The economic crisis in Greece, Spain, and Italy

Abstract

The causes of the economic downturn in Greece, Spain, and Italy vary. The economic problems that occurred around these states, that is, the crisis in the USA, its transfer to Europe and the specifics of a state’s functioning in a monetary union, were all conducive to the emergence and consolidation of a series of tensions, imbalances and irregularities within these states. The specifics of the Greek political system, for example, “democratic populism” and clientelism in the functioning of political parties and the political culture in the state combined with unfavourable external circumstances, pushed Greece into a very difficult economic and political situation. This was made worse by the weakness of public administration, difficulties in controlling public expenditure and poor tax collection. As a result, the public debt that had accumulated over the years had de facto led to Greece’s bankruptcy, which the state had de jure been saved from announcing thanks to external assistance, and a reduction of part of its debt. As shown by the previously mentioned case of the IMF, the activity and influence of international organisations on the development of events in Greece was far from perfect. In turn, the main reason behind Spain’s problems was excessive development of the construction and property sectors, severe imbalance and burst of the speculative bubble on these markets. This is directly evidenced by changes in the supply, demand, and prices in the construction and real-estate market, and indirectly by changes, for example, to the net credit demand in the private sector, private debt, domestic debt, and the current account balance over a period of several years before and after the crisis. In Italy, the crisis was markedly less severe, however, it revealed a series of weaknesses in the Italian economy. [fragm. tekstu]