Eleven prominent Greek academic economists, eight of whom are founding members of this blog, write about the Greek crisis. They argue that although the crisis has an important European dimension, its root causes lie in Greece and especially in the low quality of economic and political institutions. Given the low competitiveness of the Greek economy and its rising level of debt, a hard landing was unavoidable from the moment that access to capital markets was lost. The bailout plan made the recession less severe but not has much as it should have, partly because not enough emphasis was given to the implementation of structural reforms and that was compensated by more austerity. A Euro exit is now a real risk as many of Greece’s foreign partners become convinced that Greek society is unable to support a path of convergence towards the European core. The new government should have broad political support and show a strong commitment to remain in the Euro on the basis of the existing agreements. Otherwise, Greece is likely to default chaotically with dramatic consequences. A new government should embark urgently on a programme of reforms and on this basis keep reformulating the existing agreements over time, in the direction of promoting growth and reducing unemployment.
The article was published in Kathimerini newspaper on Sunday 3 June 2012, and was the first topic on its front page. It was also published in the blog www.protagon.gr. The summary of the Kathimerini article here and the full article here. The article at Protagon here.