Theodore Katsanevas
Abstract
In this
paper it is argued that, in an economy with heavy loans such as Greece Greece Greece
2023 and 2060. No country in the world can survive under such a heavy burden of debt obligations. It is argued that, even a country with heavy loans such as Greece, can succeed growth by imposing structural reforms such as sweeping impediments of labor, goods and service markets, breaking business and union monopoly power, make it easy to fire unwanted employees, removing regulations, red tape and licensing fees, privatizing state assets, increasing taxes and suppressing pensions etc. This is nothing but a totally false hypothesis. It has been illustrated in research that, structural reforms may provide in the long run a yearly growth of a little over 1% . It is also found that, they do not increase output during a crisis and they might have negative effects in the medium run. Thus, in the case of Greece, only deep cuts and restructuring of the debt (as with the German debt in the London 1953 agreement), accompanied with Grexit, development policies, efficient state management and reasonable structural reforms, may lead to the way out of the crisis and to growth.
2023 and 2060. No country in the world can survive under such a heavy burden of debt obligations. It is argued that, even a country with heavy loans such as Greece, can succeed growth by imposing structural reforms such as sweeping impediments of labor, goods and service markets, breaking business and union monopoly power, make it easy to fire unwanted employees, removing regulations, red tape and licensing fees, privatizing state assets, increasing taxes and suppressing pensions etc. This is nothing but a totally false hypothesis. It has been illustrated in research that, structural reforms may provide in the long run a yearly growth of a little over 1% . It is also found that, they do not increase output during a crisis and they might have negative effects in the medium run. Thus, in the case of Greece, only deep cuts and restructuring of the debt (as with the German debt in the London 1953 agreement), accompanied with Grexit, development policies, efficient state management and reasonable structural reforms, may lead to the way out of the crisis and to growth.
( This paper was presented in the ICABE scientific Conference in Sofia,Bulgaria, 28-29 Oct., 2017 and published by the International Journal of Economics & Business Administration (IJEBA), 2016, vol. IV, issue 3, 19-35)
Introduction
During the post war period,
Histogram I
Average Annual Growth
of GDP in Greece
world
world
Source : World Bank, The
Global Outlook, 2016. Own elaboration of
analytical data of all countries
internationally. Latvia and Lithuania Greece , Italy , Portugal ,
Spain and Ireland
It is
argued that the Greek debt has been inherited from the past as a result of bad
and corrupt state management. Yes, part of the blame may be related to the
malpractices of the Greek political system. But we must not forget that, the
same political system, more or less also to be found in many other countries,
existed also in the past during the previous 150 years of the drachma years.
Although there were several economic crises and bankruptcies in the country’s
economic history, (Deo S., Donovan P. & Hatheway L.2011), as in many other countries (Deo S., Donovan P. & Hatheway
L.,2011). No one remembers a deep and long catastrophe like the one witnessed
today. Moreover, in the same declivity
trend, although to a lesser extent, Greece
is followed by Italy , Portugal , Spain ,
Ireland
Histogram
II
Evolution
of the Greek debt as a percentage of the GDP
Source
: Eurostat
Histogram III
Evolution of state debts in Greece , Ireland ,
Portugal , Italy , Cyprus ,
Spain
 |
Gr Ire Port It Cy
Source
: Eurostat
This widely spread saying that the Greek debt has been inherited from the past isa cunning
myth. According to Eurostat data, the debt as a percentage of the GDP, has
almost doubled after the 2008 during the euro zone years. (Histogram II). In
other words, the Greek debt created during the euro zone years, almost equals
