DP10898 The Pitfalls of External Dependence: Greece, 1829-2015
|Author(s):||Carmen M. Reinhart, Christoph Trebesch|
|Publication Date:||October 2015|
|Keyword(s):||Bailouts, Crisis Resolution, External Debt, Sovereign Default|
|JEL(s):||E6, F3, H6, N0|
|Programme Areas:||Economic History, International Macroeconomics and Finance|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=10898|
Two centuries of Greek debt crises highlight the pitfalls of relying on external financing. Since its independence in 1829, the Greek government has defaulted four times on its external creditors ? with striking historical parallels. Each crisis is preceded by a period of heavy borrowing from foreign private creditors. As repayment difficulties arise, foreign governments step in, help to repay the private creditors, and demand budget cuts and adjustment programs as a condition for the official bailout loans. Political interference from abroad mounts and a prolonged episode of debt overhang and financial autarky follows. We conclude that these cycles of external debt and dependence are a perennial theme of Greek history, as well as in other countries that have been ?addicted? to foreign savings.