Athens and the politics of the sovereign debt crisis

The 2008 global financial crisis originated in a US housing bubble but complex interconnections in the global financial system diffused the crisis worldwide. European banks and other financial institutions were severely hit (Aglietta, 2009: 82–4). As elsewhere in the world, European governments responded to the crisis by spending huge amounts in loans, asset purchase, guarantees and direct spending for the rescue of financial systems (Aglietta, 2009). State interventions stabilized the banking sector but at the same time they increased public deficits and transferred the burden of the crisis to national government budgets. The most vulnerable countries, those whose public finances were in bad condition, rapidly faced difficulties in re-financing their already high sovereign debts. The financial crisis led thus to a sovereign debt crisis in several European countries (mainly in Greece, Ireland and Portugal, while Spain and Italy felt also significant pressures).