, and social sciences, oering them insights

from a political economy perspective. Furthermore, the intellectual rea-

der does not need to be conversant with European economics and politics

Nikos Astroulakis, Themis Anthrakidis From the Eurozone Entrance to the Economic Restructuring: A Polical Economy Analysis of the Greek Economic Crisis

as proper clarications about are oered. Lastly, the political economy

analysis of the GEC presented here encapsulates policy recommendations.

By adopting a political economy approach, the study integrates

theoretical analysis with empirical evidence extracted from the origi-

nal documents of the three Greek EAPs employing a qualitative resear-

ch approach combined with descriptive data analysis with quantitative

indicators presented in Table 1, and policy evaluation. Policy measures,

institutional reforms, and scal strategies implemented during the cri-

sis are assessed through direct references to these foundational docu-

ments. Furthermore, macroeconomic data from ocial sources such as

the International Monetary Fund (IMF), the Bank of Greece, the Greek

Government Law Gazette and the European Central Bank (ECB), were

systematically collected and utilized to support the analysis, ensuring a

robust empirical foundation. Policy analysis was conducted through di-

rect reference to foundational policy documents, supported by relevant

secondary literature. This combined approach allows for a detailed in-

vestigation of the GEC, emphasizing how policy responses were shaped

by institutional constraints and economic conditions, as extensively dis-

cussed throughout the paper. This framework consciously moves beyond

conventional classications, acknowledging the multidimensional nature

of crisis management and policy responses in a highly integrated econo-

mic and political landscape.

What distinguishes this study is its novel approach of blending

primary policy documents with a critical political economy perspective

drawing from diverse sources, considering institutional, socio-political,

and global economic dynamics. This allows for an in-depth examination

of the policy responses. By connecting theoretical insights with empiri-

cal data and policy analysis, the paper contributes a multidimensional

understanding of the GEC, addressing gaps in the existing literature and

oering fresh perspectives on crisis management within the Eurozone

framework. By rejecting simplistic theoretical binaries, the study

highlights the complex interactions between policy measures, domestic

and European institutional structures, and the political apparatus, oe-

ring a rened perspective on the GEC.

Let us pose from the beginning some compacted preliminaries

for better understanding of the research theme. The narrative of the

transition of Greek economy into the Eurozone in 2001 brings nancial

economic benets (Kotios; Pavlidis; Galanos, 2011, p. 5). Nevertheless,

the initial benets of the Eurozone membership, such as increased in-

vestment and growth, gradually gave way to emerging scal imbalances

and economic fragility (Nelson et al., 2010, pp. 3–4). The GFC of 2008

exacerbated Greece’s existing economic vulnerabilities, precipitating

a severe downturn in 2009. The exposed and aggravated pre-existing

scal decits and competitiveness issues, propelled Greece into severe

economic distress and the GEC. In response, the EAPs, initiated in 2010,

aimed to stabilize the Greek economy through rigorous scal consolida-

tion, austerity measures, and structural reforms. However, EAPs deepe-

ned the economic downturn, leading to signicant social and economic

challenges. The EAPs’ neoliberal underpinnings, emphasizing austerity

estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 12, n. 3, (dez. 2024), p. 7-29

and market liberalization, faced criticism for their lack of sensitivity to

Greece’s socio-economic context and the adverse impacts on the po-

pulace, illustrating the complexities of crisis management within the

Eurozone’s supranational framework. What are the political economy

lessons from this process; This is the research question that the follo-

wing lines scrutinize. Data analysis is designed to answer this question

by examining macroeconomic indicators, policy decisions, and socio-e-

conomic outcomes.

The structure of the paper has as follows: Section 2 examines

Greece’s path from the Eurozone entrance to the economic downturn of

2010. Section 3 delves into Greece’s political economy from 2010 to 2018,

a period marked by the GFC’s aftermath and successive EAPs. Section

4 presents the key political economy lessons drawn from the GEC. The

paper concludes with Section 5, which summarizes the analysis’s key

results.

2 FROM THE EUROZONE ENTRANCE TO ECONOMIC DOWNFALL

Greece formally joined the European Union (EU), then called the

European Economic Community (EEC) in 1981, following an applica-

tion in June 1975 shortly after the restoration of democracy, becoming

its 10th member. This early accession granted Greece access to vital

structural funds, trade liberalization agreements, and policy frame-

works aimed at fostering economic modernization and institutional re-

form. The accession was perceived from the country and its elites as a

way of consolidating the newly restored democratic freedoms, as well

as ensuring and furthering the social and economic progress of Greece

(Alogoskous, 2019, p. 2). Portugal and Spain also joined the EEC in

1986, further integrating Southern Europe into the broader European

market, prompting crucial economic reforms, including trade liberaliza-

tion, scal consolidation, and market modernization, which facilitated

their later participation in the European Monetary Union (EMU) (Royo,

2010, p. 212). Having recently emerged from totalitarian regimes and

restored democratic governance, the three Mediterranean nations were

eectively committed by their entrance to the EEC, also to democra-

cy in an unwavering and permanent way (Goebel, 2003, p. 19). Greece’s

early membership played a critical role in for its economy to align with

European standards and strengthening its institutional capacity for fu-

ture integration. However, Greece experienced lower GDP and pro-

ductivity levels after its EU accession compared to other member states

(Campos; Coricceli; Moretti, 2019, p. 93).

This trajectory ultimately led to Greece’s entrance to the EMU and

the adoption of the euro in 2001, following the currency’s initial intro-

duction in 1999. The advent of the common currency marked a signi-

cant monetary experiment in global economic history (Dinopoulos;

Petsas, 2000, p. 4). To ensure a stable and integrated monetary union,

the Maastricht Treaty of 1991 established ve key convergence criteria

for Eurozone membership comprising economic prerequisites to ensu-

re readiness for common currency adoption. These required countries

Nikos Astroulakis, Themis Anthrakidis From the Eurozone Entrance to the Economic Restructuring: A Polical Economy Analysis of the Greek Economic Crisis

to maintain a public decit below 3% of GDP, public debt below 60%

of GDP, and ination rates close to the average of the three best-perfor-

ming EU countries. Additionally, long-term interest rates needed to re-

main within a narrow range of the lowest-performing countries, while

exchange rate stability had to be ensured through participation in the

Exchange Rate Mechanism (ERM) for at least two years without signi-

cant devaluation. These requirements aimed to promote scal discipli-

ne, price stability, and economic convergence across EU member states

(Monteverdi, 2017, p. 9).

