Welcome

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.

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Disastrous Policies in Greek Tertiary Education

In an article that was published in Kathimerini newspaper on Sunday 4 June 2017, Harris Dellas, Amedeo Odoni, and Dimitri Vayanos argue that the situation in Greek universities keeps getting worse, and that the main problem is not ever-diminishing resources but bad governance. The problems with governance are similar to those in other segments of the public sector, and result in mismanagement and waste, as well as in a lack of performance incentives. Bad governance persists because this benefits interest groups—some academics and rectors as well as student representatives of political parties.  These groups undermined Law 4009/2011 (Diamantopoulou Law) which brought about significant innovations such as the University Councils. Education Minister Mr.Gavroglu seeks to completely abolish Law 4009/2011 and bring back some of the worst features of the previous system. The problems with the Greek education system increase economic inequality and hinder long-term growth. Reforms in education should receive more attention in the design of the adjustment programmes.

The article (in Greek) is available here. It is also pasted in the Greek section of our blog.

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Grexit is catastrophic for Greece

The Greek government reopened the discussion “euro or drachma.” The real question is not “euro or return to the drachma,” but “euro or Grexit.” Grexit to a new drachma is not a solution, it is a catastrophe.

14 Greek economists published this statement in eKathimerini on February 20, 2017. This is an english translation of the original statement in Greek, published in Kathimerini one day before.

Statement on Grexit 2017 English Final

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Towards a theory on the causes of the Greek depression and its implications for understanding the Eurozone crisis

Paul-Adrien Hyppolite

Paul-Adrien Hyppolite (https://www.linkedin.com/in/paul-adrien-hyppolite-71217ab4) is a graduate student in economics and a student-engineer of the Corps des Mines. His research focuses on international macroeconomics and finance. paul-adrien.hyppolite@mines.org @PaulAdrienHypp (https://twitter.com/PaulAdrienHypp).

October 10, 2016

The following text serves as introduction to the attached presentation summarizing the main findings of a research project on the root causes of the ongoing Greek crisis. Throughout the text,  there are references to the slides of a more detailed presentation.

 

Drawing on a new dataset [slides 7 to 21], I explore the sectoral dynamics of national wealth accumulation in Greece since 1997. I show that the Greek crisis can be best viewed as a balance of payments (or external debt) crisis driven by a real estate bubble and unsustainable foreign capital flows, rather than as a pure sovereign debt crisis. Thus, I depart from the conventional explanation of the crisis that focuses only on fiscal indiscipline. It is not a question of denying the fiscal slippage or even the role of fiscal issues in the run up to the crisis, but rather of highlighting the broader and endogenous macroeconomic dynamics that ultimately plunged the country into crisis.

Continue reading

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The euro’s leverage of competitiveness and its significance for the contrasting economic performance of Germany and Greece

Thanos Skouras, Professor Emeritus at the Athens University of Economics and Business revisits the notion of competitiveness with a view to its historical roots, draws a distinction between “essential” and “apparent” competitiveness, and applies the concepts to a discussion of Greece’s current predicament and reform programs. The full text is available in Greek, but here is a summary in English: Continue reading

Posted in General, Labour market, Macroeconomics, Political economy, Product market, Public sector productivity, Uncategorized | 1 Comment

Plus ça change, plus c’est la même chose

“The more things change, the more they stay the same”. Professor Georges Siotis, former member of the Task Force for Greece, writes on the poor track record on reforms and presents three examples of “win-win” reforms that never came to fruition.

He writes: There is no panacea to the Greek drama, but a route that would have been worth exploring is to identify reform areas that are “win-win” and that could deliver positive results over a relatively short time span. … To be “win-win”, a reform must be to the liking of the Principal and yield a positive cost benefit ratio for the Agent. In practice, the latter implies focusing on projects that involve few, if any, costs to local constituencies or vested interests. If these conditions are met, implementation could be closer to incentive compatibility. There are such reforms, but that have been partially (and often reluctantly) implemented, or not at all. I limit myself to mention three of them: the introduction of a well targeted Guaranteed Minimum Income (GMI), the development of a fully fledged export strategy, and cost effective, incentive compatible ways to close the VAT gap in the form of a Portugal like “VAT lottery”.

Read the text here

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Greece & Europe: Beyond the Financial Crisis

Gikas A. Hardouvelis (University of Piraeus) gave a keynote address at the Harvard University Center for European Studies in the 2nd Annual Summit on the Future of Europe (September 22-23, 2015), where he addressed two main questions:

  • Will the Euro Area survive the next economic crisis?
  • Will Greece be a member of the Euro Area over the next decade?

The two questions are interrelated, as the Greek crisis has laid bare the faults in the architecture of the Euro Area and forced policy makers to address some of those faults. You can read a summary of the speech, written by Hardouvelis, here.

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The Greek NPL Issue and a Possible Resolution Path

Andreas Koutras argues that the creation of an Asset Management Company or bad bank that would acquire most if not all of the 100 bn NPL would be advantageous to the Greek economy the Greek banking system and the society, provided, it is structured so as to minimise political influences and hazards. The AMC would operate for 15-20 years, allowing for a smooth work out of the loans and maximizing recovery rates. The cleaned banks would be recapitalised from the private sector. The proposal would cost less to European and Greek taxpayers and can be an engine of economic growth. Similar solutions have been applied to many countries the most recent in Italy and can be adapted to Greece.

Read the post.

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Is the Greek Crisis One of Supply or Demand?

Yannis M. Ioannides, Tufts University

Christopher A. Pissarides, London School of Economics and University of Cyprus.

The Greek crisis is more difficult than just fixing debt; Deeper reforms needed. 
Greece’s low productivity and competitiveness will hamper growth. Even if Greece’s debt were eliminated tomorrow, the Greek economy will still not grow substantially enough to catch up with the rest of Europe. Continue reading

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Could a Return to the Drachma Help Greece Regain its Competitiveness?

Vasilis Sarafidis (Monash University) recently posted an article discussing the thesis that a return to the drachma would help Greece regain its competitiveness. His main point can be summarized as follows.

The basic argument for returning back to the drachma is that the ability of a country with sovereign monetary policy to occasionally devalue its currency can help it regain its competitiveness in international markets. This article examines, with the help of time series plots, the effect of 3 distinct events of currency devaluation that took place in Greece during the period 1974 – 2001. It appears that currency devaluations have had only a small and short-lived favourable effect on the competitiveness of the Greek economy. By contrast, there exists a long term deterioration in the trade and current account deficits, which appears to be moderately halted in the short term through application of stabilization policies rather than currency devaluation alone. This is consistent with the popular view among economists that competitiveness is a structural feature of an economy and it mainly depends, among other factors, on the ability to exploit comparative advantages, which requires high productivity, business agility, skilled human capital, an efficient public sector that does not work to the detriment of the rest of the economy, and a fair and efficient tax system.

Read the post (in Greek) here.

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Capital Controls and Transactional Culture

Antonis Kotidis (Bonn Graduate School of Economics) documents that the recent imposition of capital controls led to an increase in the number of debit cards issued and in POS (point-of-sale) terminals installation. Although these developments are encouraging for the future of transactions efficiency and tax compliance, the available data on payments statistics over the entire period 2000-2013 shows contradictions in the transactional culture of Greeks and suggests only modest optimism.

Read the article here.

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