Welcome

Posted on July 30, 2010 by The Reforming Economist

This blog publishes articles by leading academic economists on issues relevant to economic policy and reforms in Greece. The crisis in Greece is also a time of opportunity: ambitious reforms can be undertaken that will not only stave off bankruptcy, but also modernize Greece’s economy and raise the productivity and incomes of Greek citizens on a sustainable basis. The articles in this blog aim to offer constructive proposals and impartial analysis of potential, proposed or implemented reforms that are based on the principles of modern economics and on lessons from recent cutting-edge research.

The editors of this blog do not necessarily endorse the opinions expressed by other contributors to the blog, the agenda of any political party, or the views of those who link or otherwise refer to the blog and its contents. Comments that do not concern the ideas and arguments published in this blog, but consist of personal attacks will be deleted.

Posted in General | Tagged | 7 Comments

What is the best option for Greece? Stay the course? Declare bankruptcy? Leave the Euro?

Posted on February 19, 2012 by N_Economides

Nicholas Economides evaluates the options available to Greece: (A) accept the new agreeement with the lenders, receive €130 billion, and implement the PSI; (B) declare bankruptcy within the eurozone; and (C) decrare bankruptcy and leave the eurozone. He argues that option A is far better for Greece.

See Greek options assessment.

Posted in Banking and finance, Economic development, Europe, Macroeconomics, Public finance | Leave a comment

Nicholas Economides interviewed on Bloomberg on the downgrade of Eurozone countries by S&P

Posted on February 18, 2012 by N_Economides

S&P downgrades EU countries, Bloomberg TV interview January 13, 2012. In this interview, Nicholas Economides discusses the mass downgrade of EU countries by S&P. Although the countries’ downgrade was expected, the effect of the downgrade on the EFSF remains to be seen. Additionally, yields in Eurozone sovereigns have decreased not because of a reduction of risk but because of the half trillion euros of three-year loans given to banks by the ECB in mid-December 2011, which the banks use to buy sovereign bonds.

Posted in Banking and finance, Macroeconomics, Public finance | Leave a comment

Lets take the deal and reform: we can only gain from this

Posted on February 13, 2012 by D_Vayanos

In two articles published in Kathimerini on 12 February 2012, (a) Costas Meghir and (b) Michael Haliassos, Yannis Ioannides and Dimitri Vayanos argue that the incentives for the Eurozone to bail out Greece are waning as Italy is being shored up and a Greek default becomes containable. Greece should thus stop pretending it has any bargaining power, it should accept the latest bailout deal and should proceed with deep and carefully planned reforms.

The article of Costas Meghir here. An English translation is below. The article of Michael Haliassos, Yannis Ioannides and Dimitri Vayanos here. Continue reading →

Posted in Banking and finance, Europe, Macroeconomics | Leave a comment

Yannis Ioannides interviewed by Bloomberg, “Taking Stock with Pimm Fox,” Thursday February 9, 2012

Posted on February 10, 2012 by Y_Ioannides

In this interview,Yannis Ioannides expresses his opinion that the key issue for Greece is lack of competitiveness. Restoring competitiveness will take time because it requires deep reform of institutions and governmental decision making processes. This is only possible by means of the breathing room that funding provides. He believes that the negotiations that led to the latest proposed agreements would not have been possible without Lucas Papademos at the helm.

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Greece, the Eurozone, and the Debt Crisis

Posted on February 7, 2012 by Y_Ioannides

The text of this lecture reviews the origins and nature of the Greek crisis. While the loss of competitiveness that the country has experienced ever since accession to the monetary union is a central force in its current condition, there have been other also troublesome developments, such as slowdown in productivity growth, overconsumption, the lack of productive investments, a continuing tendency for the public sector to assume the debt of insolvent public corporations and inability of the country to modernize while experiencing increasing inequality and corruption. However, there are also issues with the design of the Eurozone itself, which are contributing to Greece’s having become a particularly vulnerable member of the Eurozone. The Greek experience is discerned in the experiences of other Eurozone countries.

A full set of slides is here: http://greekeconomistsforreform.com/wp-content/uploads/Ioannides-Presentation-Fletcher-Oct-28-11.pdf

 

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The PSI’s enigma—and a possible solution

Posted on January 18, 2012 by A_Koutras

The Greek government is currently preoccupied with solving the PSI (Private Sector Involvement) enigma. Bringing the PSI to fruition is a precondition for receiving the next tranche of bailout funds from the EU, which is necessary to pay the bond maturing in March. Failing this and in absence of an alternative it would be very hard for Greece to avoid a disorderly default with unpredictable consequences both for Greece and the rest of Europe. This article, written by Andreas Koutras, briefly reviews the decisions and history that led to the current impasse. It further proposes a modification to the PSI that could significantly improve the chances of success and could also give Greece the necessary breathing space to effect economic change. The proposal is within the realms of the EU council’s decisions and involves the voluntary sell back by the ECB of its holdings at cost and adding the option for private bondholders to exchange their holding for cash. This would greatly increase the probability of a successful PSI without endangering the government bond markets or risk contagion and default. Continue reading →

