The political economy of crisis and recovery in modern Greece

Fifteen years after the Great Recession, the Greek economy shows slow growth following a prolonged stagnation. This article examines the causes of Greece’s economic crisis and the factors behind its tentative recovery. Our analysis highlights the pivotal role of profitability, particularly changes in the net rate of profit, in both the crisis onset and recovery. The recovery relies heavily on increased exploitation through wage cuts and inflation, alongside significant devaluation and destruction of physical capital. However, persistently low profitability, investment and capital accumulation hinder technical progress, productivity and real wage growth, preventing net profitability from reaching healthy levels. Moreover, structural weaknesses, including the absence of a capital goods sector, limit sustainable recovery. Despite some progress, the fragile recovery has revived balance of payments issues, revealing its unstable and vulnerable foundations. JEL classification: B51, E11, N14, O52.