Partisan Politics in Greece from 1974 to the Economic Crisis and Beyond

Abstract

This paper presents the main features of the Greek political landscape during the period 1974–2008 and examines whether the governing ideology of the country’s main political parties is correlated with specific fiscal and monetary policy patterns. The descriptive analysis reveals two key findings. First, the data indicates ideological differences in fiscal policy during the pre-1993 period, with PASOK governments exhibiting higher public spending and deficits, while the conservative New Democracy (ND) demonstrated greater fiscal restraint. Monetary policy during this period also appears to follow ideological differences. Second, in the post-1993 period, two trends emerged that do not seem to be ideologically driven. From 1994 to 2001, both major political parties in Greece focused on joining the Economic and Monetary Union, aligning their policies with the Maastricht Treaty. This resulted in a decrease in government expenditure and an increase in total revenue, even under the left-wing PASOK government that was in office during that period. However, after Greece joined the eurozone, external constraints such as the Stability and Growth Pact did not effectively enforce fiscal discipline. From 2001 onward, there was an increase in expansionary fiscal policies, even under the right-wing ND government, suggesting that government ideology had minimal influence on fiscal variables during this period. Greece provides an intriguing example of how partisan politics can intersect with international institutional and policy constraints. (JEL codes: H2 and H1)

1. Introduction

It is widely believed that political factors, such as elections and political ideology, influence the determination of economic policy. In turn, economic policy can impact macroeconomic outcomes. This belief has led to a substantial body of academic work, both theoretical and empirical, known as the political business cycles literature (see, e.g. Drazen 2000; Persson and Tabellini 2000; Mueller 2003; Dubois 2016, for surveys of this literature). According to this literature, economic policies are chosen by the party in power for at least two reasons. Specifically, the incumbent party or government manipulates its policy instruments either to secure re-election and/or to align with its ideological orientation. Models that focus on the first motive are known as electoral or opportunistic models, while those that focus on the second motive are known as partisan models.

This study focuses on partisan motives, which stem from the assumption that different voters have varying preferences regarding aspects such as the amount and mix of public goods and the sources of tax revenues. These differences lead to distinct policy platforms adopted by political parties, each targeting the welfare of their own constituency. The debate over whether government ideology influences economic policymaking has been a longstanding and prominent topic in both political and economic discourse. Partisan theories suggest that left-wing governments are more inclined to adopt expansionary economic policies compared to their right-wing counterparts (Persson and Tabellini 2000). This expectation aligns with empirical evidence showing that left-wing parties often advocate for increased government spending, robust social welfare initiatives, and a more interventionist role of the state in economic affairs (see, e.g. Potrafke 2017; Magkonis et al. 2021). The objective of this paper is twofold. First, it aims to provide a concise summary, supported by data from the Comparative Manifesto Project (CMP), of the ideological evolution of the two main parties that dominated the political landscape in Greece between 1974 and 2008: the centre-right ND and the centre-left Panhellenic Socialist Movement (PASOK). We should emphasize from the outset that our sample ends in 2008 because our domestic data source, the National Statistical Service of Greece (ELSTAT), only provides data up to this year for crucial public policy variables. Second, it attempts to connect with descriptive evidence this ideological evolution with potential partisan motives in the conduct of public policy over the same period.¹ It should be noted that although our descriptive analysis ends in 2008, in Section 5, we provide an overview of the fundamental changes in the political landscape in Greece during the Memoranda era.

The case of Greece presents an appealing study for at least two reasons. First, except for a very brief period (i.e. from 1989 to 1990), all governments formed in Greece during this time were one-party governments with a distinct (either right- or left-wing) ideological identity. Moreover, during the 35-year period covered by our sample, there was a balanced representation: PASOK governed for 19 years, while ND governed for the remaining 16 years. Secondly, Greece provides an intriguing example of how partisan politics intersect with international institutional constraints and external mechanisms of ‘checks and balances’. Prior to 1993, noticeable variations in the ideological characteristics of the major political parties in Greece were evident. After 1993, both major political parties made the entry of Greece into the Economic and Monetary Union (EMU) an ultimate national priority. To achieve this goal, they aligned their political platforms with the objectives outlined in the Maastricht Treaty, thereby influencing the economic policies implemented while in power. This aligns with the so-called discipline effect of globalization (see Dreher et al. 2008). The international integration of markets is expected to impose external constraints on domestic policymaking by creating budgetary pressures for national governments, stemming from factors such as international tax competition or the loss of control over monetary policy and seigniorage options. If the discipline effect on government policies holds true, a similar effect on parties’ policy agendas is also anticipated. Essentially, parties are likely to adopt policy positions typically considered conservative, aiming to reduce budget deficits and generally supporting economically prudent government policymaking (see Adam and Ftergioti 2019 for further details on this).

The descriptive analysis of Greek fiscal and monetary policy from 1974 to 2008 reveals significant trends and potential ideological influences. From 1974 to 1993, public sector deficits were prominent, peaking in 1993. Under PASOK from 1982 to 1989, government expenditure increased significantly, leading to higher deficits. Under ND, public finances appeared to be more controlled, although budget deficits increased during its last term from 1990 to 1993. Public sector wage bills, subsidies, and pensions were the main drivers of increased public spending, especially under PASOK. As regards monetary policy, inflation rates were high in the period 1974–1981, but showed a downward trend. The period of PASOK from 1982 to 1989 was characterized by a moderate decline in inflation and a less contractionary monetary policy, indicating a more expansionary stance. This is in line with previous studies which predict that left-wing governments are more likely to pursue expansionary economic policies than their right-wing counterparts. From 1994 to 2008, Greece’s monetary and fiscal policies reflected pro-market approaches and external constraints imposed by the EU. Government expenditure fell and revenues rose under the left-wing PASOK governments and until 2001, when Greece joined the euro area. After 2001, however, the policy constraints imposed by the Stability and Growth Pact (SGP) did not seem to act as a discipline effect, as more expansionary fiscal policies were observed even under conservative governments. Public sector wages and subsidies increased again, reaching levels similar to those in 1990. As for monetary policy, it aimed to reduce inflation after 1993 and achieved significant success by 1999, with inflation rates stabilizing at around 3%. Overall, the patterns we observe in the data over the period 1994–2008 do not seem to be correlated with the ruling party’s ideology.

