41. The Gold Standard, the Euro, and the Origins of the Greek Sovereign Debt Crisis
- Author:
- Harris Dellas
- Publication Date:
- 10-2013
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The entry of Greece into the euro zone in 2001 was widely expected to mark a transformation in the country's economic destiny. During the decade of the 1980s, and for much of the 1990s, the economy had been saddled with double-digit inflation rates, double-digit fiscal deficits (as a percentage of GDP), large current-account imbalances, very low growth rates, and a series of exchange rate crises. Adoption of the euro—the value of which was underpinned by the monetary policy of the European Central Bank (ECB)—was expected to produce a low-inflation environment, contributing to lower nominal interest rates and longer economic horizons, thereby encouraging private investment and economic growth. The elimination of nominal exchange-rate fluctuations among the former currencies of members of the euro zone was expected to reduce exchange rate uncertainty and risk premia, lowering the costs of servicing the public sector debt, facilitating fiscal adjustment, and freeing resources for other uses.
- Topic:
- Economics
- Political Geography:
- Europe