Stories, Fables, Parables, and Myths: Greece and the Euro Crisis, Toward a New Narrative

Abstract

The debt crisis in the Eurozone has generated an intense academic debate about the appropriate policy response to the crisis. At the same time, the general public hears a variety of stories about the crisis, and especially stories about the debt crisis in Greece. This paper deals with the economic significance of stories, in particular with the importance of the Greek "morality tale." Stories are powerful in influencing public psychology, and they can affect the economy through fluctuations in confidence and "animal spirits." The paper considers the development of the Greek story through a web of related stories, fables, parables, and myths. It argues that the story dramatically distorts the reality of the debt crisis in the Eurozone and poses a threat to the global economy through its adverse effects on confidence and "animal spirits." It concludes that Europe needs not only a new policy direction, but also a new narrative about the debt crisis.

Keywords:

• austerity
• debt crisis
• expectations
• fiscal consolidation
• monetary integration
• stories