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The Euro Crisis and Its Aftermath$
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Jean Pisani-Ferry

Print publication date: 2014

Print ISBN-13: 9780199993338

Published to Oxford Scholarship Online: May 2014

DOI: 10.1093/acprof:oso/9780199993338.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 12 May 2021

To Help or Not to Help

To Help or Not to Help

(p.77) Chapter 11 To Help or Not to Help
The Euro Crisis and Its Aftermath

Jean Pisani-Ferry

Oxford University Press

Seven months passed between George Papandreou’s revelations on the sorry state of Greece’s public finances, and the agreement of European leaders on a tentative solution. By then the spread between Greek and German 10-year bonds had widened from 2 to 10 percentage points. Papandreou had tried to seek the help of the International Monetary Fund (IMF), whose Managing Director, Dominique Strauss-Kahn, had replied that no financial assistance could be provided without the prior consent of the other euro-area countries. But these countries, however, were extremely divided on the issue. They knew that Greece needed outside help, but remained reluctant to provide it. The fear of moral hazard, which the Maastricht Treaty had sought to banish with the no-bailout clause, and concerns of sliding towards a transfer union, explain some of this reluctance. After months of arduous negotiations, Europeans eventually declared that coordinated bilateral loans would be made available to Greece, complemented by IMF financing, but with conditions which were initially so harsh that the financial help they were offering was more like punishment than genuine assistance.

Keywords:   George Papandreou, Greece, public finances, Europe, International Monetary Fund, financial assistance, bilateral loans, euro crisis

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