1. Introduction
The 2008 global financial crisis (GFC) that began in the US housing sector mutated into a sovereign debt crisis and economic depression for countries in southern Europe, threatening the very existence of the Euro zone. The translation of the financial crisis into a sovereign debt crisis was specific to Europe and did not happen in the USA, UK or Japan. After the GFC, the government budget deficits in the South increased due to automatic stabilizers, as part of countercyclical policy or because of bank rescue measures, thus increasing the government debt to GDP ratios. From 2007 onwards the spreads on government bond yields of Greece, Ireland and Spain increased gradually until in 2009 Greece revealed that it had failed to meet its public debt targets. This sparked a crisis of confidence in sovereign debt which spilled over to Spain, Portugal and Ireland where public deficits were high and ultimately led to the shutting down of access of governments to private financial markets. Emergency lending facilities (EFSF and EFSM) had to be established. The following bailout packages entailed policies of austerity and structural reforms imposed by the Troika i.e. the European Commission (EC), European Central Bank (ECB) and the International Monetary Fund (IMF). Throughout southern Europe this led to a deep recession and further real GDP losses. The unemployment rate in the South remained as high as 20% in 2016. While the political narrative of the troika institutions has remained that the crisis was a result of fiscal irresponsibility on the part of southern countries, thus imposing stricter austerity measures, the scholarship in comparative political economy has tried to identify the underlying economic causes of the sovereign debt crisis and the specificities of the capitalist economies that led to it.
