The article provides a structural and political account of financial intervention in Spain, Portugal and Greece and examines competing explanations for financial liberalization. It focuses on the economic and political objectives underlying financial reform, and the costs and benefits for government, central bank, and the banking sector. It argues that financial liberalization was, to a significant extent a necessary prerequisite for the central banks' programmatic effort to achieve effective disinflation. This challenges the dominant arguments viewing financial liberalization exclusively within the framework of the European financial integration program or as a result of interest group pressure. At a subsequent stage, a stabilization strategy based on monetary austerity entailed the significant political advantage of allowing governments to avoid a more radical pace of fiscal adjustment. Both financial interventionism and liberalization displayed a state-driven policy pattern.

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Privatisation in Greece represented a reversal of the entire post-war and post-authoritarian interventionist policy paradigm. The privatisation decision resulted from pressures associated with the EC/EU and globalisation in general. The Simitis governments reactivated a privatisation programme comparable to that of ND in the early 1990s, but distinctly pragmatic in its reasoning, gradualist in its pace, and nonconflictual though unilateralist in its policy implementation. A central feature of the 'Simitis privatisations' was the flotation of successive minority stakes in public enterprises leading to retention of public control even though the government kept only a minority stake in the privatised enterprises. Privatisation was most far-reaching in the banking sector, with important broader implications for the entire economy. Despite the remarkably more favourable overall conditions under which the Simitis governments implemented privatisation as compared to the ND government in the early 1990s, privatisation policies continued to provide ad hoc opportunities for considerable sociopolitical opposition.

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The EMU fiscal adjustment paths of the four Southern Europe members (Italy, Spain, Greece, and Portugal – SE-4) vary along two dimensions: (a) cross-temporal pre- and post-EMU accession and (b) cross-country. We account for the cross-temporal variation by distinguishing between the ‘hard’ and ‘soft’ EMU conditionality of the pre- and post-accession stage. External constraints in the form of the Maastricht eligibility criteria constituted a significant common ‘push’ factor in the fiscal stabilization process of EMU candidate countries throughout the 1990s. However, their power does not necessarily lead to fiscal sustainability as demonstrated by the post-accession budgetary outlook of the SE-4. We account for the cross-country variation by introducing additional ‘pull’ factors related to the reform content, context and capability, such as unemployment, the level of social concertation, and government effectiveness. Only in cases where such factors were at work did governments engage in structural reforms to consolidate public finances instead of the less controversial path of macroeconomic policy reform.