This paper contributes to a small empirical literature that examines partisan motives in the conduct of public policy in the context of Greece. Alogoskoufis and Philippopoulos (1992) delve into the interplay among inflation, unemployment, exchange rate regimes, and political parties in Greece spanning 1958–1989. They suggest that during periods of floating exchange rates, left-wing administrations in Greece tended to experience higher inflation rates on average, though without any detrimental effect on unemployment. Bratsiotis (2000) contends that the signing of the Single European Act in 1986 significantly influenced partisan inflation cycles in Greece. Left-wing governments in Greece were linked with higher inflation levels before the act, but not afterward, as a more anti-inflationary stance was adopted. Research on the presence of partisan and electoral effects in Greece extends beyond examining inflation and unemployment to encompass other policy tools. For example, Andrikopoulos et al. (1998) employ cointegration analysis and discover evidence supporting the existence of electoral cycles in economic outcomes, as well as electoral and partisan effects on policy instruments. Similarly, Lockwood et al. (2001) analyse annual data from 1960 to 1997 and provide evidence indicating that pre-election years coincide with rising expenditures and declining taxes, a trend that diminishes in the post-Maastricht period, specifically after 1993. Their findings also indicate that between 1974 and 1992, no partisan disparities were observed in Greece regarding the fiscal policies enacted by socialist and conservative governments.²

The rest of the paper proceeds as follows. Section 2 briefly summarizes the literature on partisan motives. Section 3 presents the main features of the Greek political landscape in the post-military dictatorship period and discusses the ideological evolution of parties and governments between 1974 and 2008. In turn, Section 4 attempts to assess the relationship between government ideology and fiscal/monetary policy instruments in the sub-periods 1974–1993 and 1994–2008. Section 5 provides an overview of the fundamental changes in the political landscape after 2008 and during the Memoranda era. Finally, Section 6 concludes the paper.

2. Partisan Motives and Economic Policy

In the context of ideological motives, Kirschen et al. (1964) were the first to show that economic policy is influenced by the ideology of political parties. Hibbs (1977) developed a model in which voters have heterogeneous preferences and parties have different ideological goals regarding unemployment and inflation. According to this theoretical perspective, and consistent with empirical evidence, left-wing incumbents exhibit a configuration of low unemployment and high inflation, while right-wing incumbents may exhibit a pattern characterized by higher unemployment and lower inflation. Alesina and Sachs (1988) provide some support for this idea by presenting a study that rejects the hypothesis that macroeconomic outcomes have been similar under Democratic and Republican administrations in the United States after World War II. In addition, Alesina and Roubini (1992) find evidence of temporary but not permanent partisan differences in output and unemployment, supporting the hypothesis known as rational partisan theory. According to this, the political orientation of the party in power systematically affects macroeconomic outcomes; however, this relationship between political orientation and macroeconomic outcomes is temporary and occurs only in the period following a change of government due to the probabilistic uncertainty about which party will win the election (see Alesina, 1987).

Another strand within the same literature has theoretically examined the effects of political ideology on fiscal policy in general and the choice of tax structure in particular (see, e.g. the contributions by Persson and Tabellini 1992, 1994; Lockwood et al. 1996; Haufler 1997; Winer and Hettich 2003; Lockwood and Makris 2006). The general conclusion from this body of research is that other things being equal, left-wing parties would prefer to tax capital income rather than labour income compared to right-wing parties. Moreover, governments that place a greater emphasis on the welfare of households at the bottom of the income distribution, which are usually associated with left-wing parties, should, other things equal, prefer higher income taxes and lower consumption taxes, given the regressive nature of the latter. With regard to the empirical investigation of the impact of political ideology on fiscal policy, the relevant literature has mainly focused on its effect on both the overall budget and the expenditure-tax mix. For example, Alesina et al. (1997), Cusack (1997), Kneebone and McKenzie (2001), Volkerink and de Haan (2001), Perotti and Kontopoulos (2002), Bräuninger (2005), Baskaran (2011), and Potrafke (2011), among others, find evidence that ideology affects various measures of the overall fiscal size as well as the composition of public spending. Moreover, Tavares (2004) and Mierau et al. (2007) suggest that ideology may play a significant role when governments are obliged to make decisions regarding fiscal adjustment which typically has recessionary consequences. In the same direction, Allers et al. (2001), Ashworth and Heyndels (2002), Reed (2006), Angelopoulos et al. (2012), and Osterloh and Debus (2012), among others, examine the effect of political ideology on the tax structure. The main message of the above studies is that left-wing governments are associated with both higher government spending and a higher tax burden, as well as a higher capital-labour tax ratio, relative to right-wing governments. Finally, according to Cahan et al. (2019), like their implementations of fiscal policy, left-wing governments tend to implement more expansionary monetary policies than right-wing governments (see also Schnakenberg et al. 2017).

3. The Greek Political Landscape during 1974–2008

The Third Hellenic Republic was established after a military junta (1967–1974), which led to the emergence of a completely new political landscape. The main political parties that emerged and governed between 1974 and 2008 were the centre-right ND and the centre-left PASOK (see, Nicolakopoulos 2001). These parties, which differed significantly from their predecessors in terms of structure, function, and programme, dominated the Greek political landscape during the aforementioned 35-year period (see, e.g. Kammas et al. 2024).

3.1 The ideological evolution of ND

On 26 September 1974, Konstantinos Karamanlis announced the formation of ND, highlighting its identity as a ‘new political movement’ distinct from the pre-junta National Radical Union (ERE).³ From the outset, ND had abandoned ERE’s passionate and simplistic anti-communism in favour of a more radical socio-economic policy, a liberal stance on civil rights and an overall more moderate approach to its political rivals. The party’s platform emphasized ND’s commitment to the need for economic development, but also to social justice (see Loulis 1981). In particular, according to ND’s ideological platform, state intervention in the economy should not be rejected out of hand, although the party was committed to the general principles of the free market economy. In May 1980, George Rallis (a moderate centre-right politician) succeeded Konstantinos Karamanlis in the party leadership, but he was defeated in the national election that took place on 18 October 1981. So, he was replaced at ND leadership by Evangelos Averoff, who steered ND further to the right, embracing ultra-conservative views and ideas reminiscent of the pre-junta National Radical Union (ERE). On 17 June 1984, ND experienced a new defeat in the European Parliament election, leading to the resignation of Evangelos Averoff.