At the beginning of 1998, Greece appeared ill-prepared to meet the

Maastricht criteria, grappling with 5% ination long-term interest rates

at 9.8%, a budget decit of -4% of GDP, and public debt reaching 108.7%.

Despite these challenges, dedicated eorts over the subsequent two years

enabled Greece to achieve the prescribed targets, securing its member-

ship in the Eurozone. This integration immediately ushered in an impro-

ved economic climate, bolstering the country’s credibility (Neubaumer,

2015, p. 18). To attain compliance, Greece committed to a six-year conver-

gence program (1994-1999), successfully reducing the budget decit from

13.6% of GDP in 1993 to 3.1% in 1999. Greece showcased a primary sur-

plus, accompanied by robust economic growth and lowered ination and

interest rates. Yet, scal rigidities and continuous currency appreciation

undermined competitiveness despite declining interest rates that stimu-

lated investment (Karamessini, 2014, p. 98).

Greece adopted the common currency in January 2001, becoming

the 12th state following the European Council’s conrmation of ful-

lling the Maastricht criteria (Papadogiannis, 2015, p. 37). Upon entry

into the Eurozone, Greece’s central aim, through its participation in the

Euro system and the European System of Central Banks, focused on

ensuring price stability (Bank of Greece, 2013, p. 11–15). Between 2001

and 2007, Greece experienced signicant GDP growth, ranking second

among Eurozone members after Ireland. However, this growth mainly

stemmed from strong domestic demand fueled by increased consump-

tion, private borrowing, tax evasion, and public spending supported by

external borrowing (Baltas, 2013, p. 6; Karamessini, 2014, p. 97). Despite

early success, Greece encountered challenges post-Eurozone entry.

Policies shifted after adopting the euro, leading to overspending and

breaching the Maastricht criterion on budget decits (Katsimi; Moutos,

2010, p. 3).

The following Table 1 summarizes key macroeconomic indicators

of the Greek economy from 2001 to 2018, highlighting trends in GDP

growth, ination, scal and current account balances, public debt, unem-

ployment, and government expenditure. These gures provide essential

context for assessing the economic conditions that inuenced the design

and implementation of the EAPs. The table provides a quantitative foun-

dation for understanding the economic realities that the EAPs aimed to

address and serves as a reference point for evaluating the eectiveness

and socio-economic consequences of the policy measures implemented

during the adjustment period.

estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 12, n. 3, (dez. 2024), p. 7-29

Table 1: Macroeconomic overview of Greece, years 2001-2018

Year Real GDP

Growth %

Ination

Rate (CPI) %

Current Account Ba-

lance as % of GDP

Fiscal Balance

as % of GDP

Public Debt

as % of GDP

Unemployment Rate as

% of total labor force

Government Total Ex-

penditure as % of GDP

2001 4.1 3.6 -6.9 -5.46 107.1 10.8 47.46

2002 3.9 3.9 -6.3 -6.02 104.9 10.4 47.11

2003 5.8 3.4 -6.3 -7.83 101.5 9.8 47.87

2004 5.1 3 -5.5 -8.82 102.9 10.6 48.82

2005 0.6 3.5 -7.3 -6.18 107.4 10 46.60

2006 5.7 3.3 -10.9 -5.94 103.6 9 45.86

2007 3.3 3 -13.9 -6.70 103.1 8.4 47.77

2008 -0.3 4.2 -14.5 -10.17 109.4 7.8 51.53

2009 -4.3 1.3 -10.9 -15.2 126.7 9.6 54.82

2010 -5.5 4.7 -10 -11.39 147.5 12.7 53.08

2011 -10.1 3.1 -10.1 -10.50 175.2 17.9 55.07

2012 -7.1 1 -2.6 -6.84 162.1 24.4 57.92

2013 -2.5 -0.9 -2.6 -4.01 178.8 27.5 63.85

2014 0.5 -1.4 -2.5 -4.26 181.8 26.5 51.50

2015 0.2 -1.1 -1.5 -3.01 179.1 24.9 54.76

2016 -0.5 0 -2.4 0.28 183.7 23.6 50.29

2017 1.1 1.1 -2.6 1.05 183.2 21.5 48.58

2018 1.7 0.8 -3.6 0.78 190.7 19.3 48.60

Source: constructer with data from the IMF (https://www.imf.org/external/datama-

pper/proﬁle/GRC) and the ECB https://data.ecb.europa.eu/data/data-categories

The transition into the new millennium marked a transformative

period for the Greek economy, witnessing a signicant structural and pro-

ductive shift towards market liberalization, privatization of state-owned

entities and banks and a burgeoning concentration of capital within the

private sector. This transformation corresponded to a shift from primary

sector activities towards the tertiary sector, encompassing industries such

as tourism, services, telecommunications, and shipping (Karamessini,

2014, p. 98–99). Greece experienced consecutive years of accelerated GDP

growth, notably since 1996, that was attributed to macroeconomic ad-

justments and the implementation of structural reforms. According to

De Haan and Parlevtiet (2018), structural reforms encompass policy mea-

sures aimed at enhancing the functioning of labor and product markets,

improving market competition, and strengthening economic resilience.

These reforms target institutional frameworks, regulatory settings, and

economic policies to increase productivity, reduce unemployment, and

boost long-term growth. They also cover scal reforms, governance im-

provements, and institutional adjustments that support sustainable eco-

nomic development.

The alignment with Eurozone policies facilitated scal consolida-

tion, minimized ination rates, and fostered open markets, thereby yiel-

ding substantial economic expansion. These reforms, though politically

Nikos Astroulakis, Themis Anthrakidis From the Eurozone Entrance to the Economic Restructuring: A Polical Economy Analysis of the Greek Economic Crisis

demanding, were essential prerequisites to meet the stringent Maastricht

criteria for accession into the Eurozone (Vamvakidis, 2003, p. 4–6). The

advent of a stable macroeconomic environment laid the foundation for

sustained long-term economic growth. The elimination of exchange rate

risks, signicant reductions in ination, historically low government

bond interest rates and increased accessibility to aordable loans for en-

terprises and households all contributed to this growth trajectory (Bank

of Greece, 2013, p. 13–14). Additionally, this period witnessed the amelio-

ration of several social issues, positioning Greece as a leader among EU

countries in terms of convergence speed (Christodoulakis, 2006, p. 60).

