A Diagnostic on the Greek Fiscal Crisis

Abstract

This paper explores primarily the level of international competitiveness of Greece and the degree of fit between the conditions prescribed by the optimal currency areas (OCA) theory with the actual situation in Greece. Given that Greece now shares the same currency with Germany, the de facto center country of eurozone, findings indicate that problems in Greece could have been exacerbated by loss of mercantile competitiveness to Germany and/or lack of convergence with Germany in the OCA-related dimensions.