On 1 September 1984, an internal party election for leadership occurred, and Konstantinos Mitsotakis, a centre-right politician, emerged victorious. Mitsotakis exerted considerable effort to instill a more liberal and centrist orientation within ND, a transformation that became apparent in February 1985 when he introduced a new ideological declaration titled: ‘A New Proposal for Freedom’. As outlined in this updated ideological manifesto, economic liberty was now asserted as the fundamental principle of the party's ideology, replacing the previous agenda of balancing order, social justice, and individual freedom that characterized the era of Konstantinos Karamanlis (see Alexakis 1998, 2020). In the June 1985 election, ND under the leadership of Mitsotakis adopted liberalism as its guiding principle, and the party consistently featured the prefix ‘liberal’ in its name (φιλελεύθερη).⁴ When the ND lost the 1985 election, this ideological reorientation was seen by a number of MPs and party members as the main reason for the party's defeat. In February 1986, at its second congress, the ND reaffirmed its ideological principles of radical liberalism, but this time there was an attempt to strike a balance between statist and liberal views. In the years that followed, the party placed great emphasis on promoting its social welfare policies, without abandoning its basic principles of reduced state intervention and the full operation of the free market economy, and eventually came to power on this platform between 1989 and 1993 (see Alexakis 1998, 2020).

Following the defeat of ND in the October 1993 election, Konstantinos Mitsotakis stepped down and the subsequent internal election resulted in the election of Miltiadis Evert as the new leader. One of the new leader’s first priorities was to organize the ND congress in April 1994, which aimed to reaffirm the party’s commitment to a more statist ideology. In addition, Evert sought to attribute the party’s electoral underperformance and decline in political support to the prevalence of neoliberal values within ND during the tenure of Konstantinos Mitsotakis (1984–1993). From this point on, it became clear that there were two major ideological factions within the party’s ranks: the Karamanlists (who remained faithful to the legacy of the party’s founder, prioritizing social justice and advocating state intervention) and the neo-liberals (who supported the ideological reorientation introduced by ND's 1985 manifesto) (see, e.g. Alexakis 2020). ND, led by Miltiadis Evert, lost the election in September 1996. Miltiadis Evert then resigned and in March 1997 Kostas Karamanlis (a nephew of the founder of ND) was elected leader of the party. In terms of ideology, Kostas Karamanlis made considerable efforts to broaden the party's appeal to a wider range of social classes. He vaguely claimed that ND was positioning itself as the party of the ‘middle space’ (μεσαίος χώρος), emphasizing its distance from any form of political extremism. Following this logic, a key element of ND's pre-election agenda during this period was the so-called ‘re-foundation of the state’ (επανίδρυση του κράτους), a concept with vague connotations that was perceived by the electorate primarily as a commitment to fight corruption in general, rather than to implement a specific economic policy guided by a clearly defined ideological position (see, e.g. Alexakis 2020).

We attempt to identify these changes in the ideological evolution of ND between 1974 and 2008 using data from the CMP, which provides estimates of party policy positions derived from election manifestos for over 1000 parties from 1945 to the present in over 50 countries on five continents. Related to our discussion above, we report the evolution of the variable Welfare state expansion (per504), which captures positive mentions in party manifestos of the need to introduce, maintain, or expand a social service or social security system. We also report in the Appendix evidence from the more general variable Welfare state, which captures positive mentions in parties’ manifestos of the need for social justice (per503) and the need to introduce, maintain or expand any social service or social security scheme (per504). In turn, we use the Economic orthodoxy variable (per414), which captures positive mentions in party manifestos of the need for economically sound government policies, reduction of budget deficits, and support for a strong currency. In addition, we report in the Appendix the variable Market Economy, which captures positive mentions in party manifestos of the free market and free market capitalism as an economic model (per401) and the need for economically sound government policies (per414). We also discuss in the Appendix the evolution of the variables anti-imperialism (per103) and Anti-European (per110), which capture negative references in the parties' manifestos to imperial behaviour and the European Community/Union, respectively. Explicit definitions, descriptive statistics, and sources of the variables employed throughout the analysis are provided in Table A1 in the Appendix. As can be seen in Figure 1, the Economic orthodoxy dimension remains relatively low during the period of (Konstantinos) Karamanlis, Rallis, and Averoff (i.e. 1974–1984). The same is true of the market Economy dimension in Figure A1 in the Appendix. In contrast, both dimensions increased between 1985 and 1993, when Konstantinos Mitsotakis was the leader of the conservative party and tried to bring a more liberal orientation to ND. This trend is reversed again during the periods of Evert and (Kostas) Karamanlis (1994–2008) where both of these aspects decline, while conversely, there seems to be a significant rise in the variables Welfare state expansion (Figure 1) and Welfare state (Figure A1).⁵ Finally, as can be seen in Figure A2 there are no significant mentions of anti-imperialism in the ND manifesto after 1977, and they disappear completely after 1989. The latter applies to the Anti-Europeanism dimension throughout the period.

3.2 The ideological evolution of PASOK

In September 1974, Andreas Papandreou announced the launch of PASOK as a new political force of the left, completely different from both the old parties of the Centre and the Centre-Left pole of the Greek politics in the 1960s (see Mavrogordatos 1983, 1997; Pappas 2009; Lyrintzis 2020). The party advocated a ‘third road’ to socialism, emphasizing national independence (withdrawal from NATO and the EU), popular sovereignty, and social liberation. These goals were to be pursued through a radical agenda that included the socialization of the means of production, the establishment of a robust welfare state, and major institutional reforms (see, e.g. Elephantis 1981; Lyrintzis 1984).⁶ However, as the 1981 election approached, PASOK adjusted its stance and projected a distinctly moderate image, abandoning the rhetoric of a ‘third road to socialism’ and instead advocating the ambiguous call for ‘Change’ (Αλλαγή). Euroscepticism and opposition to NATO were toned down, and the emphasis shifted to advocating essential reforms in every facet of public life (see, e.g. Lyrintzis 2020). Once in power, especially during the early period of Andreas Papandreou (1982–1989), PASOK implemented a series of policies aimed at consolidating its identity as a left-wing party representing the interests of the ‘underprivileged’. Indeed, it pursued policies based on measures of intense state intervention, the expansion of the welfare state, and the stimulation of demand, mainly through increases in pensions and salaries (Pappas 2009).

The election of Konstantinos Simitis in 1996 signalled a new phase in the history of PASOK. In the realm of ideas, Konstantinos Simitis made considerable efforts to distance the party from its previous Eurosceptic (or even anti-European) rhetoric, as well as from its populist practices of the past (see, e.g. Voulgaris 2013). In terms of its economic policy platform, PASOK adopted a strategy aimed at fulfilling the objectives set out in the Maastricht Treaty and pursuing Greece's entry into the EMU. This new policy platform has been described as the ‘modernization project’ (Εκσυγχρονισμός), which constituted the main ideology of PASOK between 1996 and 2004 (see, e.g. Voulgaris 2013; Lyrintzis 2020).