Nevertheless, the credit expansion triggered by low interest ra-

tes drove up domestic demand and imports. The inux of capitals from

European structural funds and the 2004 Olympic Games generated pro-

longed excessive demand. As observed by Paraskevopoulos (2017, p. 11),

this period of high growth was funded by readily available cheap credit,

contributing to a rising public decit. This unsustainable economic mo-

del, characterized by inated real wages and easy access to bank loans,

fostered a deceptive perception of enduring prosperity (Baltas, 2013, p. 7).

Greece’s inability to enhance productivity and competitiveness stemmed

from persisting issues such as ination, high public debt, rampant tax eva-

sion, and inadequate public administration, exacerbated by pervasive cor-

ruption undermining trust in the rule of law (Pagoulatos; Triantopoulos,

2009, p. 36). The excessive reliance on demand-driven growth and the

failure to implement structural reforms led to substantial public sector

recruitment. Additionally, increased taxes without a proportional rise in

revenues and absorption of private corporate losses fueled a cycle of debt

accumulation (Katsimi; Moutos, 2010, p. 9). The resulting current account

decits and reliance on external credit played a pivotal role in the design

of the EAPs, which imposed severe restrictions on public spending. The

Troika’s response to these enduring structural issues, thoroughly explo-

red in Section 3, included sweeping public sector reforms and institutio-

nal restructuring, aiming to reverse this trend, but triggered widespread

social discontent.

The policy trajectory adopted post-Eurozone entrance failed to

address crucial structural deciencies, particularly in scal policy, de-

viating from necessary austerity measures critical for convergence with

other Eurozone members and debt reduction (Bank of Greece, 2013, p.

20). Throughout the decade following Eurozone entrance, Greece pur-

sued policies marked by a lack of requisite structural reforms. Escalating

wages and public expenditure further derailed the economy, perpetua-

ting an output gap (Arghyrou, 2015, p. 6). This unchecked rise in public

spending along with credit expansion left Greece vulnerable to the har-

sh conditionalities later imposed by the EAPs, as examined in Section

3. Prior to GFC of 2008, Greece displayed indicators of macroeconomic

imbalances and competitive weaknesses. Worsening scal and current

account decits, increased government spending, rising debt-to-GDP ra-

tios, and declining competitiveness set the stage for an impending crisis

(Provopoulos, 2013, p. 4–5). Moreover, systemic tax evasion, particularly

among rms and self-employed individuals, exacerbated by selective tax

estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 12, n. 3, (dez. 2024), p. 7-29

privileges, diminished state revenues and strained the sustainability of

Greece’s pension system (Karamessini, 2014, p. 105). In the mid-2000s,

Greece’s scal situation deteriorated further with relaxed scal policies,

particularly from 2007 to 2009, that led to substantial increases in gover-

nment expenditures, budget decits, and a subsequent surge in public

debt, exacerbating the country’s economic woes (Papadogiannis, 2015, p.

141).

Furthermore, the GEC was deeply intertwined with domestic poli-

tical failures, marked by delayed and half-hearted implementation of ne-

cessary public policy reforms. Political uncertainty, driven by governance

instability and confrontational policymaking, intensied Greece’s econo-

mic downturn. Section 3 elaborates on how these political dynamics in-

uenced the implementation and outcomes of the Economic Adjustment

Programs, intensifying the crisis rather than resolving it. Successive go-

vernments struggled with tax evasion, inecient public administration,

and resistance to structural reforms due to entrenched clientelistic practi-

ces and union opposition (Tsarouhas, 2012, p. 84). Furthermore, political

mismanagement in critical moments, such as the 2015 confrontational

strategy with EU lenders, exacerbated scal instability and led to heighte-

ned market uncertainty (Hardouvelis, Gikas et al., 2024, p. 1202). Over

the past decade since the outburst of the GEC, there has been a noti-

ceable decline in political governance indicators. Despite the adoption of

new institutional frameworks through the MoUs, the country’s political

and institutional governance has continued to deteriorate, underscoring

a broader failure to address the political conditions that inuence overall

quality of life and societal well-being (Maris; Sklias; Maravegias, 2022, p.

16).

However, Greece’s scal and structural challenges must be un-

derstood within the broader context of the PIIGS crisis, which included

Portugal, Ireland, Italy, Greece, and Spain. These countries faced severe

economic diculties following the GFC, suering a sudden stop in credit

nancing and facing the prospect of debt-defaults (Christodoulakis, 2019,

p. 2). Strong nancial interlinkages between US and European banks al-

lowed the crisis to spill over into Europe, exposing scal and institutional

weaknesses in peripheral Eurozone economies. The PIIGS’ economies

experienced major structural vulnerabilities due to unsustainable ca-

pital inows, which fueled consumption booms and asset bubbles, lea-

ving them exposed when the crisis struck. As the crisis intensied, the

Eurozone’s xed exchange rate system constrained their ability to adjust

through currency devaluation, making scal adjustment the only availa-

ble policy response (Frieden; Walter, 2017, p. 378). Among the PIIGS cou-

ntries, Greece emerged as the most vulnerable due to its high public debt,

persistent budget decits, and politically unstable environment. As global

nancial markets reacted, Greece’s debt quickly spiraled out of control,

intensifying the sovereign debt crisis within the Eurozone (Sapir et al.,

2014, p. 23).

Amid these escalating challenges, the GFC of 2008, originating

from the U.S. subprime mortgage crisis, abruptly disrupted the econo-

mic and nancial landscape. This global upheaval resulted in a drastic

Nikos Astroulakis, Themis Anthrakidis From the Eurozone Entrance to the Economic Restructuring: A Polical Economy Analysis of the Greek Economic Crisis

contraction of internal gross demand and plummeting prices, leading to

stagnating GDP and economic activity. GFC had far-reaching implica-

tions, signicantly impacting the European periphery countries, trigge-

ring what was termed the most severe nancial crisis since World War II

(Paraskevopoulos, 2017, p. 1). Countries in the European periphery, Greece

prominently, grappled with the aftermath of the “Great Recession” wit-

nessing a collapse in housing and asset prices, coupled with mounting

debts. This dire scenario, culminating in a substantial rise in the debt-to-

-GDP ratio due to a sharp decline in the denominator, heralded a profou-

nd economic downturn, posing a grave threat to the European common

currency structure (Frieden; Walter, 2017, p. 376).

