The Impact of Policy Retrenchment in Europe
Edited by Daniel Vaughan-Whitehead
Chapter 7: Public sector adjustment amidst structural adjustment in Greece: Subordinate, spasmodic and sporadic
This chapter reviews the post-2009 public sector adjustment measures in Greece. Unlike many public sector reforms in democratic countries, where checks and balances in the system lead to adjustment before dysfunctionality reaches alarming proportions, the ongoing and planned public sector adjustment in Greece is subordinate to a massive fiscal and structural adjustment programme driven by the public debt crisis: public debt was 126 per cent of GDP in 2009 and has now (June 2012) reached approximately 170 per cent. Although Greek debt accounts for merely 1 per cent of global debt, the possibility of a sovereign default has endangered the survival of the euro and with it the world economy due to the interconnectivity of the global financial system. If this were to happen, it would be the first such default for a high-income economy in more than 60 years. Under these conditions a quick response to avoid a disorderly default and save the global economy in the short term was deemed by the lenders to carry more weight than an orderly adjustment that would put Greece on a sustainable course in the long term with lower social costs.
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