The severe economic crisis of Greece has tested the limits of Greek democracy and revealed a crisis of governance. Social protest has challenged legitimate political institutions, while a new polarized multiparty system has emerged. The causes of these trends are related to the impact of the economic crisis and to a combination of low-quality democracy and extended income inequality, which, in turn, stem from the longer-term deficiencies of the democratic regime that emerged after the fall of Greek Colonels from power (1974). Deficiencies include the intrusion and replication of party competition in all administrative and social institutions, the capture of public policy sectors by strong interest groups, and an ineffective welfare state that protects a limited number of ”insider” groups.