Welcome

Posted on Friday July 30th, 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

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

Posted on Sunday January 1st, 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 | Leave a comment

Two priorities for return to growth and prosperity

Posted on Sunday January 1st, 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 | 1 Comment

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

Posted on Wednesday December 28th, 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 Friday December 23rd, 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

Euro versus Drachma: A Televised Debate

Posted on Thursday December 15th, 2011 by M_Haliassos

On December 12, 2011, the Greek TV station ‘SKAI’ broadcast a debate between seven Greek economists on whether Greece should stay with the Euro or switch to a new Drachma. The debate was aired a second time on December 15. Five of the participants were members of Greek Economists for Reform, with four supporting the Euro (Haliassos, Meghir, Pissarides, Vettas) and one supporting the Drachma (Azariadis). All of us were in favor of immediate, large-scale reforms to promote productivity and ultimately growth of the Greek economy. The other two participants (Lapavitsas and Skaperdas) supported unilateral default and switch to a new Drachma. The debate is in Greek without subtitles. You can watch Azariadis and Pissarides here and the studio debate here. Answers to the question ‘What is the first thing that should be done?’ here. Comments on the future of the economy here.

Posted in Banking and finance, Economic development, Europe, General, Macroeconomics, Product market, Public finance | 4 Comments

A Great Depression for Greece?

Posted on Wednesday December 7th, 2011 by C_Azariadis

Costas Azariadis looks at the most recent “vital signs” of the Greek economy and argues that austerity measures without investment or market reform will not succeed in balancing the government budget. He finds that private economic activity has already dropped by 20% since 2008, and concludes that austerity by itself has brought the country to the brink of a Great Depression similar to the one that gripped Britain in the 1920’s and 1930’s. Continue reading →

Posted in Macroeconomics | 12 Comments

The recapitalization of Greek banks

Posted on Saturday December 3rd, 2011 by D_Vayanos

Because of the impending haircut on Greek government bonds, and of the large fraction of non-performing loans, Greek banks are likely to be insolvent on aggregate. Calls for increased state ownership of the banking system as a long-run solution to the problem should be resisted: state control distorts lending decisions of banks and hinders their effective regulation. Data on Greek banks’ holdings of Greek government bonds confirm the costs of state influence. Recapitalization should proceed promptly as follows. Solvent banks should be required to meet their Basel capital ratios, and in a way that involves not only asset sales but also injections of fresh capital. Banks that are insolvent but not deeply so should continue operations, existing equity should be set to zero, and capital ratios should be restored through injections of capital. In either case, existing equity holders should be given the chance to provide the necessary capital before public funds are injected. The process should be monitored carefully by the troika to ensure good corporate governance in the banks that receive public funds. Banks that are deeply insolvent should be liquidated through a good bank/bad bank scheme.

This article has been written by Peter Dalianes and Dimitri Vayanos. The full article here. A shorter version of the article titled “Greek banks and the state” in Kathimerini newspaper here.

Posted in Banking and finance | 1 Comment

Greek wages and international competitiveness

Posted on Thursday November 24th, 2011 by H_Dellas

Greece has had large external imbalances (current account, external official debt) because both  the  government and the households spent too much and saved too little; and  spending fell disproportionately on foreign goods as the domestic goods were too expensive.  This article examines the options for restoring international competitiveness and external balance in Greece. Unless productivity enhancing reforms are enacted, average wages may have to decrease by at least 20% in order to make Greek traded goods competitive.

This article has been written by Harris Dellas, and is available here.

Posted in Macroeconomics | 2 Comments

Civic Capital(ism)

Posted on Wednesday November 23rd, 2011 by E_Papaioannou

In a TEDx Academy talk that took place in the Benaki Museum, Athens, on October 10, 2011, Elias Papaioannou argues that the current economic crisis in Greece is driven by the lack of civic capital. Papaioannou starts his analysis reviewing recent research in political economy showing that personal and social values affecting cooperation and civic engagement are crucial for various aspects of economic development, such as international trade, efficient regulation, an uncorrupt bureaucracy, a sound institutional infrastructure, and entrepreneurial activity. He then discusses the ranking of Greece with respect to commonly used proxy measures of civic capital, such as trust, blood donation, tax evasion, and parents’ didactical methods at home. Continue reading →

Posted in Economic development, Education, Europe, General, Labour market | Leave a comment

To Euro!

Posted on Monday November 21st, 2011 by C_Pissarides

The article below, written by Yannis Ioannides and Chris Pissarides, is part of the ongoing discussion on this blog about the costs and benefits for Greece to continue being part of the Eurozone. The authors argue that Greece has a strong interest to stay in the Euro.

A shorter version of this article in Greek was published by Kathimerini, November 27, 2011. Continue reading →

Posted in Banking and finance, Europe, Macroeconomics, Public finance | 10 Comments