the total debts of the past 150 years ( which have been going through cuts and
restructuring, an arrangement not accepted within the euro). There is also
another important point. If the Greek debt was enormous as said before the year
2002, how could Greece
Moreover, in accordance with Eurostat data, the debt as a percentage to
the GDP was more or less doubled in other peripheral countries between 2008-2015. Apart from Greece where it jumped
from 120% to 181%
of the GDP, in Ireland climbed from 47% to 89%, in Portugal from
82% to 149%, in Italy from
112% to 157 and in Cyprus
from 55% to 110%. Above all in Spain
Histogram
IV
Estimations
for the distribution of euro loans to Greece
Source
: European School
of Management and Technology, Berlin
The debt trap is destroying the Greek
economy and keeps the country under an economic and political occupation. New
loans are given to the Greek government so as to pay older loans and this has
no end. In May 2016, the European School of Management and Technology (ESMT)
based in Berlin, published a research report providing a descriptive analysis
of where the Greek bailout money went since 2010 (Rocholl,A.Stahmer,A. ESMT, 2016). Out of
the 220 billion euro disbursed to Greece since the beginning of the economic crisis about 95% (210,3 billion euro ) has gone
mainly to German and French banks and less than 5% (9.7 billion euro) went into
the state budget for the benefit of Greek citizens (Histogram IV). More
analytically, apart from the above sum of 9,7 billion, 86.9 billion euro
(46,67%) of the bailout money went to repay old debts, 52.3 billion euro
(28,08%) for payment of interest, and 37.3 billion euro (20,03%) for the
recapitalization of Greek Banks. In the latter case, this was necessary because
of the large escape of capital abroad - a fact also related to the malfunction
of the euro zone.
These
findings were assumed and discussed but few knew as a fact, yet now they are
confirmed by the above verified study. As stated in the same study, “for six years there are attempts to stop
the Greek crisis with tougher measures and loans that require new loans to pay
back the older ones. The cause of the failure is less in the side of the Greek
government and more in the design of assistance programs. These calculations
are raising doubts about the proper design of assistance programs, since the
loans serviced debts, although Greece
The economic deadlock
The Greek GDP has fallen more than
25% since 2008, and this dramatic drop has no parallel in length in history
(Histogram V). Moreover, the Greek households lost 40% of their wealth between
2009-2014. (Charalampakis,E. 2017). Greece
Histogram V
As a result
more than 500.000 Greeks, most of them young, emigrated abroad in the last five
years. All economic indicators (GDP,
unemployment, investments, industrial production, construction, etc), move with
a monotonous downward trend (The World Bank Factbook, 2016, IMF Economic
Outlook, 2016, ELSTAT).
Inflation
moves at a negative pace of 1-2% and this is extremely negative for growth and
the burden of debts. Not only the public, but also private debts have increased
dramatically. More than one in two businesses fails to service their loans, tax
and insurance obligations. Overall arrears to the Greek Income Revenue Service
(IRS) are growing sharply now surpass 215 billion by mid 2017, that is 120% of
GDP. More than half of the total of 5.8 million taxpayers owe to the IRS. Many
millions of debts are also owed to businessmen and pensioners by the State
which always postpones its payments obligations so as to present a better
budget. The only positive sign was the equilibrium and/or the surplus in the
State budget and the balance of payments, mainly due to the deep drop of
imported oil prices and large cuts in public expenditure, which turn leads to
more recession.
Continuously expanding is the number
of uninsured citizens and entrepreneurs. The pension funds, wounded with the
haircut of their reserves from the PSI in 2011, are sinking (Bevan 2012). Their
deficits are growing sharply and this results to huge cuts in all kinds of pensions.
