The Greek Crisis: Tragedy or Opportunity 
9-711-088
REV: SEPTEMBER 16, 2011
DANTE ROSCINI JONATHAN SCHLEFER KONSTANTINOS DIMITRIOU
The Greek Crisis: Trag k gedy or Oppor rtunity? ?
By November 2010, Georg Papaconst y ge tantinou, the Greek fina e ance minister was pract r, tically oblivi ious to the daily chants of protesters in Constituti d o ion Square outside his of ffice. He pon ndered wheth the polici his gover her ies rnment had adopted over the past yea would allo it to avoi the a r ar ow id restru ucturing of it public deb ts bt—in effect, partial defau ult—that man saw as li ny ikely, even if only f severa years ahead al d. Du uring his Oc ctober 2009 electoral cam e mpaign, Geor rge Papandre eou, leader o the Panhe of ellenic Social list Movemen (PASOK), had promised to stren nt , ngthen social protection. But the pre evious gover rnment’s estim mates of the 2009 deficit— —rising from 3.7% of GDP to 6.7% of G P GDP—had proven wildly optimistic.1 Almost as so as PASO took office and Papaco y oon OK e, onstantinou w named finance was minis ster, he had co oncluded that the deficit would be twice as high: 12.7 of GDP.2 A by Nove t w e 7% ember And 2010, the deficit for 2009 was de r etermined to have reached 15.4% of GD 3 h DP. As the deficit numbers wors s n sened, nervou financial m us markets had k kept demand ding higher in nterest rates on governm ment debt. At one point, interest rates reached alm i s most 19%. In the end, on an n nly emerg gency loan from the Europ pean Union (EU) and the International Monetary F ( l Fund (IMF) in May n 2010 had allowed Greece to avoid default In return t a t. the governme had enac ent cted a harsh fiscal retren nchment, red ducing salarie and pensi es ions for pub blic employee raising th retirement age, es, he t cuttin services, and increasing taxes. Now Papandreou was calling for a drast decrease i the ng a w u g tic in numb of public employees.4 ber e Ini itial protests had been vio olent but bac ckfired when rioters set fi to a bank in
REV: SEPTEMBER 16, 2011
DANTE ROSCINI JONATHAN SCHLEFER KONSTANTINOS DIMITRIOU
The Greek Crisis: Trag k gedy or Oppor rtunity? ?
By November 2010, Georg Papaconst y ge tantinou, the Greek fina e ance minister was pract r, tically oblivi ious to the daily chants of protesters in Constituti d o ion Square outside his of ffice. He pon ndered wheth the polici his gover her ies rnment had adopted over the past yea would allo it to avoi the a r ar ow id restru ucturing of it public deb ts bt—in effect, partial defau ult—that man saw as li ny ikely, even if only f severa years ahead al d. Du uring his Oc ctober 2009 electoral cam e mpaign, Geor rge Papandre eou, leader o the Panhe of ellenic Social list Movemen (PASOK), had promised to stren nt , ngthen social protection. But the pre evious gover rnment’s estim mates of the 2009 deficit— —rising from 3.7% of GDP to 6.7% of G P GDP—had proven wildly optimistic.1 Almost as so as PASO took office and Papaco y oon OK e, onstantinou w named finance was minis ster, he had co oncluded that the deficit would be twice as high: 12.7 of GDP.2 A by Nove t w e 7% ember And 2010, the deficit for 2009 was de r etermined to have reached 15.4% of GD 3 h DP. As the deficit numbers wors s n sened, nervou financial m us markets had k kept demand ding higher in nterest rates on governm ment debt. At one point, interest rates reached alm i s most 19%. In the end, on an n nly emerg gency loan from the Europ pean Union (EU) and the International Monetary F ( l Fund (IMF) in May n 2010 had allowed Greece to avoid default In return t a t. the governme had enac ent cted a harsh fiscal retren nchment, red ducing salarie and pensi es ions for pub blic employee raising th retirement age, es, he t cuttin services, and increasing taxes. Now Papandreou was calling for a drast decrease i the ng a w u g tic in numb of public employees.4 ber e Ini itial protests had been vio olent but bac ckfired when rioters set fi to a bank in