Posted in Banking and finance, Europe, Public finance | 3 Comments

Greek Economists for Reform comment on Greece’s priorities for 2012

Posted on January 1, 2012 by The Reforming Economist

For its New Year’s edition, Kathimerini newspaper asked Greek Economists for Reform to propose specific actions that Greece should take in 2012 to improve its economy.

Costas Azariadis and Yannis Ioannides urged Greeks to become more involved in civic society, including in the formation of new political parties, and to exert pressure for radical changes, including constitutional amendments to fight corruption and to ensure greater influence and political participation by women. The article in English, titled “Jolting Expectations,” is here.

Nicholas Economides argued that Greece should make every effort to stay in the Euro, and its priorities should be to fight corruption and tax evasion.

Costas Meghir argued that emphasis should be given on growth-promoting reforms, and he proposed specific reforms in the justice system and in the labor market. A fuller version of Meghir’s article, in English, here.

Dimitri Vayanos argued that fighting tax evasion should be an important priority and can be achieved by transferring tax assessment and collection from the Local Tax Offices and the Ministry of Finance to a new independent authority, with emphasis on productivity-based incentives and independence from political pressures.

Posted in Banking and finance, Europe, Justice, Labour market, Macroeconomics, Press, Public finance, Public sector productivity | 1 Comment

Two priorities for return to growth and prosperity

Posted on January 1, 2012 by C_Meghir

Costas Meghir argues that reforming the judiciary and the labor market should constitute priorities for structural reform in Greece.  The reform of the judiciary should focus on the time it takes to resolve commercial disputes as well as on the quality of judges and their ability to deal with complex issues. Hiring immediately from amongst the best lawyers offers an immediate way of dealing with the huge backlog of cases. In the longer term incentives structures backed with better pay should be put into place both to improve effort levels and to attract higher quality individuals in the profession.  The labor market regulations should be simplified and all workers should face the same regulations, irrespective of occupation. All mandated severance pay and restrictions on mass layoffs should be abolished.  Liberalizing the labor market also requires reforming the way unions work and making them much more accountable to the workers they represent in the workplace.  A well functioning judiciary is a key complement of such reforms because it mitigates the possibility of abuse and ensures that the few regulations are implemented. Together these reforms are key to creating a business friendly environment with suitable protection for workers and investors. Continue reading →

Posted in Justice, Labour market | 5 Comments

Prodigal Italy, Greece, Spain? A Letter to Northern Partners

Posted on December 28, 2011 by M_Haliassos

Michael Haliassos presents a key dilemma in the current debate regarding the future of the Euro: to prolong support of debt refinancing to countries in the periphery, so as to signal to markets that Euro membership is a one-way street; or to cut it off, so as to discourage other eurozone members from letting their finances get out of control in the future? He argues that the answer crucially depends on the way that northern partners perceive the prospects of citizens in the periphery to work hard and to be prudent with their finances. Recently available data on hours of work and on household net wealth levels suggest that basing this choice on preconceptions and stereotypes may be leading to counter-productive measures that put the eurozone at risk.
The article, originally written as Editorial for the Newsletter of the Center for Financial studies, appeared also in the German newspaper Frankfurter Allgemeine Zeitung (23.12.11) and in the Greek newspaper Kathimerini (24.12.11). The full text and Table in English here.

Posted in Banking and finance, Europe, General, Labour market, Macroeconomics, Press, Public finance, Public sector productivity | 1 Comment

Reinventing Greece

Posted on December 23, 2011 by C_Meghir

Costas Meghir argues that an important element of the Greek malaise is the credibility of Greek politicians and their long history of abusing their power by borrowing vast amounts and spending them to satisfy specific interests and a client-based political system. Their behavior is not a surprise to the student of political economy: politicians, like everyone else, act in their best interest. Constitutions and laws are there to align their interests as far as possible with those of the people they serve. Given the existential crisis of the Greek economy it is now an opportunity to reform the constitution to improve the credibility and incentives of the politicians. Meghir proposes a constitutionally mandated cap on the deficit of 3% and on the debt to gdp ratio of 60%, following a suitable period of adjustment and the necessary restructuring of the debt. He also proposes the abolition of all immunity from prosecution of all government ministers and all members of parliament.

The article appeared in Kathimerini newspaper on Sunday 11 December 2011.

Posted in Justice, Public finance | 1 Comment