The economy is drying up and contracting all the more. The extreme recession policies, the huge
levels of unemployment, the excessive compression of labor rewards and of
pensions, are both inhumane, and uneconomic. They lead to a large drop of
domestic demand with dangerous economic and social consequences. Recession creates more recession lowers the
business circle and the tax base. Poverty creates more poverty, misery, hate
and upheaval. Loans lead to more loans and dependency – a perpetual cycle[3]. Mainly due to the overvalued euro, the lack of currency liquidity and
the high interest rates of loans for business transactions, the country’s poor
competitiveness is dying. Recession
cannot be beaten with more recessionary policies, an overvalued currency and
without a generous development plan (Krugman, 2012). Over the long term, this
is burdensome to all, even for Greece
The negative influence of the euro
Τhe overvalued euro is a costume that does not
fit peripheral economies based on labor intensive economies. It mainly favors
countries that create high technology and innovation products, those with
capital and technology intensive economies. For instance, when a product such
as a new effective medicine safeguards its patent and cannot be copied for at
least 20 years, its production cost may be trivial, but its sale price is
extremely high. This allows for an absurd profit margin, since the labor and
raw materials cost is significantly low. A modern magnetic resonance tomograph
for example, one made by Siemens, is so expensive because its purchase is
considered necessary in the global market. This is true for its spare parts and
maintenance as well. Conversely, Greece
Moreover, the cost of living in neighbour countries is much lower. In other words, the
purchasing power of 25 euro in Greece
corresponds to 12-15 euro in Turkey
or Bulgaria Bulgaria Bulgaria Albania ,
FYROM, Bulgaria and Turkey
The extreme policies of the Eurogroup
Every year, successive Greek
governments, the European Commission, the IMF, announce optimistic forecasts
for the future trends of the Greek economy. These forecasts, also called as
“the success story”, are always refuted in the end. The IMF accepted that it
was wrong with its initial predictions concerning mainly the country’s
multiplier (I.M.F., 2013, Spiegel & Harding, 2013, Blanchar,2015). Yet, the
lesson was not learned. Under Berlin
«The Eurogroup welcomes the commitment of
Greece to maintain a primary surplus of 3.5% of GDP until 2023 and
thereafter a fiscal trajectory that is consistent with its commitments under
the European fiscal framework, which would be achieved according to the
analysis of the European Commission with a primary surplus of equal to or above
but close to 2% of GDP in the period from 2023 to 2060. The Eurogroup
concluded that debt sustainability should be attained within the framework of
the debt measures envisaged by the Eurogroup in May 2016. In this regard, the
Eurogroup recalled the assessment of debt sustainability with reference to the
agreed benchmarks for gross financing needs: GFN should remain below 15% of
GDP in the medium term and below 20% of GDP thereafter so as to ensure that
debt remains on a sustained downward path.»
The debt trap was thus completed and the
country is seemingly held under a modern economic occupation for the next 43
years. With this Eurogroup decision, (which was a prerequisite for a necessary
new loan of 8 billion euro for the payment of precious loans), Greece Greece
but even by prosperous states like Sweeden ,
Germany
This combined with the ever more extreme
austerity measures policies imposed by the Eurogroup, will lead to further
shrinkage of the economic cycle and to deeper recession. It is an undeniable truth that Greece
The German debts to Greece
On February 23 1953, the London Germany Germany Germany Germany Germany Greece
Today, these remedies-compensation, are
estimated by the Bank of Greece at 108.43 billion euro, without interest. The
occupation loan, amounting to 3.5 billion dollars, is estimated at 54 billion
euro, without interest. In accordance with other estimates, these amounts are
much larger, even higher than 160 billion euro in current prices. As foreseen
in the agreement, part of the debt and war compensations would be paid to Greece with the reunification of Eastern and Western Germany . When the German Union integrated into a
single state in 1990, the conference agreed by the London Agreement on this
issue, never took place. Germany Germany Europe
instead would be infinitely more preferable.
Professor Albert Ritschl of the London
School of Economics in an outspoken interview to Spiegel[5] points out that “Germany Greece Germany Greece
Wolfgang Schäuble, the German Minister of
the Economy was asked why he insists on imposing very hard economic burdens
upon Greece , while Germany
The myth of structural reforms
Dani Rodrik (2015) describes structural
reforms as improvements in regulation and institutions to enhance efficiency
with which markets operate, reducing transaction costs of market activity,
product and service markets: licensing fees and other costs, labour markets:
hiring/firing costs, reducing entry barriers, eliminating monopolies, enhancing
the role of private sector over government, improved public sector
administration, e.g., tax collection, rule of law. According to the OECD,
labour market structural reforms include: (i) simplification of dismissal
procedures, (ii) increased flexibility in working-time regulations, and (iii)
enhancing firms' wage-setting flexibility. Examples of product market
structural reforms consist of: (i) privatisation programmes of state-owned
enterprises, (ii) stricter competition laws, and (iii) removing barriers to entry
in professional services.
