Labour and Pensions in the Greek Crisis: The Microfoundations of Disaster

September 2012
Südost-Europa;2012, Vol. 60 Issue 3, p363
Academic Journal
This paper examines the antecedents and dynamics of the Greek crisis by focusing on pensions and the labour market - the microfoundations of disaster. The crisis was caused by fundamental features of Greece's political economy, already present before entry into the Monetary Union. The fact that reform did not take place until after the bailout may be seen as a governance shortcoming, linked to the way major policy choices are handled in Greece. Since the early 1990s, discussion of pensions and of labour flexibility had been avoided, quantification shunned and data withheld, in such a way that issues were tampered with to fit what was thought politically feasible. Thus, in those two areas, a disjunction was created between appearance and reality, as well as a difference in perceptions between domestic and external commentators. When pension and employment protection reform finally came in 2010, it was seemingly imposed from outside. However, the absence of a process through which problems are defined, proposals sought and solutions implemented remained an issue even after the bailout. In this way Greece's recovery process is still undermined by the same governance shortcomings which were responsible for bringing on the crisis in the first place.


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