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State-driven in Boom and in Bust: Structural Limitations of Financial Power in Greece

Published online by Cambridge University Press:  22 May 2014

George Pagoulatos
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Abstract

The Greek financial system was typical of a state-directed credit-based southern European model. Financial liberalization from the late 1980s and early 1990s was mainly state directed, aimed to serve the objectives of disinflation and the single European market. As a result of liberalization, the banks emerged as powerful players in the 1990s. The cheap-credit, rapid credit-growth period of 1998–2008 allowed banks to maximize sectoral profits, incomes and power. Debt-driven growth also served the government’s objectives of delivering relatively effortless rapid prosperity. The banks’ decline following the 2010 public debt crisis resulted mainly from the fiscal failure of the sovereign and the current account imbalances of the euro area. In crisis, the banks cannot escape the confines of their sovereign, which itself is heavily constrained by the surrounding euro area economic structure. Such structural limitations circumscribe the power of bankers.

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Articles
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Government and Opposition , Volume 49 , Issue 3: The Power of Finance: Before and After the Great Financial Crash , July 2014 , pp. 452 - 482
Copyright
Copyright © Government and Opposition Ltd 2014 

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Footnotes

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George Pagoulatos is Professor of European Politics and Economy in the Department of International and European Economic Studies (DIEES) at Athens University of Economics and Business (AUEB). Contact email: george.pagoulatos@gmail.com.

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