FROM THE PERSPECTIVE OF THE PUBLIC CHOICE THEORY FISCAL CAUSES OF THE GREECE DEBT CRISIS, FISCAL MEASURES TAKEN AND ITS RESULTS
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2021
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Since Greece is the country experiencing the worst global crisis, it is aimed to examine the reasons for this in terms of public choice theory. Before the crisis, without making arrangements to eliminate the fragility of the economy, Greece reported its economic indicators incorrectly to international institutions for many years, and grew at a high rate with the advantages of joining the European Union (EU). In this environment, the public increased their consumption by borrowing. Moreover, the tax effort of the people was very low. With waste, corruption and favoritism, public expenditures increased, economic indicators diverged from Maastricht criteria. Therefore, the hypothesis of the public choice theory stating that “the share of the state in the economy will increase considerably as a result of the behavior of the actors in the political field that creates benefit maximization” realizedin Greece. During the crisis, the budget deficit and debt figures grew even more, and the country entered a independent debt crisis. The EU and the International Monetary Fund (IMF) provided aid packages in return for commitments to tax reform, raise the retirement age, freeze wages, and regulate public employment. Thus, it aimed to reduce the share of the state in the economy, as the public choice theory defends. As a result, with these aids and implemented austerity policies, the budget deficit recovered. However, the public debt stock continued to increase.