By January 2009, amidst the 10th anniversary celebrations of the

common currency, European leaders lauded the euro’s role in stabili-

zing the global economic crisis (Copelovitch; Frieden; Walter, 2016, p.

814). However, this optimism overlooked the looming crises within the

Eurozone. By the end of 2009, Greece economy public debt had soared

to €301 billion, reaching 126.87% of GDP, a signicant escalation from

€181.5 billion, constituting 101.5% of GDP in 2003 (Eurostat, 2020). The

ballooning decits and diminishing GDP growth underscored a trajec-

tory toward nancial instability (Lyrintzis, 2011, p. 9; Pagoulatos, 2016, p.

62). The newly elected Greek government disclosed a staggering three-

fold upward revision of the scal decit gures previously announced.

The revised decit for 2009 stood at €36 billion, constituting 15.2% of

GDP, a stark contrast to the earlier forecast of €14.36 billion, represen-

ting 6% of GDP (Pagoulatos, 2018, p. 6). This unforeseen revelation of an

enormous decit not only shocked global economic and political spheres

but also triggered a debate regarding the manipulation of statistical data,

eroding international market condence. Greece, already burdened by

high public debt, faced soaring borrowing costs as bond yield spreads wi-

dened alarmingly against German counterparts(Mavroudeas, 2017, p. 28).

These persistent scal decits and rising public debt later became central

targets of the Troika’s austerity-driven EAPs, as discussed in Section 3.

The global nancial turbulence following the 2008 crisis, heighte-

ned market aversion to risk and magnied scrutiny of the Greek eco-

nomy, laying bare chronic imbalances and deciencies. Notably, scal

imbalances in the form of a burgeoning scal decit and escalating public

debt, alongside current account imbalances that deteriorated interna-

tional competitiveness, became conspicuous (Karamouzis; Anastasatos,

2019, p. 13–14). Greek economy found itself in a state of “twin decits”,

signifying simultaneous decits in both the scal budget balance sheet

and the current account balance. Public debt soared to 127% of the GDP,

while private debt exhibited a consistent upward trajectory (Tsakloglou

et al., 2016, p. 20). Ultimately all the above culminated in the eruption of

the most severe economic crisis in modern Greek history.

3 THE ECONOMIC ADJUSTMENT PERIOD (2010-2018)

The year 2009 witnessed signicant scal challenges in Greece,

characterized by a staggering decit of 15.1% of GDP and public debt

estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 12, n. 3, (dez. 2024), p. 7-29

reaching 127% of GDP (Eurostat, 2020). Notably, for the rst time in f-

teen years of growth (1994-2008), Greece experienced a GDP contraction

of 3.2% in 2009, despite substantial scal expansion. Public expenditures

surged from 47.87% of GDP in 2003 to 54.82% in 2009 (Papadogiannis,

2015, p. 40). These events translated into deteriorating creditworthi-

ness and a signicant widening of bond spreads between Greek and

German bonds signaling a markedly negative international evaluation

of the Greek economy, with an impending collapse (Katsikas, 2012, p.

7). With the newly elected government (PASOK) taking oce in 2009

and revealing the revised scal decit, the Greek economy faced unpre-

cedented market turmoil. International nancial markets lost condence

in Greece’s creditworthiness, initiating a downward spiral (Mavroudeas,

2017, p. 28). By April 2009, Greece was unable to secure international fun-

ding without facing exorbitant interest rates (Pagoulatos, 2018, p. 6). On

April 27, Standard and Poor downgraded Greece’s credit rating to junk

status, triggering a rapid escalation in yields between Greek and German

bonds, hitting 1,000 basis points from the previous 200 within three

months, marking the initial phase of the crisis (Matsaganis, 2013, p. 4).

Subsequently, Greece was aided from the European Commission (EC),

the European Central Bank (ECB), and the International Monetary Fund

(IMF), namely the “Troika”.

3.1. The First Economic Adjustment Program (2010-2012)

The rst bailout program attached within a Memorandum of

Understanding (MoU) and executed through an EAP, totaling €110 bil-

lion, was signed between Greece and other EMU countries for €80 billion

and with the IMF for €30 billion over three years. The primary aim was

to enable Greece to regain access to nancial markets at aordable inte-

rest rates after the program’s conclusion (Ardagna; Caselli, 2014, p. 294).

The loans from the Troika imposed policy conditionalities on Greece to

rebalance its macroeconomic and nancial aggregates by reforming its

economy towards stability (Hardouvelis; Gkionis, 2016, p. 6). However,

the parliamentary vote on the agreement sparked massive demonstra-

tions, dividing the Greek society into factions either in favor or against

the MoU (Matsaganis, 2013, p. 5). The parliament’s vote on the bailout

agreement caused internal divisions within parties, resulting in expul-

sions and reshaping of parliamentary groups (Gemenezis; Nezi, 2015, p.

9).

The rst EAP aimed to restore condence, secure macroeconomic

stability, and enhance Greece’s competitiveness through necessary refor-

ms. Fiscal consolidation, nancial stability and internal devaluation were

primary objectives to attain a budget surplus and address debt dynamics

(Catsambas, 2016, p. 62; Karamessini, 2014, p. 108). Achieving internal de-

valuation means reducing a country’s production costs, mainly through

wage cuts, labor market reforms, and scal austerity, to boost competi-

tiveness without adjusting its currency value. This approach was used

in the case of Greece, because currency devaluation is not possible, as

the country is a member of the Eurozone (Stockhammer; Sotiropoulos,

Nikos Astroulakis, Themis Anthrakidis From the Eurozone Entrance to the Economic Restructuring: A Polical Economy Analysis of the Greek Economic Crisis

2012). The EAP included scal adjustment measures in order to reduce

decit well below 3% of GDP and put the debt on a downward path ii)

incomes and social security policies with measures to improve competi-

tiveness iii) nancial sector policies to maintain stability of the banking

system iv) structural reforms to modernize the public sector and create

a friendly environment for investors (Greek Government Law Gazette,

2010).

