The Greek austerity myth(ology)

Brussels

SINCE the anti-austerity Syriza party's victory in Greece's recent general election, the "Greek problem" is again preoccupying markets and policymakers throughout Europe. Some fear a return to the uncertainty of 2012, when many thought that a Greek default and exit from the eurozone were imminent. Then as now, many worry that a Greek debt crisis could destabilise - and perhaps even bring down - Europe's monetary union. But this time really is different.

One critical difference lies in economic fundamentals. Over the last two years, the eurozone's other peripheral countries have proven their capacity for adjustment, thereby negating the need for financing. Indeed, Greece is the only one that has consistently dragged its feet on reforms and sustained abysmal export performance.