Chapter 3: Greece

As most European countries were coming out of recession at the end of 2009, Greece was entering a tumultuous period. The announcement of the newly elected Greek government in October 2009 that the projected budget deficit for 2009 would be 12.7 percent of GDP2 (rather than the 5.1 percent projection that appeared in the 2009 Spring Commission forecast), was initially met with shock and opprobrium in Brussels and other euro-area capitals. The initial reaction of policymakers across the European Union was that the risk of contagion was minimal, and that the right way to deal with the situation was to let Greece “swing in the wind”.