A common definition of structural reforms
includes the modernization of public administration, the effective management
of the wider state, the abolishment of professional labour and market
privileges and monopolies, the promotion of innovation, the proper treatment of
tax evasion, the widening of tax base, privatization, deregulation and
liberalization. A wider interpretation of the term however includes deep cuts
in pensions, wage, incomes and labour conditions. The European Commission which
strongly supports structural reforms, relates them with a wide range of
measures including actions to promote growth and create more jobs, fiscal
responsibility, investment and structural reforms and in particular:
- make labour markets more
adaptable and responsive
- liberalize service sectors,
boost competition in product and service markets, specific sectors, or
improve overall business environment
- encourage innovation
- improve the quality of public
taxation systems
- address the challenges of
population ageing on the welfare state.
Behind such well written sentences, lies
the wider interpretation of the term, pointing toward pension and wage cuts, as
well as including the abolishment of basic labour conditions. The neoliberals
insist that, structural reforms tackle obstacles to the fundamental drivers of
growth by liberalising labour, product and service markets, thereby encouraging
job creation and investment, improving productivity, boosting the economy’s
competitiveness, growth potential and adjustment capacity. The euro zone
supporters are in love with this hypothesis. They insist with passion
that, structural reform is the only key
to growth and prosperity. So Greece
Histogram
VI
Change
in OECD responsiveness to structural reforms recommendations
Source
: OECD and David Pothier, (2014)
Every program imposed upon the Greek
economy by its creditors since the financial crisis in 2008 has been held
together by a central conceit: that structural reforms, conceived boldly and
implemented without slippage, would bring about rapid economic recovery. The
European Commission, the European Central Bank, the International Monetary
Fund, all anticipated that fiscal austerity and structural reforms would result
in a compensatory boost to the Greek economy. For the last eight years, Greece Greece
Several studies concerning the outcome of
implementing structural reforms around the world—particularly in Latin America
and Eastern Europe since 1990—have shown very
poor results. It has been found that, privatization, deregulation and
liberalization typically produce growth in the longer term at best a little
over 1%. (Bouis and Duval OECD (Buis, R, et al ( 2012). In the short-run,
effects are often negative especially when slack in the economy is large.
Anderson et al. (2014) has found that, weak demand conditions could dampen the
short-run impact of structural reform, and in some cases, structural reforms
initiated in weaker initial demand conditions have very little positive and
possibly negative impact on growth and employment even in the medium run
(Anderson et al., 2013).
Moreover, Eggertsson et al. (2014) show
that, structural reform does not increase output during a crisis. Their
simulation also shows that structural reform may have negative impact when
strict monetary policies are active. Anna Rose et al., in an International
Monetary Fund research paper ascertain that “
Some structural reforms may not achieve the desired improvements, having small
or even negative effects in depressed economies. By reducing the uncertainty
and sustaining aggregate demand during the reform episode, supportive
macroeconomic policies can increase the positive effects of reforms on
macroeconomic outcomes. This supports the view that some structural reforms are
best initiated in conjunction with supportive fiscal or monetary policy if
policy space is available”. (Rose - Bordon, A., Ebeke Ch.and
Shirono,K.(2016).
