ABSTRACT

The Eurozone crisis articulates, to date, as the sovereign debt crisis of states in the European Union (EU) periphery that hold large current account deficits. It first surfaced in late 2009 when, after a change in government, the level of Greece’s government debt was fully revealed and concern arose among investors that the Greek government might fail to service its debts. Successive downgrading of the creditworthiness of Greece sparked speculation on its default and the devaluation and breakup of the Euro currency. Greece was a likely first target of speculative attacks given its persistently high government debt, the little credibility of the Greek government in managing public finances, and the relative insignificance of the Greek economy both in the Single Market and global markets (Lapavitsas et al. 2012, 6). Had it occurred in isolation outside the currency union, the Greek sovereign debt crisis could have been resolved in ways similar to sovereign debt crises discussed in the other chapters of this volume—by devaluating the country’s currency in combination either with government default or with loans from the International Monetary Fund (IMF) and other partners.