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The Greek Debt Crisis: likely causes, mechanics and outcomes

Arghyrou, Michael Georgiou and Tsoukalas, John D. 2011. The Greek Debt Crisis: likely causes, mechanics and outcomes. World Economy 34 (2) , pp. 173-191. 10.1111/j.1467-9701.2011.01328.x

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We use insights from the literature on currency crises to offer an analytical treatment of the crisis in the market for Greek government bonds. We argue that the crisis itself and its escalating nature are very likely to be the result of: (i) steady deterioration of Greek macroeconomic fundamentals over 2001–09 to levels inconsistent with long-term EMU participation; and (ii) a double shift in markets’ expectations, from a regime of credible commitment to future EMU participation under an implicit EMU/German guarantee of Greek fiscal liabilities, to a regime of non-credible EMU commitment without fiscal guarantees, respectively occurring in November 2009 and February/March 2010. We argue that the risk of contagion to other periphery EMU countries is significant; and that without extensive structural reforms, the sustainability of the EMU is in question.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
H Social Sciences > HM Sociology
J Political Science > JN Political institutions (Europe)
Publisher: Wiley Blackwell
ISSN: 0378-5920
Last Modified: 04 Jun 2017 03:28

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