Instead of the forecasted improvements, the initial two-year imple-

mentation of the neoliberal policies of the EAP led to an unprecedented

economic downturn. The country’s GDP plummeted by 21.5% from 2009

to 2012, exacerbating scal decit and public debt to GDP ratios. The

steep decline in demand triggered a cycle of rising unemployment, wide-

ning current account decits, and persistent ination (Mavroudeas, 2017,

p. 29–30). The stringent scal measures induced a drop in real GDP by

14.1% during 2009-2011, alongside a signicant spike in unemployment,

peaking at almost 18% in 2011 (Hardouvelis; Gkionis, 2016, p. 6). This

unleashed widespread public outrage, manifesting in large-scale protests,

leading to an unusual polarization of the Greek populace along pro and

anti-memorandum lines rather than traditional right and left aliations

(Matsaganis, 2013, p. 4–5). Despite implementing reforms outlined in the

MoU, the program failed to meet expectations, necessitating modica-

tions and additional funding. The steep GDP decline derailed the pro-

gram from its targets, leading to a deepening recession, 6.9% GDP fall

in 2011, 17.7% unemployment, and public debt surging to 155% against

program projections (Katsikas, 2012, p. 9–10).

In October 2011, Greek Prime Minister (PM) George Papandreou at-

tended an EU summit that agreed upon a 50% debt reduction via a volun-

tary debt restructuring program and a new loan of €130 billion. However,

reactions against this agreement created new uncertainties. Papandreou’s

decision to call for a referendum to navigate the complex agreement exa-

cerbated the economic climate (Papakonstantinou, 2016, p. 303). The call

for a referendum triggered rapid political developments. Greek PM was

pressed to retract his decision, leading to the government’s resignation

and the formation of a new coalition government in November 2011, led

by Lukas Papademos, a former vice-president of the ECB, tasked with im-

plementing decisions from the EU summit (Gemenis; Nezi, 2015, p. 14).

At the end of the rst EAP, only €52.9 billion out of the agreed €80

billion had been disbursed due to the replacement of the program by the

second EA P.

3.2. The second Economic Adjustment Program (2012-2014)

In the May 2012 election, supporting the adjustment programs

took the form of meaning the backing to the Eurozone presence of

Greece, while rejecting the EAPs posed a challenge to that membership

(Katsanidou; Otjies, 2016, p. 263). The main opposition conservative party

of ND emerged victorious but fell short of a complete parliamentary ma-

jority. Concurrently, SYRIZA, the anti-austerity left party, ascended as

the largest opposition force in Parliament (Liakos; Kouki, 2014, p. 52).

estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 12, n. 3, (dez. 2024), p. 7-29

Antonis Samaras, leader of ND assumed the role of PM, forming, a new

coalition government between ND, PASOK, and DIMAR (Democratic

Left) a smaller left-wing party, approving the second EAP. Despite this

unprecedented coalition, achieving broad political and social unity re-

mained an ongoing challenge in the recent political landscape of Greece

(Featherstone, 2016, pp. 3–4).

Amid prolonged negotiations, the new transitional government

signed this second MoU, which included an additional loan of €130 bil-

lion from the European Financial Stability Facility (EFSF) and the IMF.

This program also encompassed the Private Sector Involvement (PSI), en-

tailing a debt restructuring plan and extensive recapitalization of Greek

banks. As part of the PSI, holders of Greek government bonds accepted

a 50% nominal cut in bond value in exchange for new bonds with adjus-

ted terms (Arghyrou, 2015, p. 7). The restructuring of Greek government

bonds during the PSI resulted in a substantial reduction in the Net Present

Value (NPV) of these bonds, averaging around 21%. This restructuring

aimed to reduce Greek debt to 120% of GDP by 2020, involving a nominal

bond value discount of 53.5%. Ultimately, this exchange, involving bonds

amounting to €199 billion, was completed by April 25, 2012, with 96.9%

participation among private sector investors (Bank of Greece, 2012, p. 12).

Despite achieving a substantial debt reduction of over 50% of Greek GDP

in 2012, criticism emerged regarding the PSI’s limited eectiveness due

to its voluntary nature and the smaller scale of the process (Zettelmeyer;

Trebesch; Gulati, 2013, p. 2). The debt restructuring negatively impac-

ted Greek domestic bond investors, leading to substantial losses, parti-

cularly aecting Greek banks. Consequently, a considerable portion of

the second bailout funds was directed towards recapitalizing the banking

system (Tsoukis et al., 2017, p. 16). Besides, the outcomes were deemed

unsatisfactory as they led to a transfer of debt from private to ocial

hands, causing bankruptcy for banks and welfare funds that required ad-

ditional state support (Mavroudeas, 2017, p. 39). The PSI also had broader

repercussions, such as the loss of condence in the Greek nancial sector

and subsequent challenges in accessing ECB funding (Alcidi; Capolongo;

Gros, 2020, p. 40).

The second EAP, enacted in February 2012, introduced more se-

vere conditionalities than its predecessor, totaling an additional €164.5

billion in loans. A substantial portion of this funding, €50 billion, was

allocated to recapitalize the Greek banking system, which suered subs-

tantial losses due to the PSI (Frangakis, 2017, p. 58). The main objectives

of this second MoU were to ameliorate the competitiveness gap of the

Greek economy, to enhance growth and employment, to ensure scal

soundness, to secure nancial stability and to provide a fair distribution

of the adjustment cost. The government committed to achieve a general

government primary surplus of 4½ percent of GDP by 2014 by implemen-

ting a series of reforms (Marangos et al., 2024, p. 67).

Α mid-term scal strategy framework was introduced in October

2012, followed by commitments to reduce Greek debt levels to sustaina-

ble, supported by extending loan maturities and reducing interest rates

(European Counsil, 2012). Although by 2014, Greece recorded positive

Nikos Astroulakis, Themis Anthrakidis From the Eurozone Entrance to the Economic Restructuring: A Polical Economy Analysis of the Greek Economic Crisis

but sluggish economic growth rates for the rst time in ve years, still,

the prolonged economic recession had deeply aected domestic demand

and caused substantial drops in GDP and employment. The neoliberal

policies and austerity measures, combined with a deationary economic

policy, created a cycle of contraction that strained the economy further

(Karamessini, 2014, p. 119–120). Critics emphasized the Troika’s underes-

timation of the recession’s impact and its persistent focus on austerity,

which exacerbated the economic downturn (Pigasse, 2015, p. 33–34).

