Business Briefs

The "Greek" Crisis: Origins
(Part 1)

At an extraordinary meeting of the European Council on the weekend of May 9 and 10, 2010 the heads of state and government of the European Union (EU) agreed to allocate €500 billion in special assistance to help member states that no longer have access to market-based financing to meet their balance of payments and fiscal obligations. They also negotiated with the International Monetary Fund (IMF) to “provide at least half as much as the EU contribution through its usual facilities” – bringing the total volume of financial assistance to €750 billion.

The purpose of this briefing is to explain how the EU got into such a dire situation – one which many have described as the most important challenge yet to the stability of the single European currency. A companion briefing looks at how things are likely to develop from here. This briefing has five sections. The first looks at the proximate problem of Greek indebtedness. The second explains how this problem extends well beyond Greece. The third sketches Europe’s halting attempts to address this situation before it evolved into a crisis. The fourth suggests why those efforts were not more successful. The fifth concludes with a short narrative of Europe’s last ditch effort to stabilize the Greek situation. These conclusions explain why it will be difficult to create a lasting solution to the “Greek” crisis, and thus introduce the next brief.

  • Greek Public Finances
  • Macroeconomic Imbalances
  • Halting Responses
  • Hard Constraints
  • Contagion


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