The Detrimental Impact of Political Budget Cycles on the Greek Economy

Over the last fifty years, and more specifically during the period 1974–2022 known as the “Third Hellenic Republic,” Greece exhibits the pattern of severe political budget cycles, or electoral fiscal cycles, causing the country’s public debt to soar to unprecedented levels and possibly impeding its economic growth. In this paper, we aim to assess the impact of political budget cycles on the Greek economy. To this end, first, we quantify the effects of electoral cycles on the Greek actual budget balance, to evaluate the significance of political budget cycles on the accumulation of public debt in Greece in the post-1974 period. Secondly, we explore whether general or national elections affect the country’s GDP and estimate the extent to which this effect has played a stabilizing or a destabilizing role in the long-run evolution of the Greek economy.