The lessons of the debt crisis in the Eurozone, emphasizing on the Greek case, is examined in a survey of the European Commission’s Economic Affairs general directorate.

The survey, conducted by professors M. Argyros and A. Kontonikas, is a 47-page document, examining five basic issues: which were the reasons why spreads rose in Eurozone states after the financial crisis began in August 2007, while Greek spreads grew dramatically in November 2009, why Greek spreads rose so much compared with other regional countries and whether the Greek crisis expanded to other Eurozone economies. Finally, what is the role of speculation in the CDS market.

The conclusions of the survey say that in contrary to what was happening before the crisis, during the crisis markets changed their attitude evaluating both international risks and macro-economic fundamentals of each country. The Greek crisis is the result of worsening macro-economic data in the period 1999-2009 and a change of private investors’ expectations. The country suffered from the transfer from a status of fully credible commitment in participating in EMU to a status of non-full commitment in EMU without any fiscal guarantees. This change was the cause of a rapid worsening of the debt crisis in Greece since November 2009 and a rise in Greek yield spreads. The survey concludes that Greece suffers from problems of confidence and its public finances. The survey also noted that the Greek crisis spread to other Eurozone states, such as Portugal, Ireland and Spain.

The Commission noted there were no evidence that speculation in the CDS market was a cause of the debt crisis in the Eurozone, without this meaning that there was no speculation in the market. The survey concluded that a marked improvement in fiscal condition and competitiveness was a precondition for a de-escalation of yield spreads in Eurozone states, while these states should improve investors’ expectations over their economic outlook.