The ideological transformations outlined for PASOK can be identified also in Figure 1. More precisely, we observe that during the period of Papandreou (i.e. 1974–1996) Welfare state expansion remains at high levels, whereas the Economic orthodoxy is consistently close to zero. The same trends are observed in Figure A1 that exhibits the variables Welfare state and Market economy. At the same time, the anti-imperialism dimension in Figure A2 in the Appendix, which captures negative references in party manifestos to imperial behaviour and/or negative references to one state exerting a strong influence over other states, remains high during the first two decades of PASOK's existence. This characteristic seems to have changed after 1993 and certainly during the period of Konstantinos Simitis (i.e. 1996–2004). The same is true of the anti-European dimension, which tends to converge to values close to or at zero, as in the case of the conservative ND party.

3.3 Alteration in power and public policies

The ND, led by Konstantinos Karamanlis, governed between 1974 and 1981, winning two successive elections. In the first election after the restoration of democracy in 1974, the ND received widespread electoral support, reaching 54.4%, mainly due to Konstantinos Karamanlis and his role in the difficult transition from military junta to democracy.⁷ However, democratization coincided with a major international crisis. In 1974, the country's GDP fell by 6.4%, an unprecedented event in the previous decades of continuous economic growth. At the same time, inflation had risen sharply following the destabilization of the Bretton Woods fixed exchange rate system and the first oil crisis of the 1970s (see, e.g. Alogoskoufis et al. 1995; Alogoskoufis 2021).

The dominant international view of economic policy during the period under review was still the so-called ‘Keynesian paradigm’.⁸ The ND government operated within the framework of Keynesian orthodoxy, adopted a moderately expansionary policy to address the economic downturn (see, e.g. Voulgaris 2013; Kostis 2019). More precisely, it pursued a policy of relatively low primary public deficits (around 1.5–2% as a share of GDP until 1980) and a more generous income policy by increasing the real wages.⁹ State intervention in the functioning of the economy also became quite intense. Public ownership was expanded through nationalization and a number of public enterprises and organizations were created in the fields of energy, development finance, commercial property, and export promotion. In summary, ND's economic policy could be characterized as an attempt to treat the longstanding, structural problems of the Greek economy as if they were temporary. But it soon became clear that the problems ran deeper. In the new international environment, the Greek development model of the 1960s and 1970s was already obsolete (see, e.g. Voulgaris 2013; Kostis 2019).

PASOK won the election of 18 October 1981, ending the monopoly of power held by the conservatives since the end of the civil war (1949). The change of government went smoothly, demonstrating the maturity of post-dictatorship democracy in Greece. PASOK governed for eight consecutive years after a second electoral victory in 1985 again under the leadership of Andreas Papandreou. Economic policy during PASOK's first term was based on strong state intervention, extensive public sector activity, and stimulating demand mainly through consumption. Indeed, PASOK’s fiscal policy was highly expansionary, leading to significant budget deficits. The main directions of expenditure included salary increases for an expanding public sector workforce, financing the public sector that took on the burden of so-called problematic (i.e. insolvent) enterprises, and subsidies to local governments through which PASOK developed its party machine. The monetary policy of the period was also expansionary. In 1982, immediately after coming to power, PASOK introduced a substantial increase in the minimum wage in order to send out a clear ideological signal from the new government and in the hope of stimulating the economy through increased consumption.¹⁰

However, the generous income policy that was implemented and continued in the following years failed to stimulate economic growth. Growth rates remained weak throughout 1982–1989, and wage increases had a negative impact on productivity and the international competitiveness of the Greek economy (see, e.g. Alogoskoufis et al. 1995; Kostis 2019). By 1985, almost all macroeconomic indicators had deteriorated, while public deficits, debt, and inflation were out of control (Alogoskoufis et al. 2019; Alogoskoufis 2021). Facing a balance of payments crisis, the government was forced to seek a loan from the European Economic Community (EEC) and committed to changing its economic policy to stabilize the economy.¹¹ After the electoral victory in 1985, Konstantinos Simitis took over the Ministry of National Economy and implemented the first economic stabilization programme. This involved devaluing the drachma and imposing a two-year wage freeze, which led to a significant reduction in macroeconomic imbalances. However, in November 1987, Prime Minister Andreas Papandreou decided to abandon the stabilization programme and revert to a policy of increased public deficits, anticipating the upcoming 1989 election. In response, Konstantinos Simitis disagreed with this decision and ultimately resigned.

Konstantinos Mitsotakis led ND to victory in the June and November 1989 elections. However, despite the electoral success, the party faced challenges in forming a government due to the proportional representation electoral law (Electoral Law: 1847/1989). In April 1990, ND secured a third consecutive victory, capturing 150 out of the total 300 parliamentary seats. They subsequently established a single-party majority government, aided by the support of one MP from a smaller right-wing party called DIANA.¹² Between 1990 and 1993, the ND government pursued an economic policy aimed primarily at reversing the negative trends in macroeconomic indicators. To achieve this goal, it adopted both a highly contractionary fiscal policy and privatization initiatives, consistent with the principles of a more liberal economic policy. At the same time, to steer Greece towards the objectives of the Maastricht Treaty, the government formulated a medium-term convergence programme for the period 1993–1998. This programme was approved by the European Community in March 1993. However, the ambitious targets set were not met, either in terms of inflation (despite a significant reduction) or in terms of budget deficits and public debt. Additionally, the privatization efforts faced fierce resistance from workers and led to major conflicts between business groups, resulting in considerable political costs for the government (Voulgaris 2013; Alogoskoufis 2021). In parallel, the handling of the Balkan crisis, particularly the issue of the name of the new neighbouring state that emerged from the break-up of Yugoslavia and became officially known as FYROM, led to intense internal disagreements within the government and a sharp decline in political support. The ND government ultimately fell in 1993 due to the defection of some of its MPs who joined forces with Antonis Samaras, the former ND foreign minister (see, e.g. Alexakis 2020).¹³

PASOK’s return to power after the 1993 election marked the beginning of a new era of political dominance, which lasted until the early months of 2004. This period can be divided into two distinct sub-periods. The first lasted from the re-election until January 1996, when Andreas Papandreou resigned for health reasons. The second, from 1996 to 2004, can be called the ‘Simitis period’ because of the significant influence of the new leader of PASOK, Konstantinos Simitis. In terms of economic policy, PASOK's shift away from its previous Eurosceptic (or even anti-European) stance was notable. From the outset, the government pursued an economic policy aimed at fulfilling the objectives of the Maastricht Treaty and securing the country's accession to the EMU. It is noteworthy that this significant shift in PASOK's economic policy occurred as early as the first period of PASOK’s governance (1994–1996). In fact, it was Andreas Papandreou himself who, at the first cabinet meeting of the new government in December 1993, declared in dramatic tones that: ‘Everyone must fight, knowing that either the nation will eliminate the country’s over-indebtedness, or the over-indebtedness will eliminate the nation’. Based on this assessment, the government presented a revised convergence programme for 1994–1998. The previous programme, under ND's administration, had clearly fallen short of its goals. Approved by the European Council of Finance Ministers, the new convergence programme set the framework for PASOK's economic policy starting in November 1994.

