The Greek Debt Crisis: The Need for “Heroic” Economic Policy Reforms in the European Economic and Monetary Union

Abstract

Greece is in the midst of a devastating economic and financial crisis that the European Union has been trying ardently to resolve since the default of Lehman Brothers in 2008. A significant number of other European Union (EU) Member States are also in crisis due to various state-level economic and monetary causes. Meanwhile, the European Union has consistently used the existing treaty articles and legislation within its competence to impose traditional and homogenized austerity measures on highly indebted Member States, most notably Greece. In sum, the European Union has zealously advocated for fiscal conservatism driven by the German “uber-fear” of inflation, which the European Union firmly believes is not only an indicator of economic instability, but also an ineffective debt reduction policy. The discord sown by such a policy at the EU level is evident even without detailed economic analysis: inflation, wages, unemployment, debt, and other economic indicators are affected, and often controlled, by a wide variety of factors, both global and domestic. This Note will deal chiefly with the economic and monetary causes of the crisis in Greece, and it will briefly discuss the crisis in Spain. While an understanding that each crisis is different would induce a reasonable expectation that each of those countries—as well as any other Member State in need of assistance—would have been prescribed a tailored solution to the extent that is practicable, this Note will explain that this has not been the case.