By Neil Dooley
Nearly ten years on from the first Greek bailout, the countries of the eurozone periphery have exhibited markedly divergent recoveries. A popular narrative attributes the contrasting recoveries of Greece and Ireland to their divergent enthusiasm for following EU rules on structural reforms and austerity. In contrast, my new book, The European Periphery and the Eurozone Crisis, shows that ‘following the rules’ doesn’t always ensure good economic health, but is linked to the causes of the eurozone crisis in the first place.
Why the ‘official narrative’ is flawed
The eurozone crisis has often been told as a story of excessive spending, runaway borrowing, weak competitiveness, and the political unwillingness to make painful but necessary reforms. This ‘official narrative’, developed by, among others, Greece’s lenders has underpinned a policy response of austerity and ‘structural reforms’. As Greece exited its bailout in August 2018, this story resurfaced as a tale of assisted redemption. The European Commission tweeted that Greece has embarked on a “new chapter” which is:
“the result of both national reforms and support from EU partners. The sacrifices and efforts of the Greek people in undertaking these reforms have delivered real, tangible results”.
European Commission President hopeful Manfred Weber similarly tweeted:
“It is good that #Greeceexits its bailout. Nevertheless we don’t have to forget that due to the SYRIZA government this didn’t happen much earlier and much cheaper for the Greek people”.
As this story goes, the country got into trouble by flouting the rules of the game. The EU helped Greece recover by assisting it in (eventually) getting with the programme. Ireland, on the other hand, has been held up as the ‘poster child’ of austerity, praised by former Commission President Barroso as evidence that “with strong determination and support from partner countries we can and will emerge stronger from this deep crisis”. Continue reading