The transition of leadership from Andreas Papandreou to Konstantinos Simitis within PASOK and the country occurred smoothly in January 1996, contrary to prevailing expectations that PASOK might struggle after the departure of its founder. Subsequently, in the September 1996 election, under Konstantinos Simitis's leadership, PASOK secured victory by promoting the ‘Modernisation Project’ (Εκσυγχρονισμός) agenda and prioritizing Greece's participation in the EMU as a national imperative (Voulgaris 2013). The national goal of joining EMU drastically changed the previous populist perception of economic policy and quickly produced encouraging positive results. Inflation fell from 10.9% in 1994 to 2.9% in 2004, public debt stabilized and primary government surpluses were achieved from 1994 onwards. The instruments used to achieve these objectives were mainly monetary and exchange rate policies (the so-called ‘hard drachma’ policy), fiscal measures aimed mainly at increasing tax revenues (without, however, significantly reducing primary expenditure), and social agreements on income policy (Alogoskoufis 2021).¹⁴ Finally, Greece joined the EMU on 1 January 2001 and replaced the drachma with the euro on 1 January 2002. Thereafter (already at the end of 2001), the implemented fiscal policy was loosened, once again following political-economic incentives.

In the 2004 election, ND, led by Kostas Karamanlis, won a significant victory with 45.36% of the vote share. Following the conclusion of the Olympic Games held in Greece in the summer of 2004, the ND government implemented a programme of ‘mild fiscal adjustment’ (ήπιας δημοσιονομικής προσαρμογής) aimed at containing the primary budget deficit, which had started to increase at the end of 2001. The combination of this ‘mild fiscal adjustment’ from 2005 to 2006 and the presence of low international interest rates ensured public debt stability until the summer of 2007. However, after the 2007 election—which ensured a new electoral victory for the ND—fiscal imbalances resurfaced and finally spiralled out of control in 2008. This was undoubtedly the result of the global financial crisis (and the ensuing economic downturn), but also of the government's expansionary economic policy aimed at stabilizing the economy.

4. Descriptive Evidence on the Evolution of Public Policies

This section provides a comprehensive graphical analysis of the evolution of fiscal policy from 1974 to 2008, complemented by evidence on monetary policy over the same period. We should emphasize that most of our fiscal data is sourced domestically, specifically from the National Statistical Service of Greece (ELSTAT). In addition, the fiscal data provided by ELSTAT focuses on the central government rather than the general government. The main reason for this is that until 2008, non-central government components used different accounting systems, which made consolidation with the central government difficult (see Hawkesworth et al. 2008). Although this consolidation was achieved after 2008, fiscal data for the general government are only available from 2006 onwards, while consistent and detailed fiscal data at the central government level are provided by ELSTAT for the period between 1974 and 2008. Since we want to discuss the evolution of public policies since the beginning of the Metapolitefsi, we choose the latter in the descriptive analysis that follows. As a result, fourteen out of sixteen fiscal variables that are obtained from ELSTAT (e.g. total expenses, primary deficit) refer to the central government, while the remaining two that we obtain from Bachas et al. (2023), namely, effective tax rates on labour and capital, are only available at the general government level. Diagrammatic evidence regarding the evolution of fiscal policy between 1974 and 2008 is displayed in Figures 2–4. Figure 2 shows the evolution of the size of the central government (total expenses and revenues) and the budget balance (total and primary deficit). Moreover, based on the economic classification of public expenses, which distinguishes between capital and current expenses, Figure 3 illustrates the evolution of components within current expenses, such as wages and goods and services, some of which experienced significant expansion during the period under consideration.¹⁵ In addition, Figure 4 provides a summary of the evolution of fiscal capacity (i.e. measures showing the ability to collect revenues), showing the percentage of direct-to-indirect taxes, and the capital and labour effective tax rates. All fiscal variables, except the effective tax rates, are calculated as ratios to GDP, whereas effective tax rates on labour and capital are scaled to their macroeconomic tax bases.

Finally, Figures 5 and 6 show the evolution of inflation and money growth, and growth and unemployment, respectively, over the period under review. The data for money growth were retrieved from the Bank of Greece (BoG) and data for inflation from the National Statistical Service of Greece (ELSTAT); data on GDP growth and unemployment rate were obtained from the World Development Indicators. It should be noted that the discussion of the money growth rate is limited to the year 2000, which coincides with Greece's relinquishment of monetary independence upon joining the euro area, while data on unemployment are available for the period after 1981, so our discussion of unemployment focuses on this period.¹⁶ In the presentation that follows we divide our analysis into the pre-1993 and post-1993 periods, because the signing of the Maastricht Treaty marks a political shift that imposes many common features on the two political parties that governed Greece during the period under study, namely the conservative party ND and the centre-left party PASOK.

4.1 The period 1974–1993

4.1.1 Trends in fiscal data

We begin the analysis by examining the evidence presented in Figure 2, which shows the evolution of the size of the public sector and the associated fiscal balance. As can be seen, while a public sector deficit is clearly evident during the pre-Maastricht treaty era, peaking in 1993, we can discern three distinct sub-periods corresponding to different government administrations. In the first eight years of our analysis (1974–1981) when ND was the ruling party, government revenue and expenditure as a percentage of GDP range around 15% and 19%, respectively, with no clear upward trend, except for the pre-election year of 1981. During the period when PASOK was in power (1982–1989), we observed a significant increase in government expenditure, which reached 29.2% of GDP in 1989, together with a slight upward trend in government revenue, which stood at 17.01% in the same year. Both contributed to the widening of the overall and primary deficits, which reached levels of 12.01% and 7.2% of GDP, respectively. The following period (1990–1993), when the ND was in power, shows an initial decline in expenditure, which quickly reverts to its previous trend, while revenues grew faster, but again at a much slower rate than expenditure, leading over time to an increase in an already high budget deficit.

