Abstract
The discussion on the causes of the Greek crisis has focused on the twin deficits: the fiscal and current-account deficit. The objective of this paper is to examine how the twin deficits came about implicating structural features of the Greek economy which contributed to the loss in competitiveness. The paper uses evidence on labor market outcomes and business demographics together with detailed information on product and labor market institutions to support the argument that these institutions played a role in the premature deindustrialization of the economy and in shaping a structure binding the economy to a low productivity level. These structural characteristics are related not only to cost elements but also to the capacity of the economy to deliver.
