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Commentary: The Five Stages of Greece

By James Solloway, CFA, Managing Director, Senior Portfolio Manager

Psychiatrist Elisabeth Kübler-Ross is best known for her theoretical model of The Five Stages of Grief, which holds that, when faced with a catastrophic loss, most individuals pass through five distinct emotional stages—Denial, Anger, Bargaining, Depression and Acceptance. Interestingly, Greece’s experience as a member of the single-currency eurozone appears to be following a similar trajectory. There was profound denial of the problems surrounding Greece’s long-term fiscal health as far back as the signing of the European Union’s (EU) Maastricht Treaty in 1992. There has been widespread anger at the discovery that Greece’s finances were in a worse state than believed, and at the austerity measures being demanded of Greece by the EU. Greece has been forced to bargain intensively with the EU and other parties since its troubles came to light, and the conditions imposed by those deals are now ushering in a period of economic depression.

Consistent with the Five Stages of Grief model, we believe that the ‘fifth stage of Greece’ will involve acceptance, by the troika and Greece and that the latter must depart from the single-currency union. We do not believe that departures by Greece or other periphery nations will lead to the collapse of the eurozone, however. As we noted in a December 2011 commentary, The European Union’s ‘Fiscal Compact’—More of the Same.

Download the full commentary (PDF)