From “combined-but-not-unified” to “integrated isolation” - Greek banking in Europe 2010–2015

Abstract

Between 2010 and 2015 Greek banks received capital injections as part of an EU-led rescue package that left the Greek state with large losses on their investments and a debt to repay; in the most acute moments of the crisis the European central bank twice forced the Bank of Greece to assume sole responsibility for any losses on lending to Greek banks, and; in 2015 Greek banks were subject to EU-mandated controls that restricted the transformation of Greek bank deposits into Euros in other forms. Why did European banking infrastructure leave the Greek state facing losses and liabilities alone, while still full members of the EU and Euro Area (EA)? We find that European banking infrastructure is combined-but-not-unified, and that integration requires both. Drawing on Marxist political economy we examine the financial mechanisms in detail and find a scalar split in state provision of banking infrastructure in the EU/EA. At the supranational level, the removal of barriers to cross-border banking and a common rule book. Meanwhile, promises of monetary support, such as deposit guarantees and lending of last resort have largely remained the responsibility of nation states. The combined-but-not-unified structure ensured that when crisis struck, Greece was isolated, yet still fully part of the EU/EA.