Fiscal Deficits and the Role of Fiscal Governance: The Case of Greece

What really went wrong with Greek public finances? This paper evaluates the evidence from the decade preceding the outbreak of the fiscal crisis in Greece shedding some light on specific factors behind deviations from fiscal plans. It explains that Greece only partly fits international evidence on the economic, political and institutional determinants of fiscal forecast errors. The weak domestic institutional budget framework emerges as the main reason for weak fiscal performance, while inconsistencies in the forecasts of international organisations place the effectiveness of their monitoring under question. In this light, the paper puts forward some ideas for improving the domestic institutional framework for conducting fiscal policy in Greece and briefly evaluates some relevant recent government initiatives.