An institutional bailout plan for Greece

Greece’s bailout plan is failing to meet some of its key objectives. This article argues that the ECB/EU/IMF “troika” should be wary of focusing on short-term goals, such as monthly tax revenues and privatization proceeds, and instead strive for an institutional framework that will drive the long-term growth of the Greek economy. This applies both to the bailout plan’s design, where there is little reference to key areas such as introducing accountability in the public sector and strengthening the justice system, and to its implementation, where the government is pressured by the troika more for missed fiscal targets than for shortfalls in institutional reforms, e.g., opening up closed professions. The public is becoming increasingly aware that the absence of institutional reforms benefits only small minorities; hence, progress with these reforms will raise the bailout plan’s currently low popularity. Finally, progress with institutional reforms requires strengthening Greece’s public administration, where budget cuts and hiring freezes are making it hard to recruit talented individuals to help implement the reforms.

This article has been written by Elias Papaioannou and Dimitri Vayanos, and has been published on Bloomberg under the title “Greek lessons for Italy and Spain”. The full article here.

The article on the VoxEU blog here. A shorter version of the Bloomberg article in Kathimerini newspaper here. The article translated in Italian on the Lavoce blog here.

About D_Vayanos

London School of Economics

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