According to Figure A3 in the Appendix, which decomposes total expenses into its capital and current counterparts, the expansion of the public sector seems to be driven by the latter type of expenditure. For this reason, in Figure 3, we delve into the evolution of the components that constitute current expenses. In particular, Figure 3 shows the evolution of all current expenditure components, ranked (from top left to bottom right) according to their contribution to the total current expenditure budget: public sector wages, subsidies, other current expenses, pensions, goods and services, and transfers. The first thing to note is a clear upward trend in the public sector wage bill, which was evident from the beginning of Metapolitefsi, peaking at 7% of GDP in 1990, during a very intense and prolonged pre-election period between 1989 and 1990, with three election campaigns. Instead, there is a marked decline in the government wage bill between 1991 and 1993, falling to around 6.1% of GDP. It should be noted that, until 1993, the Greek civil service was under direct political control; recruitment, transfers and promotions tended to favour those who supported the ruling party, in the complete absence of meritocracy (see, e.g. Lyrintzis 1984; Sotiropoulos 1996). Such patronage practices were partially curtailed after 1994 with the establishment of the independent Supreme State Council for Public Service Personnel Selection (ASEP), which was responsible for ensuring the correctness of the recruitment of tenured civil servants. Turning to subsidies, the story is somewhat different: there is already an upward trend in the period 1974–1981, with subsidies almost doubling as a percentage of GDP (from about 1.5% to 3%). The trend is much steeper during the PASOK years, with subsidies accelerating to around 6% of GDP. Instead, the trend is somewhat reversed in the 1990–1993 period, with subsidies falling back to around 5% of GDP. Other current expenses exhibit considerable variability, with an upward trend noted during PASOK's administration that extends into the second administration of ND as well. As far as pensions are concerned, it is worth noting that there is a (weak) tendency for pensions as a percentage of GDP to fall during the ND governments (1974–1981 and 1990–1993)—pensions at the end of their terms were always lower than at the beginning—and to rise during the PASOK governments. Finally, we do not observe any significant trend with respect to goods and services and transfers.

The descriptive analysis presented aligns with previous evidence indicating that left-wing governments tend to adopt more expansionary fiscal policies (see, e.g. Alesina et al. 1997; Volkerink and de Haan 2001; Perotti and Kontopoulos 2002; Angelopoulos et al. 2012; Potrafke 2011, 2017). Additionally, they are also inclined to implement higher taxes (more details on this point are provided below). Moreover, this surge in the public budget seems to be driven mainly by higher public sector wages, subsidies, and pensions (see, e.g. Baskaran 2011; Magkonis et al. 2021). Meanwhile, during the years of the ND government (1974–1981 and 1990–1993), a more pro-market and liberal party, public finances appeared to be more in order. The only feature of the data that seems to contradict this somewhat is the fact that budget deficits continued to rise during the last term of the Conservative government between 1990 and 1993.

Another aspect of the data that relates to government revenue is the measure of state capacity over this period. We proxy this in Figure 4 by the percentage of direct-to-indirect taxes and by the effective tax rates of labour and capital. Setting aside minor fluctuations, an intriguing aspect of the direct-to-indirect tax percentage is the distinct patterns it exhibits: a clear upward trend during the 1974–1981 period, a downward trajectory from 1982 to 1989, and a relatively stable level maintained between 1990 and 1993. This clearly indicates that in the early periods of ND ruling, much more effort had been placed on increasing the tax base of direct, personal income relative to other indirect taxes. Instead, during the 1982–1989 period we note that more emphasis was placed on increasing the tax base of indirect taxes relative to that of direct taxes.¹⁷ Obviously, the above-mentioned trends are not in strict accordance with the theoretical priors suggesting that left-wing governments, should, prefer higher income taxes and lower consumption taxes, given the regressive nature of the latter. However, when it comes to taxation, Greece stands out as a special case marked by high levels of income tax evasion. So, the introduction of more and/or higher indirect taxes, like the VAT, can be seen as an attempt to widen the overall tax base and distribute the tax burden more fairly.¹⁸

Next, according to the literature, left-wing ideologies tend to be associated more with increases in capital taxation and reductions in labour taxes (see, e.g. Angelopoulos et al. 2012; Potrafke 2017). Using data on effective tax rates on labour and capital in Figure 4, we can see whether the tax burden on the two main factors of production is correlated with government ideology. Our descriptive evidence suggests that it is only in the period 1985–1989 under the left-wing government of PASOK that effective labour taxation falls, and effective capital taxation rises. This trend is reversed for labour taxation under the conservative ND government between 1990 and 1993, although there is no clear pattern for capital taxation over the same period. To sum up, as far as taxation is concerned, we observe some patterns for the period 1974–1993 that are consistent with the ideology of the ruling party, such as the increase in indirect taxation during the PASOK government, but these patterns do not fully fit the ideological narrative.

4.1.2 Trends in monetary data

While government spending and taxation are much easier to fit into the government ideology framework and attract much more attention, the trends in monetary policy are also of interest. To explore this issue, we look at the annual inflation rate and monetary base (M0) growth rate, depicted in Figure 5.¹⁹ The period 1974–1981 is in the aftermath of two global oil price shocks and is characterized by high inflation rates (well above 20%) but in between inflation has been coming down, despite some degree of accommodative monetary policy, in line with the governing party ideology of the conservative party. The 1982–1989 subperiod is characterized by only a moderate reduction in the inflation rate and a slightly less accommodative monetary policy. Given that the global economic outlook was much more favourable in terms of inflation during this period, one would be tempted to argue that PASOK did, to some extent follow expansionary monetary policies, or at the very least they were not contractionary enough to bring inflation down to manageable levels. It is only after 1986 that we see signs of more contractionary monetary actions, something that was continued during 1990–1993—the latter being consistent with the ideology of the right-wing ruling party.²⁰ To better appreciate this finding, we should highlight that in 1982, the Currency Committee that was established in 1946 was abolished and most of its tasks were transferred to the BoG. This can be interpreted as a step towards establishing the independence of the central bank, but it was not enough to tame inflation. In fact, in the approach adopted, the government was responsible for economic/fiscal policy and the BoG for monetary and exchange rate policy. Thus, to a certain extent, the data seem to indicate that monetary developments in Greece during the period 1974–1993 are in line with the ideology of the government: conservative governments seem to be more effective in fighting inflation than centre-left ones (see, e.g. Schnakenberg et al. 2017; Cahan et al. 2019).

