Souvlaki connection; reflections on the Greek crisis

After the subprime credit crisis of 2007, the world is no longer what we thought. An unprecedented crisis of confidence was combined with a credit crunch, and the G20 countries had to enact massive public spending programmes to save the economy and at least buffer the inevitable hard landing. In 2010 this excessive public spending produced the first public debt crisis in the wake of the subprime crisis: Greece reported that in 2009 it had run an unprecedented deficit of 15.4 per cent of GDP, and that its public debt had skyrocketed to 126.8 per cent. The Greek crisis is the product of years of recession, the sluggish economic environment and poor productivity – but above all it is the product of the mismanagement of the public finances and of unsatisfactory reporting practices. In this essay we analyse this crisis in the context of the era of financial derivatives and underscore a number of crucial effects that have been largely ignored in both academic discussion and public debate.