Drawing on Minsky’s theoretical framework, we critically assess the effectiveness of the currently implemented fiscal austerity measures in the Greek economy. We develop and apply two indexes that encapsulate the financial fragility in the public sector and the macroeconomy. The statistical evidence suggests that over the last 5-6 years prior to the onset of the crisis the public sector was situated in the ultra-ponzi area and the financial fragility of the Greek economy was steadily increasing, making the economy extremely vulnerable to potential shocks. We show that the fiscal austerity measures do not produce a substantial decline in the financial fragility of the public sector; they also set the stage for chronic financial instability in the economy. We call for a fundamental change in the policy mix currently implemented in the Greek economy