Moreover, societal turbulence ensued, with opposition parties inciting

public resistance against government measures, reecting a signicant

shift in Greek political dynamics (Papadogiannis, 2015, p. 203–204).

3.3. The third Economic Adjustment Program (2015-2018)

Before the January 2015 elections, the Greek populace had endured

ve years of deep austerity and recession, with national income plumme-

ting by 26% from 2008 to 2014. This discontentment against the establi-

shed political entities elevated anti-memorandum parties amid the crisis

(Varvitsioti; Dendrinou, 2019, p. 31). After ve years of non-performing

austerity strategies the Greek population instigated a change in the politi-

cal landscape (Shin, 2017, p. 166).In January 2015, SYRIZA, a left party, in

collaboration with ANEL, an anti-memorandum party of the right, came

in governance.

As the Greek government engaged in a months-long debt-relief stra-

tegy, aiming to pressure lenders into sustaining nancial support, it faced

mounting pressure from EC ocials to commit to agreed-upon reforms

to maintain aid. Ultimately, Greece defaulted on an IMF loan installment

in July 2015, a move considered unacceptable for a developed country

(Catsambas, 2016, p. 66). With the looming end of the extension of the

Greek program, negotiations faltered, and Greece faced nancial strain.

The state treasuries depleted, compelling the government to resort to

unconventional measures to meet nancial obligations (Nelson, 2017, p.

6). As the four-month extension of the bailout program neared its end,

Eurozone members oered a further extension without additional funds.

Rejecting the oer, the Greek government called for a referendum on the

proposed program, intensifying bank deposit outows and necessitating

capital control measures (Tsakloglou et al., 2016). The government ad-

vocated for a “No” vote in the referendum, which prevailed with 61.3%

support. However, this “victory” led to a more burdensome agreement

signed by Greek government, marked by societal division and nancial

turmoil (Featherstone, 2016, p. 8). Eventually, SYRIZA and ANEL gover-

nment coalition abandoned its anti-memorandum agenda and embraced

policies aligned with the third EAP of €86 billion (Marangos; Triarchi;

Antrhakidis, 2020, p. 16).

The third EAP’s intended eects, focusing on macroeconomic sta-

bilization, scal sustainability, nancial stability and growth, led to signi-

cant social and welfare state challenges, increased pressure on incomes,

and led to declining investments and heightened poverty rates (Hazakis,

2018, p. 202). The nal MoU closely resembled its predecessors in terms

estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 12, n. 3, (dez. 2024), p. 7-29

of internal rationale and content, also allocating substantial funds for

bank recapitalization. However, the agreement entailed measures sur-

passing those proposed before the referendum, setting a target of a 3.5%

GDP primary surplus and introducing a €50 billion fund as collateral

(Papakonstantinou, 2016, p. 384).

By the end of 2015 the Greek GDP had decreased by 0.4%. The cri-

sis extended into 2016, when GDP fell by 0.2%. However, starting from

the third quarter of 2016, the Greek economy returned to a growth path.

However, this growth was weak, not reaching 2% per year and did not

overtake growth in the Eurozone until 2019 (Revuelta, 2021, p. 5). The

third program’s ambitious targets for structural reforms faced challen-

ges as political economy factors signicantly inuenced its pace of im-

plementation. High levels of private and public debt, coupled with many

non-performing loans, continue to hinder economic growth. Greece’s ta-

xpaying capacity has been exhausted, with minimal revenue impact from

increased taxation (Hazakis, 2018, p. 201).

4 THE POLITICAL ECONOMY LESSONS

Solely attributing the root causes of the GEC to macroeconomic

instability and the GFC would be insucient for a comprehensive analy-

sis. Political economy factors, including an immature domestic political

system and institutional underdevelopment, played pivotal roles. In any

case, to our research, the political economy design and implication of the

EAPs accelerated the neoliberal restructuring of the Greek economy.

The macroeconomic and political conditions of the country were

compounded by the neoliberal strategy of the MoUs, leaving little space

for moderate reform adjustments. As addressed in Clifton et al (2018), the

policies imposed by the Troika were “brutal, intrusive and long-lasting”

due to a disconnect between the strategies outlined in the EAPs and the

national political economy and ideological structure of the country. The

Troika aimed to enforce its “ideologically-motivated” harsh measures to

mitigate market volatility and align the Greek economy with the political

and economic standards of the broader Eurozone (Clifton; Diaz-Fuentes;

Gomez, 2018). Within this context, certain policies of the EAPs reected

a rigid and uncompromising ideological stance, appearing to lack subs-

tantial rationale.

Though, the institutional adjustments embodied in the EAPs failed

to guide the Greek economy towards the desired recovery. As shown by

the deterioration of macroeconomic variables (refer to table 1) and the

World Bank Governance Indicators, Greece has faced the most severe

consequences of the crisis (Christodoulakis, 2019, p. 27). Hence, the failu-

re of the Troika to account for the initial conditions of the country when

estimating the government scal multiplier resulted in a sharper and lar-

ger-than-expected decline in GDP. The macroeconomic overview in tab-

le 1 indicates a GDP contraction of -4.3% in 2009 and -5.5% in 2010, rein-

forcing how underestimated scal multipliers led to deeper-than-expec-

ted recession. IMF economists Blanchard and Leigh (2013), highlighted

that “scal multipliers were, on average, underestimated for both sides

Nikos Astroulakis, Themis Anthrakidis From the Eurozone Entrance to the Economic Restructuring: A Polical Economy Analysis of the Greek Economic Crisis

of the scal balance, with a slightly larger degree of underestimation as-

sociated with changes in government spending” (Blanchard and Leigh,

2013, p. 3). This was exacerbated by awed design of the EAPs, which

disregarded the actual economic circumstances of Greece (Petrakos,

2014, p. 12, 21). The measures introduced concerned comprehensive and

fundamental alterations in the collective bargaining procedure and the

labor market institutions unsettling the established tradition of social

dialogue (Koukiadaki; Kokkinou, 2016, p. 195). As Fragakis mentioned

since 2015 the Troika’s emphasis on austerity, deregulation, and privatiza-

tion in Greece could ultimately reduce aggregate demand, aecting con-

sumption, investment, output, and employment (Frangakis, 2015, p. 298).

