Study on Greece Debt Crisis and Eurozone's Governance of Crisis Management
Authors:   Asia-Europe Perspective Association, Yoon Sung-Wook 
Published: June 2018

Global concern on debt crisis of PIIGS, particularly Greece still exits. This article aims to examine the systemic problem of the eurozone governance in terms of crisis management by analysing the reasons for Greece debt crisis and eurozone's governance of crisis management. For this, this article analyses the economic convergence criteria to join the eurozone and its governance. It has been controversial since the economic convergence criteria were initially set up, and these criteria did not consider different economic situation of each member state. Regarding the eurozone's governance, SGP built on the economic convergence criteria set up the strict criteria of national debt. In addition, the Treaty(TFEU) includes ‘no bail-out clause' which prohibit the ECB and member states to provide financial assistance to other member states in crisis. However, the EU's decision discriminatively applied to Portugal, and Germany and France when these countries broke the rule stipulated in SGP clearly shows the problem of the eurozone's governance. Another feature in terms of the eurozone's governance is the division of monetary and fiscal policy; that is, the competence of the each member state's monetary policy was transferred under the responsibility of the ECB. However, the fiscal policy still belongs to the competence of each member state.
Various studies on the reasons for Greece financial crisis have been conducted, but this article intends to focus on debt issues. Greece, in reality when Greece became the 12th member of the eurozone, did not meet the economic convergence criteria, but the Greek government forged the statistics of its economic situation mainly because of government debts. Eventually, the continuous problem of government debts and deficits leads Greece to need bail-out. The more serious problem is, however, that the agreement on financial assistance to Greece at the EU level was reached on May 2010, although the Greece debt crisis became serious since September 2009. The main reasons for this delay is domestic political situations of member states-for example, Germany had an election on May 2010 and negative public opinions, the difficulty of reaching agreement among member states, and no bail-out clause. The EU's bail-out to Greece with the IMF eventually broke the ‘no bail-out clause.’ With Greece debt crisis as a momentum, various responses and policy reform have been introduced in the EU, but these are not likely to be the principal solution in terms of the governance of crisis management. If Greece will operate an irresponsible fiscal policy again after overcoming its debt crisis thanks to bail-out, there is no fundamental measure to control Greece fiscal policy. This is because the competence of the fiscal policy belongs to Greece. There is one common argument as the best solution; that is 'political integration' which creates one authority to control fiscal as well as monetary policy. However, the possibility of creating the political union seems to be very low. The policy-reform of the eurozone's governance of crisis management does not seem to be the fundamental solution; rather this reform reinforces the existing one. Therefore, it is still uncertain whether this reform would be effective when the EU faces new crisis.