By
Jennifer Schonberger
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May 3, 2010
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Greece is in trouble. Last week, the debt-saddled country formally requested aid from the IMF and the EU. Though a bailout of the country seems likely, markets and analysts remain very nervous. Moody's and Standard & Poor's have downgraded Greek debt to junk status, yields on Greek bonds continue to skyrocket to new highs, and shares of Greek banks like National Bank of Greece (NYSE: NBG ) continue to trade with extreme volatility. Worse, Greece's debt woes have begun to spread.
Greece's crisis has many causes. But Daniel Kaufmann believes political corruption, one of the least discussed catalysts, could have played a large role in the country's woes. Kaufmann is a senior fellow at the Brookings Institution, author of the Kaufmann Governance Post blog, and the author of a new study that finds a correlation between fiscal deficits and corruption across developed countries. He maintains that bribery, nepotism, and cronyism, which are commonplace in Greece, could account for as much as an 8% decrease in Greece's GDP.
Kaufmann was formerly a director at the World Bank Institute, leading work on governance and anti-corruption. What follows is part one of our edited conversation.
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