ABSTRACT
In 1985 the PASOK government under Andreas Papandreou was forced to take action to tackle a crisis in the balance of payments. This chapter examines how these considerations defined the nature, pace and fate of the stabilization program which the second PASOK government implemented between 1985 and 1987. The program, though triggered by economic urgency and the desire to secure extraordinary financial aid by the European Community, had a bias towards protecting the status of PASOKs core support groups. High levels of public spending and higher nominal wages in the first PASOK years led to a surge in imports which exacerbated the trade deficit. Many PASOK politicians raised their objections on economic grounds, claiming that the austerity program was reducing domestic demand and was fuelling unemployment. Many of the unionists who were expelled from PASOK formed a political organization but failed to forge strong social alliances and ultimately faced political isolation.
