Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

If Greece had been in Hungary’s situation in 2008, a member of the EU but outside the eurozone, it would in all likelihood have joined the East Europeans in the first round of IMF crisis programs.3 It was not that Greece was directly caught up in the transatlantic financial crisis. Its banks had regional interests at most. The crisis reached Greece by way of its export and tourism sectors. Then automatic fiscal stabilizers kicked in. Tax revenues slumped. None of this was unusual in 2008–2009. What set Greece apart was the precariousness of its fiscal position when the crisis struck. It bears repeating that Greece had not used eurozone membership to go on an outsized borrowing binge. The bulk of its debts were piled up in the 1980s and 1990s as its two main parties, PASOK (social democrat) and New Democracy (Christian democratic), lured voters with the promise of West European modernity and affluence.4 In 2006 Greece’s debt level relative to GDP was lower than it had been when it joined the eurozone in 2001. But it was not reduced by much and would have been worse but for fiddling. Athens’s failure was not to have used the exceptional period of rapid growth and low interest rates to substantially reduce its debt burden. Any sudden surge in the deficit, any upward hike in interest rates, was likely to topple it from just about managing to insolvency. That is precisely what happened in 2008. In response to the crisis, the conservative New Democracy government abandoned all f...