Out of many researchers that have searched
the impact of structural reforms, only
Hobza and Mourre (2010) support that structural reforms could boost real
GDP growth from 1.7 percent to 2.2 percent between 2010 and 2020, depending on
the depth of the reforms. Yet even if we accept their findings, one wonders if
this rate of growth is enough to pull out of the crisis a destroyed economy
such as that of Greece Greece
The way out
In front of the deadlock, the only
solution appears to be a structured and friendly Grexit, accompanied by a
controlled bankruptcy, suspension of debt payments (as best illustrated by
German loans in the London 1953 Agreement), and negotiations for cutting the
debt and extending its repayment period. Structural reforms should concentrate
in improving state management, eliminate corruption and tax evasion and
reorganizing the social security system on a logical basis. During the initial
negotiation days, the government must be ready to provide liquidity to the
economy through the issuing of non-interest state bonds at a ratio of 1 : 1 in
relation to the euro. Bootle R., (Jul., 2012).
Existing capital controls and the recent
widespread transactions with electronic money through the banks, will be
helpful for the same cause. Being able to immediately provide liquidity to the
Greek economy is crucial for affective bargaining with the lenders, who could
not extort deals by threatening to halt the supply of money, as they currently
do.
Yet, Greece Greece Europe as well. Following this initial period, which may last
less than a year, it is expected that the economy will regain its lost
competitiveness and move towards growth. The annual growth of GDP, wages,
pensions and income in general may reach 5-7%, a soaring increase in employment
will create over 1.4 million job positions, and unemployment can recede below
10%.
Particular care should be taken to avoid
hyperinflation which constitutes the main, if not the only risk of
transitioning. Today, less than 50% of the economy’s productive capacity is
been used and inflation moves at a negative pace. This leads to artificial
growth of the loan payments and creates conditions of extreme recession.
Therefore, a controlled heating of the economy is needed, provided that it will
not lead to extreme and not easy to controlled conditions. (Katsinos,A.,Mariolis,Th.2012
and Chionis, D. 2015). In any case, the dangers of
hyperinflation may be avoided if the amount of new drachma produced will not exceed
a certain level of the M2 of no more than 20-30% of the GDP (36-54 million
euro). Moreover, increases in wages, pensions and incomes in general, may follow and not proceed the GDP growth. So, under
the above policies guidelines and considering that imports constitute about 25%
of the country’s GDP, we have estimated that, inflation shall be sustained
below 8-10% during the initial stage and afterwards, may fall below 6%.(
Katsanevas, Th. 2016).
There shall be no issue of goods
sufficiency with regard to basic necessities, such as food, medicines, raw
materials or fuels, a fact that is further guaranteed by the current surplus in
the balance of payments. Banks shall be recapitalized using national currency
under state control. Bank deposits and debts in euro will be protected through
their conversion to new drachmas, at a dr/euro rate 1:0,75, hence covering the
devaluation of the new drachma by 25%.
This basically means that a 75.000 euro
deposit will equal 100.000 new drachmas and so on. Regarding mortgage loans,
special provision should be taken under a main policy umbrella and in
accordance with particular cases. Tactical bad debtors who, on a regular basis
deliberately avoid making payments upon their loans, shall be subject to legal
proceedings. Low and medium incomes may be increased eventually, in relation
with labor productivity and GDP growth trends.
Government spending restrictions, the combat of corruption, impunity,
bureaucracy, tax evasion and the strengthening of productive investments, are
also necessary. The Greek economy must be cleared from the pathetic syndrome of
the “import country” that depends upon loans, reactivate its production basis,
try to consume no more than it produces, abolish malpractices of the past and
make a healthy new beginning towards the future.
Among other measures, there is a need to
upgrade the national healthcare and welfare system, the enhancement of families
with three or more children, the employment of the young and of redundant
middle-aged employees. Emerging technologies, modern antagonist industry, pharmaceutical
and medical industry and services, internationalization of Greek Universities,
shipyards, agriculture and livestock raising should be promoted as major
development pillars. Greek ancient heritage, culture, music, theatre and arts
in general, should be supported. Research and innovation should be also strongly
encouraged, as well as quality tourism, predominantly quality and maritime
tourism. Incentives will be offered for attracting Greek shipping owners to be
registered under the Greek flag and transferring their registered office in Piraeus
After eight years of destruction, it has
become obvious that the debt trap coupled with the overvalued euro, with
austerity policies imposed by the euro zone, is financially sliding down the
chasm of catastrophe, with no hope of recovery. A friendly Grexit as was
briefly described above, with a generous cut of the county’s debt, together
with development policies and reasonable structural reforms, is the only
applicable way out of this tragedy.
