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Federal Reserve Bank of Richmond
Working Paper
A Comparison of Greece and Germany: Lessons for the Eurozone?
Robert L. Hetzel
Abstract

During the Great Recession and its aftermath, the economic performance of Greece and Germany diverged sharply with persistent high unemployment in Greece and low unemployment in Germany. A common explanation for this divergence is the assumption of an unsustainable level of debt in Greece in the years after the formation of the Eurozone while Germany maintained fiscal discipline. This paper reviews the experience of Greece and Germany since the creation of the Eurozone. The review points to the importance of monetary factors, especially the intensification of the recession in Greece starting in 2011 derived from the price-specie flow mechanism described by David Hume.


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Robert L. Hetzel, A Comparison of Greece and Germany: Lessons for the Eurozone?, Federal Reserve Bank of Richmond, Working Paper 15-4, 15 Apr 2015, revised 30 Jul 2015.
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