Finally, this happened. Even if IMF principles shaping the formulation of

conditionalities encompass several key elements: the principle of national

ownership over the adjustment programs, prudence in decision-making,

transparency in outlining program conditions, customization tailored

to the unique circumstances of each country, and ecient coordination

with other relevant organizations (Krokow-Fritz; Ramlogan, 2016, p. 25).

In the case of Greece, these principles were not always followed.

Searching the lessons derived from the EAPs’ design and impli-

cation, we rstly could argue for the ideological parameter. The core

framework of the Troika’s conditionalities is rmly rooted in neoliberal

ideology. In this manner, the Washington Consensus (WC), as outlined

by Moosa (2021, pp. 2–3), refers to a set of ten economic policy recom-

mendations aimed at promoting market-oriented reforms. These measu-

res include scal discipline, tax reform, trade liberalization, privatization

of state-owned enterprises, deregulation, and securing property rights.

In the context of the GEC, these principles -adjusted for an economy

with strong idiosyncrasies- inuenced the EAPs, emphasizing austerity,

structural reforms, and market liberalization to stabilize the economy

and boost competitiveness (Marangos, 2021, p. 400). Alongside, the EU,

as outlined in the Maastricht Treaty, institutionalized the neoliberal pa-

radigm in accordance with the principles of the WC. This integration

involved the incorporation of scal constraints and the enforcement of

austerity policies (Fontana; Sau, 2023, p. 7; Hein; Paternesi; Tridico, 2019,

p. 28; Monteverdi, 2017, p. 8). The European Commission (EC) functions

as the executive arm of the EU and is entrusted with the role of over-

seeing countries’ adherence to EU law, eectively serving as the “guar-

dian of the European Treaty” (Borzel, 2003, p. 1, 29). Established in 1998,

the ECB serves as the second member of the Troika, acting as the central

bank for the 19 Eurozone countries. Its primary mandate revolves arou-

nd ensuring price stability within the Eurozone, following also the same

neoliberal logic (Scheller, 2004, p. 28). The third member of the Troika,

the IMF, is the emblematic international organization that applies the

neoliberal agenda in a global scale (Visvizi, 2012, p. 30).

Troika’s policies, throughout the three consecutive EAPs, re-

ect the neoliberal approach, resembling the traditional Structural

Adjustment Programs (SAPs) endorsed by the IMF (Behrend, 2015, p.

40–41; Greer, 2014, p. 75). The agenda of SAPs was originally conceived

to address critical issues in Latin America, but latter has evolved into

estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 12, n. 3, (dez. 2024), p. 7-29

a globally embraced framework by scholars and policymakers alike,

serving as a comprehensive blueprint for development (Gore, 2000, p.

790). In cases where a nation encounters nancial challenges and seeks

aid from the IMF, the distribution of funds is organized into install-

ments, contingent upon meeting specic policy conditions. The reci-

pient country must implement specied policies and meet predetermi-

ned targets to access IMF assistance. These conditionalities are put in

place to ensure prompt repayment of funds to the IMF and allow mem-

ber nations to address the root causes of their economic challenges

(Bird; Willett, 2004, p. 426; Joyce, 2003, p. 3). To be more specic, the

IMF’s involvement in the Troika bolstered austerity measures within

the Greek bailout program, echoing its traditional policy conditiona-

lities of layos, wage reductions, and pension cuts, following a simi-

lar logic observed in typical SAPs (Greer, 2014, p. 60; Karger, 2014, p.

37–45). The conditionalities enforced by the Troika in Greece manda-

ted liberalization, privatization, deregulation, and strict austerity mea-

sures with tight scal policies, mirroring the structural SAPs of the

IMF. The economic theory underpinning the imposed conditionalities

on Greece, as manifested through the EAPs, is grounded in neoliberal

principles, reecting to a large extent the standard agenda of the WC

(Behrend, 2015, p. 26).

The second lesson is that the Troika’s imposition of neoliberal eco-

nomic policies on Greece was inuenced by the concept of “expansionary

austerity”, a neoliberal theory which advocates for scal consolidation

alongside market deregulation as a means of addressing scal decits

and public debt over the medium to long term (Tsoukis et al., 2017, p.

375). This approach highlights the need to boost economic growth by

encouraging higher levels of private consumption while simultaneously

restraining public spending. The main objective is to achieve internal

devaluation, which involves reducing domestic costs and prices, thereby

enhancing the economy’s competitiveness internationally (Botta, 2016, p.

4; Fontana; Sau, 2023, p. 4; Papadimitriou; Nikiforos; Zezza, 2013, p. 3).

As shown in Table 1, unemployment soared from 9.6% in 2009 to 27.5%

in 2013, reecting the social costs of austerity-driven policies aimed at

internal devaluation.

A third lesson is that neoliberals interpret the scal crisis as stem-

ming from a balance of payments crisis, primarily due to a loss of com-

petitiveness. Therefore, neoliberal recommendations for Greece to na-

vigate the crisis entail scal discipline, austerity measures, and adhe-

rence to the Stability and Growth Pact (SGP) and Maastricht criteria

(Caldentey; Vernengo, 2012, p. 19). The SGP is a scal framework de-

signed to ensure sound public nances and scal discipline within the

EMU. It sets limits on government budget decits (a maximum of 3% of

GDP) and public debt (a maximum of 60% of GDP), enforced through

preventive measures and corrective actions under the Excessive Decit

Procedure (EDP), which is a corrective mechanism triggered when the-

se scal thresholds are exceeded (Angerer, 2022). The prolonged socio-e-

conomic crisis in Greece, spanning over a decade, has greatly eroded the

credibility of the prevailing neoliberal economic theory underpinning

Nikos Astroulakis, Themis Anthrakidis From the Eurozone Entrance to the Economic Restructuring: A Polical Economy Analysis of the Greek Economic Crisis

the EAPs. The GEC, coupled with the imposition of the austerity mea-

sures, led to a deterioration in the living conditions of the Greek popu-

lace and had signicant repercussions on the labor market (Karamanis;

Beneki; Ioakimidis, 2018, p. 103). Greece, as a peripheral European cou-

ntry, struggled with stagnant domestic demand and turned to internal

devaluation as a means to improve competitiveness and spur recovery.