4.2 The period 1994–2008

We start our discussion of the second subperiod of our analysis, by looking at the evolution of monetary data first and fiscal data then. Our choice mirrors the fact that official monetary data stopped in 2000, a year after which the BoG became part of the Eurosystem. What we do observe in Figure 5 in the post-1993 period is a monetary policy that is less accommodative aiming at further reducing inflation: that was gradually achieved by 1999, when inflation reached a level of about 3%, where it remained until the end of 2008. Note also that this period coincides with an increasing degree of independence of the BoG, which was also reflected in the slowing inflation rate.²¹ One could therefore argue that the adopted monetary policy framework during this period clearly reflects the pro-market approach that gradually was adopted by PASOK, and the external policy constraints that were imposed by the EU institutions in the route to adopting the common currency, essentially continuing the more restraining policies that were initiated in the early 1990s.²²

Turning to fiscal data, Figure 2 illustrates a general trend of decreasing government expenditure (partly due to falling interest rate payments) and increasing total government revenue until 2001 under the PASOK government—part of this drop in government expense has been driven by the reduction in interest payments that took place, especially after 1997, reflecting the shift in fiscal policy.²³ This aligns with the discipline effect hypothesis, which posits that parties adopt conservative policy positions to reduce fiscal deficits and support economically prudent government policies (see Adam and Ftergioti 2019 for more details). This trend seems to have changed shortly after Greece became a formal member of the eurozone, a period that also coincided with the organization of the 2004 Olympics.²⁴ In fact, gradually after 2001 exogenous political constraints through the SGP did not seem to work as a discipline effect, as in general, we observe more expansionary fiscal policies, even under conservative administration between 2004 and 2008. This evidence indicates that government ideology (if present at all) does not seem to matter much in the evolution of fiscal variables during this subperiod.

Looking at the various components of current expenditure in Figure 3, it can be seen that public sector wages and subsidies are actually reduced in the period up to 2001, clearly reflecting the efforts of the Greek government to meet the criteria of the Maastricht Treaty as well as all the requirements of being part of the common currency.²⁵ It would not be an exaggeration to say that after being admitted to the major league, public sector wages and subsidies began to follow upward trends again. This trend stabilized for the public sector wage bill around 2004, but subsidies continued to increase until the end of our sample period. An interesting feature of the data is that both public sector wages and subsidies reached percentages of GDP, similar to those the country witnessed in 1990.

A last feature of the data that deserves some attention is the measure of state capacity over this period. We observe in Figure 4 again that the percentage of direct-to-indirect taxes clearly rises until 2001 and is stabilized in the period 2002–2008. The effective tax rates on capital and labour also reflect the shift towards direct taxes described above. For the period from 1994 onwards, there is a clear tendency for the effective taxation of both capital and labour to increase, with tax rates in 2008 being much higher than in 1994. However, there are two notable differences. While both effective tax rates increased over the period 1994–2000 (with the capital tax rate rising much faster), the effective tax rate on labour stabilized over the period 2000–2008, while the effective tax rate on capital showed a downward trend. Again, the point of change is 2001, when it became known that Greece would be part of the eurozone, and the euphoria that followed probably led to a looser fiscal policy. Note that this laxer policy continued under the ND government: government spending increased, and revenue collection (taxation) was somewhat restrained. Overall, as far as fiscal policy is concerned, the patterns we observe in the data over the period 1994–2008 are mostly affected by the central strategic decision of the country to join the Eurozone, and much less by the ideological origins of the governing parties.

4.3 Trends in macroeconomic data

Given our analysis of policy-related variables, a pertinent question arises: what has happened to the two key macroeconomic variables, output and unemployment? The short answer according to Figure 6 is that there are no discernible differences in GDP growth and unemployment trends under different party rulings during the period we studied. During the PASOK government (1982–1989), the average growth rate was about 0.79%, while under ND (1990–1993), it was around 0.55%. In contrast, the post-1993 period saw high and stable output growth, averaging 3.74% from 1994 to 2004 and 2.3% from 2005 to 2008. Regarding unemployment, there was a clear increasing trend from 1981 to 2004. The average unemployment rate was 6.91% during the PASOK government (1982–1989), increased slightly to 8.42% under ND (1990–1993), and further rose to an average of 10.74% during PASOK's second tenure (1993–2004). It then fell slightly to 8.74% from 2005 to 2008. We can therefore conclude that these two key variables do not exhibit variations linked to the ruling party, its policies, or its ideology, but rather fluctuate due to other economic factors, such as the phase of the business cycle at which the economy is, or how loose the economic policy is.

5. The Greek Political Landscape during and after the Memoranda Era

PASOK dominated the 2009 election, winning 43.92% of the vote and 160 seats in parliament. However, the honeymoon period for new Prime Minister George Papandreou was shorter than expected. Shortly after the election it emerged that the public deficit, initially estimated at 9.4%, was actually 15.4%. This in turn pushed up the cost of borrowing for both the public and private sectors to unprecedented levels, eventually leading to a sudden stop in capital flows.²⁶ The resulting unsustainable debt situation forced the government to seek assistance from the Financial Stability Mechanism, consisting of the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF), collectively known as the Troika, in March 2010. The first bailout package, which diagnosed the Greek problem as a short-term liquidity problem, was accompanied by economic reforms and austerity measures outlined in the memorandum. The proposed reforms faced strong opposition from trade unions, public dissatisfaction and negative media coverage, while the austerity measures led to widespread protests, demonstrations and strikes.

The crisis has had a significant impact on the Greek political landscape. Following the parliamentary vote on the first bailout on 6 May 2010, a new division of political personnel emerged, dividing MPs and political parties into supporters and opponents of the memorandum. This shift created a new political fault line that fundamentally reshaped the political cleavages and the rules of the political game. The political landscape saw the rise of new parties, largely influenced by the costs and opportunities of the new political environment. The two main components of the two-party system, PASOK and ND, suffered significant losses in terms of political personnel and electoral power during this period.²⁷ The parliamentary events of 13 February 2012 (the date of the parliamentary vote on the second bailout) came as a real shock to the two parties that had dominated the electoral landscape since 1974. A total of 45 MPs were expelled from PASOK and ND, each losing more than 20 MPs. The dissenting ND members formed a new populist right-wing party called Independent Greeks (ANEL), led by former ND MP Panos Kammenos. ANEL adopted a catch-all approach with nativist and nationalist ideologies in order to attract the conservative anti-Memorandum vote. At the same time, the majority of dissident PASOK MPs had joined the Coalition of the Radical Left (SYRIZA) led by Alexis Tsipras. Thus, when early elections were announced in April 2012, the Greek party system had very little in common with what it had been before 2009.

