Although Greece’s GDP per capita increased during the boom period, approaching the EU average, the institutional gap relative to the euro area did not narrow. Thus, Greece continued to lag significantly behind its euro area partners in various indicators of governance and structural competitiveness.
The sharp deterioration of the fiscal and macroeconomic environment in 2008 and 2009, and the subsequent downgrades of sovereign debt and rising sovereign spreads, cut off the Greek sovereign and banks from international capital and money markets. Substantial deposit withdrawals and extremely tight liquidity conditions put strain on the banking sector.