This underscored wider gaps between core and non-core Eurozone na-

tions (Caldentey; Vernengo, 2012, p. 19).

The neoliberal approach adopted by the Troika can be charac-

terized as a “shock therapy” or “big bang” strategy, aimed at rapidly

implementing a comprehensive reform agenda (Anthrakidis, 2024, p.

133; Karamessini, 2015, p. 109). This calls for the forth lesson. The IMF

embraced the belief that the “faster the better”, indicating that a quic-

ker pace in implementing reforms could result in a more signicant

adjustment (Berg et al., 1999, p. 54). However, Table 1 clearly illustrates

the severe contraction that followed these rapid reforms. Between 2009

and 2012, Greece’s real GDP plummeted by over 20% and until the end

of the EAPs in 2018, it fell cumulatively by over 25%. Also, for the same

time reference (2009-2012) unemployment surged from 9.6% to 24.4%

while it peaked at 27.5% in 2013 and remained above 19% through 2018,

and public debt soared from 126.7% to 190.7% of GDP in 2018. On the

one hand, the rapid scal consolidation, due to the underestimated s-

cal multiplier, led to a signicant reduction in aggregate demand and

income (Skalkos, 2018, p. 175, 180). On the other hand, the Troika’s in-

tense pressure on Greek ocials to rapidly implement reforms resulted

in adverse outcomes, diminishing political ownership of the programs.

Instead of building momentum for reform, international lenders enfor-

ced severe austerity measures through unclear procedures, rapidly de-

pleting the domestic political system’s capital (Featherstone, 2015, p. 18;

Spanou, 2015, p. 51).

A fifth lesson can be seen in the neoliberal agenda of “one-size-

-fits-all” strategy (Gkasis, 2018). The neoliberal policies imposed by

the Troika in Greece aimed at implementing the WC reforms agen-

da, taking a “one-size-fits-all” approach (Marangos, 2022a, p. 12). In

this context, the Troika’s detailed policy directives primarily focused

on quantitative fiscal targets and “horizontal measures” leaving litt-

le space for qualitative reforms and diminishing national ownership

of the programs. This approach made the programs less socially and

politically accepted (Spanou, 2015, p. 49). Instead of granting political

ownership of reforms to the Greek government, the Troika microma-

naged the process, undermining Greek sovereignty and democratic

processes in a manner perceived as humiliating (Kotios; Roukanas,

2013, p. 101; Tsoukis et al., 2017, p. 26). Now, it seems as a common spa-

ce that the EAPs were externally imposed and lacked social dialogue

and consultation with social partners. The macroeconomic data in

Table 1 illustrates how Greece’s structural weaknesses and socio-eco-

nomic dynamics were overlooked by the standardized policy approa-

ch. For instance, the fiscal deficit remained alarmingly high at -15.2%

of GDP in 2009, despite severe austerity measures. Additionally, the

estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 12, n. 3, (dez. 2024), p. 7-29

soaring public debt, climbing from 107.1% of GDP in 2001 to 190.7%

in 2018, reveals how debt sustainability targets were persistently mis-

sed under the uniform austerity framework. Unemployment, which

surged from 9.6% in 2009 to a peak of 27.5% in 2013, underscores the

socio-economic damage caused by rigid labor market deregulations.

These trends reflect how the uniform fiscal targets failed to account

for Greece’s economic and political realities, undermining the pro-

gram’s effectiveness leading to “growthless employment” (Missos;

Rodousakis; Soklis, 2022, p. 313).

5 INSTEAD OF A CONCLUSION

Initially driven by aspirations of integration for economic deve-

lopment, Greece Eurozone entrance in 2001 marked a transformative

period characterized by robust growth. However, the unsustainable

economic model, compounded by scal imbalances and structural de-

ciencies, led to a severe crisis aggravated by GFC in 2008. Subsequently,

the GEC unfolded against a backdrop of political and economic tur-

moil, oering valuable insights into the interplay between neoliberal

policies and the dynamics of a struggling democracy. The initial EAP

(2010-2012) aimed to address scal imbalances through austerity, yet

its neoliberal economic policies contributed to a severe economic do-

wnturn. The subsequent EAP (2012-2014) involved a substantial debt

restructuring but failed to meet targets, deepening recession, and socie-

tal discontent. In the third EAP (2015-2018) despite stabilization eorts,

the prolonged economic recession persisted, posing challenges to s-

cal sustainability and social welfare. The GEC oers political economy

lessons, unraveling the consequences of neoliberal policies. The EAPs

imposed by the Troika exemplify the pitfalls of a rigid adherence to

neoliberal principles. Despite their stated objectives of scal consolida-

tion and economic stability, the EAPs resulted in internal devaluation

and expansionary austerity. The Troika’s strategies, rooted in the neoli-

beral agenda of the WC, reected a disconnect between their imposed

measures and the Greek political and economic reality. GEC had socio-

-economic repercussions, with GDP contracting by over 25%, a surge

in unemployment, and a notable brain drain. The Troika’s brutal, intru-

sive, and long-lasting measures not only failed to align with Greece’s

political economy but also showcased a awed understanding of the

country’s initial conditions. The neoliberal framework, emphasizing

scal consolidation and austerity, proved inexible and unsuitable for

addressing the challenges in a Eurozone member state economy. The

absence of social dialogue and consultation with social partners dimini-

shed the political ownership of reforms, eroding democratic legitimacy.

Perhaps, the key lessons learned underscore the importance of tailo-

ring economic measures to a country’s specic conditions, the fostering

of social dialogue, and the preserving of democratic processes within

the European heritage. Ultimately, the Greek experience highlights the

need for challenging the “one-size-ts-all” mentality inherent in rigid

adherence of the worldwide neoliberal policies

Nikos Astroulakis, Themis Anthrakidis From the Eurozone Entrance to the Economic Restructuring: A Polical Economy Analysis of the Greek Economic Crisis

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