The Greek sovereign debt crisis and EMU: a failing state in a skewed regime

The Greek sovereign debt crisis of 2010 exposed the weaknesses of governance of both the 'euro area' and of Greece. Successive governments in Athens had failed to overcome endemic problems of low competitiveness, trade and investment imbalances, and fiscal mismanagement placing the economy in a vulnerable international position. Once the market crisis erupted, the European Union's Council of Ministers and the European Central Bank failed to provide a timely and effective response. The implications are threefold: the constraints on domestic reform proved immutable to EU stimuli; the 'euro' is more vulnerable to crisis than previously acknowledged; and the early discussion on 'euro' governance reform suggests that its underlying philosophy has not shifted significantly towards more effective 'economic governance'. This article explores the antecedents and management of the crisis and assesses the outcome. At the EU level, a paradox was evident in the denial of agency and resources that might limit the obligation of states to rescue an errant peer. Domestically, within Greece, the unprecedented external monitoring and policing of its economy - though matched by some initial successes - raises in the longer term sensitive issues of legitimacy and governability, with uncertain prospects for avoiding further crises.