The Politics of Tax-Break: Contested Legitimacies in the Fiscal Evolution of the State in Greece

During the last five years, the Greek state is plunged in an ongoing fiscal crisis. Many scholars attempted to offer a solid explanation on the propensity of the Greek state to produce overwhelming budget deficits by adopting a variation of the argument deployed in the Electoral Budget Cycle literature. In this vein, rent-seeking politicians exploit fiscal policy tools in the electoral periods accelerating inflation and expanding public deficits in order to woo voters. Normally, during the post-electoral periods the governments attempt to tame the latter. In the Greek case, however, taming is difficult, according to the literature in question, since the political system’s populist dynamics inflate expectations pushing, thus, the successive governments over the fiscal cliff. Taking issue with this approach, the proposed paper offers an account of the current fiscal crisis of the state in Greece from the vantage point of new fiscal sociology. The primary focus is to discern the evolutionary pattern of the fiscal institutions in Greece after the Second World War. Having established the key junctures of this evolutionary pattern, the argument will be put forward that this latter is characterized by the succession of two separate fiscal regimes. The first fiscal regime was based principally on craftsmen, merchants and self-employed and its main fiscal contours were tax breaks and low-level social expenditures. The second fiscal regime begun to emerge in the late 1970s and its social basis included mainly wage-earners. This regime was prone to high levels of social expenditures, however their financing became all the more cumbersome since tax-break remained to a large extend the principal fiscal policy tool. This institutional “stickiness” resulted in an evergrowing structural gap inside the fiscal cycle.