References
Anderson,
Derek, Ben Hunt, and Stephen Snudden, (2014). “Fiscal Consolidation in the Euro
Area: How Much Can Structural Reforms Ease the Pain?” IMF Working Paper. No.
13/211 International Monetary Fund).
Bevan J.,
(Feb., 2012). “Everything you wanted to know about the Greek bailout”, http://www.room151.co.uk/blogs
Bouis, R.,
Orsetta C., Lilas D, Romain D., Aleksandra Z., (2012), “How Quickly Does
Structural Reform Pay Off? IZA Journal of Labor Policy, 1:12.
Charalampakis,E.(2017,July).
Effects of the crisis upon the Greek households.Ecobullein,Bank of Greece , No
45, www.bankofgreece.gr/Pages/el/Publications/EcoBulletin
Chionis, D.(2015).Reform
and growth or growth and reform. ICABE
Deo S.,
Donovan P. & Hatheway L., (Oct., 2011). “A brief history of breakups”, UBS
investment research,
Blanchard,O.(2015).Greece
: Past critiques and the path forward. IMF direct,July
Eggertsson,
Gauti, Andrea Ferrero, and Andrea Raffo (2014). “Can Structural Reforms Help Europe ?” Journal of Monetary Economics, Vol. 61, pp.2–22.
ELSTAT,
Hellenic Statistical Authority
European School of Management
Hobza,
Alexandr, and Gilles Mourre (2010). “Quantifying the Potential Macroeconomic
Effects of the Europe 2020 Strategy: Stylized Scenarios,” ECFIN Economic Papers
424, September.
International
Monetary Fund, (Jun., 2013). “Greece
International
Monetary Fund ( 2016).Economic Outlook
Johnson
Simon. ( 2015, 21,June).,The end of the Europe
is not about austerity. The New YorkTimes,
Katsanevas,
Th. ( 2014). Greece
Katsanevas,T.(2016).
The Modern Greek Tragedy and the Necessary Grexit.Berlin. Lambert Academic
Publications
Katsinos,A.,Mariolis,Th.( 2012).Switch to devalued drachma and cost push
inflation. Modern Economy,Vol.3,No2pp164-170
Klein
N.(2009).The Shock Doctrine:the Rise of Disaster
Capitalism. Metropolitan Books
Krugman P.,
(2012). End this Depression Now. Melrose
Road
Krugman,
P.(2013). Structural Excuses. Paul Krugman's blog
Massimo
D’Alema(6/8/20150.Interview to Skypt
Ministry of
the Economy of Greece
Negreponti-Delivani,M.(
2014). The killing of greeceIanos and L’Harmattan
Pichards,J.(2012).
Currency wars. The making of the next global crisis.Amazon
Sinn H.W.
(April 2013).Greece should exit the Eurozone as soon as possible and be offered
a return ticket!”, Open Europe, http://klauskastner.blogspot.gr/
Pothier,
D.(2014).Structural reforms in the eurozone.DIW Roundop,Politics in Focus
Ritschl
Albert interview to Yasmin El-Sharif in in Spiegel on line International,21
June 2011
Rocholl,A.Stahmer,A.(2016).Where
did the bailout money go?The European School of management
Rodrick,
D.(2015a).The elusive promise of structural reforms https://www.project-syndicate.org/./greece-structural-reforms...