Two fundamental issues dominated the campaign leading up to the election on 6 May 2012. The first focused on punishing the political elites responsible for the crisis and its management. The second prominent issue revolved around the bailout agreements and austerity measures. PASOK and ND failed to secure a majority on these critical issues. Having been in power since 1974, they bore considerable responsibility for the economic collapse, patronage, and corruption in public administration. The election results, shown in Table A1, reflected the anger and discontent of the people. Greek voters essentially punished the two former main parties and supported the anti-Memorandum forces. PASOK and ND together received less than 33% of the vote and, contrary to expectations, failed to form a coalition government. The most notable results of the night of 6 May were undoubtedly the remarkable increase in SYRIZA's share of the vote (from 5.04% in 2009 to 16.79% in 2012) and the significant presence of ANEL, which received 10.62% and won 33 seats in the Greek Parliament. Obviously, this development revealed the presence of two different political blocs. One supported the austerity measures and the Memorandum Agreements with the international creditors (composed mainly of PASOK and ND) and the other (composed mainly of SYRIZA and ANEL) opposed them.

Negotiations to form a government ended in deadlock, leading to the announcement of new elections on 17 June 2012. The electoral law intensified the competition between New Democracy (ND) and SYRIZA, with both parties striving to secure the 50-seat bonus, thus increasing the polarization between the main representatives of the two blocs. During this campaign, SYRIZA maintained its anti-memorandum stance. In the end, ND emerged as the leading party and subsequently formed a coalition government with PASOK and DIMAR. SYRIZA, however, continued to increase its electoral strength, achieving an impressive 28.89% and becoming the main opposition party. Figure A4 in the Appendix illustrates the rising electoral strength of SYRIZA compared to the combined electoral strength of PASOK and ND, which declined over the same period.

From June 2012, SYRIZA was arguably the biggest beneficiary of the financial crisis. The shock of the crisis acted as a catalyst for its exponential rise. By investing in polarization and national populism, SYRIZA called for a change in Greece and Europe. Following this strategy, SYRIZA managed to win the election on 25 January 2015, increasing its share of the vote to 36.35%. However, it fell short of a majority and formed a coalition government with ANEL. In the immediate aftermath of the election, there was widespread public enthusiasm, while government officials made statements promising radical change. The political change brought back a heightened atmosphere of uncertainty and fragility around the Greek economy: bank deposits fell, tax revenues and the stock market declined, and government bond yields rose (see, Rori 2016). A series of contacts between European officials and the government soon revealed the gulf between their perceptions. The former insisted on sticking to the existing programme and urged Greece to resolve the issue of its extension, while the latter rejected the Troika's programme and demanded a new deal and debt relief. After five months of inconclusive negotiations and a highly polarizing referendum that divided Greek society, Alexis Tsipras made a 180-degree turn and accepted a new €86 billion bailout from the European Stability Mechanism for the next three years. In return, the agreement extended the fiscal adjustment and structural reforms of previous agreements and provided for extensive monitoring by the EC/ECB/IMF/ESM.

The lack of political legitimacy—as SYRIZA had been elected in January on an anti-austerity platform—and internal party divisions, which reduced the government's parliamentary support to just 118 MPs, gave Alexis Tsipras the excuse to resign and trigger another snap election. On 20 September 2015, SYRIZA won the election with 35.46% and 145 seats, and formed a coalition government with ANEL, with the main aim of implementing the memorandum voted by the Greek parliament on 14 August 2015. All in all, from May 2010 (the first memorandum) to the last parliamentary elections in 2019, Greece saw five parliamentary elections, two European elections, and a referendum, the latter of which threatened the country's continued membership of the eurozone. In this dense and busy political period for the country, two more bailout programmes were adopted. Taken together, these events created a remarkably dynamic political landscape that disrupted traditional patterns of electoral behaviour in Greece.

6. Conclusion

In this paper, we attempted to uncover the main features of the Greek political landscape and, in particular, to investigate whether government ideology has indeed influenced fiscal and monetary policymaking over the period 1974–2008. Two main findings emerge from our analysis. First, between 1974 and 1993, under the government of PASOK (1982–1989), there was a significant increase in government expenditure, leading to higher deficits. In contrast, public finances appeared to be more controlled under ND, although budget deficits still increased during its last term from 1990 to 1993. Wages, subsidies, and pensions were the main contributors to the increase in public spending, especially under PASOK. In addition, monetary policy reflected a more expansionary approach during PASOK’s tenure from 1982 to 1989. All these findings are consistent with the predictions of the literature that left-wing governments are more likely to pursue expansionary economic policies than their right-wing counterparts. Second, there are two trends in the post-1993 period that do not seem to be correlated with ideology. The first is observed in the 1994–2001 subperiod and concerns the gradual convergence of the parties' agendas towards almost identical policies and objectives, possibly due to exogenous political constraints. More precisely, from 1994 to 2001, both major political parties set Greece's entry into the EMU as the top national priority and aligned their political platforms with the objectives outlined in the Maastricht Treaty. To this end, we observe a general trend of decreasing government expenditure and increasing total revenue until 2001 under PASOK, in line with the discipline effect hypothesis. This trend shifted after Greece joined the euro area. After 2001, external policy constraints such as the SGP did not effectively enforce fiscal discipline, leading to a more expansionary fiscal policy, even under the conservative government in 2004–2008. This suggests that government ideology had little impact on fiscal variables during this period.

The Great recession saw the traditional two-party system of PASOK and ND crumble, with new parties like SYRIZA and ANEL rising. By 2012, Greek voters punished the ruling parties for their role in the crisis, significantly boosting SYRIZA and ANEL. SYRIZA's anti-austerity stance continued to gain traction, and by 2015, it had become the dominant party. This period of political turbulence included multiple elections and a referendum, fundamentally altering Greece's political dynamics. Overall, our findings highlight the importance of considering both domestic political dynamics and international constraints when analysing the relationship between government ideology and economic policy. Future research could extend this analysis to include the post-2008 period, particularly the impact of the financial crisis and subsequent austerity measures, to provide a more comprehensive understanding of whether partisan motives shaped to some extent economic governance in Greece.

Footnotes

References

Appendix