Rodrik,D.(2015b).Structural
reforms and Greece Athens
Rogoff,K.(
2015).The Modern Greek Tragedy.VOX CEPS PPolicy portal
Rose -
Bordon, A., Ebeke Ch.and Shirono,K.(2016).When Do Structural Reforms Work? On
the Role of the Business Cycle and Macroeconomic Policies. International
Monetary Fund working paper
Spiegel P.,
Harding R., (Jun., 2013). “IMF admits to errors in international bailout of Greece
World Bank Factbook ( 2016)
Weeks,J(2013).Join
the euro.Yes for lower growth.www.socialeurope.eu
[1] The euro zone authorities in their
session of 21/8/2011, decided the implementation in Greece of the so-called Private Sector Involvement
(P.S.I ), which implies payments for the public debt with inflows from the
private sector ( bonds belonging to Social Security and Public Organizations,
Local Government, Universities,private bondholders etc). The term PSI has been
firstly used for the restructuring of the public debts of Russia , Turkey ,
Argentina , Ecuador , Brazil
[2] The ex Prime
Minister of Italy, Massimo D’ Alema in a revealing interview to Skyptg in 6/8/2015 pointed out
that “. €220bn out of the €250bn of aid
to Greece
[4] The Superfand named “Greek Company
of Partnership and Estate” basically controlled by the lenders, acquires for 99
years all state property such as ports, air ports, state land, buildings,
hotels touristic real estate, state
companies of electricity, petroleum ,gas, water, civil transport, railways etc.
[5] Interview of Albert Ritschl to Yasmin El-Sharif in in
Spiegel on line International,21 June 2011
[6] Paul Krugman adds to that by
saying “OK,
let’s be clear: I’m in favor of structural reform (as long as it’s the right
kind of reform). I’m also in favor of peace, kindness, and good coffee for everyone.
But when I see influential people calling for structural reform as the
universal answer to all economic problems, I get angry. Hence my morning ire at
the OECD”.
[7] For a more analytical presentation of these proposals, see,
Katsanevas,Th.( 2016).The Modern Greek Tragedy and the necessary Grexit. Berlin
................................................................
................................................................
The debt trap of the Greek economy and the way out
Theodore Katsanevas
International Journal of Economics & Business Administration (IJEBA), 2016, vol. IV, issue 3, 19-35
Abstract: In this paper it is argued that, in an economy with heavy loans such as Greece, structural reforms are not enough to lead the country out of the crisis. Only a Grexit with deep cuts and restructuring of debts, together with efficient state management and development policies may lead to growth. Greece has fallen in a huge debt trap which is perpetually growing by new loans. A little less than half of these loans have been created during the euro zone period and particularly after the 2008 crisis. In accordance with the Eurogroup agreements, Greece is obliged to pay every year to its lenders 15% of its GDP (27 billion euro) up to the year of 2023 and 20% of its GDP (36 billion), between the years 2023 and 2060. No country in the world can survive under such a heavy burden of debt obligations. It is argued that, even a country with heavy loans such as Greece, can succeed growth by imposing structural reforms such as sweeping impediments of labour, goods and service markets, breaking business and union monopoly power, make it easy to fire unwanted employees, removing regulations, red tape and licensing fees, privatizing state assets, increasing taxes and suppressing pensions etc. This is nothing but a totally false hypothesis. It has been illustrated in research that, structural reforms may provide in the long run a yearly growth of a little over 1%. It is also found that, they do not increase output during a crisis and they might have negative effects in the medium run. Thus, in the case of Greece, only deep cuts and restructuring of the debt (as with the German debt in the London 1953 agreement), accompanied with Grexit, development policies, efficient state management and reasonable structural reforms, may lead to the way out of the crisis and to growth.
Downloads: (external link)
http://www.ijeba.com/documents/papers/2016_IV_3_2.pdf (application/pdf)
http://www.ijeba.com/documents/papers/2016_IV_3_2.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text
Access Statistics for this article
More articles in International Journal of Economics & Business Administration (IJEBA) from International Journal of Economics & Business Administration (IJEBA)
Series data maintained by Marios Agiomavritis (marios.agiomavritis@unicert.gr).
Series data maintained by Marios Agiomavritis (marios.agiomavritis@unicert.gr).
Δεν υπάρχουν σχόλια:
Δημοσίευση σχολίου