Por qué falló el rescate a Grecia

Jul 1, 2015 Kenneth Rogoff

CAMBRIDGE – Mientras seguimos la evolución de la crisis griega, es importante comprender que el éxito de los programas de ajuste estructural requiere un fuerte compromiso del país implicado. Aun si se superan los obstáculos más recientes, será difícil confiar en que se implementen reformas si el pueblo griego no está convencido (como es evidente que sucedió hasta ahora). Y sin ellas, difícilmente habrá estabilidad y crecimiento sostenidos para la economía griega; especialmente porque los acreedores no están dispuestos a seguir prestando a una Grecia sin reformas mucho más dinero del que se le pide pagar. (Como ocurrió durante la mayor parte de la crisis, aunque uno nunca se enterará de esto por la prensa mundial.)

La pertenencia de Grecia a la Unión Europea permite a sus acreedores ejercer considerable influencia sobre el país, pero evidentemente no tanta como para cambiar el hecho básico. Grecia no deja de ser un país soberano. La “troika” de acreedores (el Fondo Monetario Internacional, el Banco Central Europeo y la Comisión Europea) no tiene sobre Grecia el tipo de influencia que, por decir algo, tenía la Corporación de Asistencia Municipal sobre la ciudad de Nueva York cuando a mediados de los setenta estuvo al borde de la bancarrota.

Los mejores programas de ajuste estructural son aquellos en los que el gobierno del país deudor propone los cambios de políticas, y el FMI ayuda a diseñar un programa a medida y provee cobertura política para su implementación. Imponer un plan desde afuera no sirve. Para que las reformas funcionen, el gobierno griego y su electorado deben creer en ellas.

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Kenneth Rogoff

Writing for PS since 2002
204 Commentaries

Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. He is co-author of This Time is Different: Eight Centuries of Financial Folly and author of The Curse of Cash.

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0 Comments on this paragraph, 47 in all 47 Comments on this article

Michael Lupsor Jul 13, 2015

Professor Rogoff has a very good intuition/point here: any program that is not an emanation of national consensus on the need to reform will not succeed. That is why the self-imposed structural reforms – read sacrifices – of Finland and the Baltic countries were successful. Most of the Greeks see themselves as victims. If they are victims, then they are the victims of their own political, economic, social and moral choices.
A legacy of 400 years of Ottoman rule is still there: the addiction to tax avoidance, corruption, clientelism, mismanagement. While Greece is geographically part of Europe- the rest is not.
The referendum was a travesty of democracy – ask your people if they would like not to pay back their debt and guess what you get. How about Luxemburg organizing a referendum with the question: ’Should Europe give us 200 billion in loans that we have no intention of paying back?’. Of course, Europe will have to respect the democratic decision of an independent nation.
It is true that most of the recent bailouts went to pay back the’institutions’ that gradually replaced the private debt-holders.
But, let us take few steps back in the past: where are the hundreds of billions of euros that Greece borrowed in the first place on the financial markets (that Goldman Sachs helped the Greek government to hide from Bruxelles)? As an independent state, Greece did not feel obliged to respect the EU rule – maximum 60% debt to GDP -, a rule that very few European countries are actually respecting, including Germany and France. No European authority raised a warning finger, on the contrary, Greece benefited of generous assistance to the tune of hundreds of billions or euros since the country joined EU(1979) and later , more incredible, the Eurozone (2002)
So Mr. Juncker should publish the full amounts of all structural, agricultural, development funds, etc. that Greece benefited from in the past 35 years, without any obligation to pay back or at least to show some tangible results in terms of economic progress? Do you know where that money is? Geneva is not far away from Athens.
What we get from the EU institutions and politicians are nothing but misguided historic and philosophical references about the cradle of democracy. Well, no Plato or Aristotle were born the past 2000 years, and the Greek finance ministers do not seem to be aware or bothered much about the free rider and moral hazard concepts. But the other European tax payers do very much, in a union that looks like a transfer union out of control and out of governance.
A new reply to this comment has been posted.
Pepy Sakellariou Jul 9, 2015

What really happened in the case of Greece was (to use Simon Wren Lewis words) that :
Loss,from junk bonds,passed from private ‪‎Europe‬an Banks to ‪‎Greece‬, as money provided by the European authorities has been used to pay off Greece’s creditors, first through delaying default in 2010 and 2011, and then by only allowing partial default in 2012.
The involvement of European governments and IMF has not helped Greece at all.
Is this why ‪‎Eurozone‬ countries tried in vain to stop the IMF publishing a gloomy analysis of Greece's debt burden and all mistakes made by troika?
Oh sorry! Institutions
A new reply to this comment has been posted.
Oliver Denker Jul 8, 2015

Why the Greek Bailout Failed?

Because it's Greece.
A new reply to this comment has been posted.
Rajendran Vasudevan Jul 8, 2015

Went to all the comments below. The take away is identical to what I had thought. Rogoff's rigidity is by now legendary. Greek has failed because of the "reform" sounds like an oxymoron. The implication, therefore, is that the formulaic approach by IMF can not be called a "reform" effort, period. Not providing a numerical buttress to support his ideological position is sort of "tell-tale". When you dont have preset notions the analytical process itself would look so breezy otherwise- as in this Rogoff note- it is such an exertion. It similar to someone else who has commented here about his excel fiasco and his rather juvenile attempt to defend....Debt GDP ratio of of 200% is also fine so long as the project in to which the money goes in is financially viable. An economy which has only about half the per capita GDP of a developed country like Germany does tend to have such viable opportunities. The point is whether the "yoke" of a Euro would free them to lookout for such opportunities...
A new reply to this comment has been posted.
Jose araujo Jul 6, 2015

What a Joke....

R&R bailouts only work on crooked excel sheets...

What about failing miserably in calculating the fiscal multipliers?

What about the 90% debt mark? How does it look now? Specially in Portugal and Ireland?

What about structural changes that are anything but structural andonly aim to increase unemployment?

What about structural changes like spending in infrastructures, health and education?
A new reply to this comment has been posted.
Cetin Ciner Jul 6, 2015

Greece is in Irving Fisher style "debt-deflation vicious" cycle. I am surprised Dr. Rogoff doesn't mention this. Demand, along with prices and wages, are falling but the nominal debt amount remains fixed to be served. The root cause of the disaster.
Greece has actually done rather well with structural reforms. It is now easier in Greece to fire someone than in Germany.
The real solution is for ECB to do its job and raise the inflation rate to 2% in EZ, its mandate, especially in Germany.
A new reply to this comment has been posted.
John Jones Jul 6, 2015

If the vast majority of Greeks want to stay within the Eurozone, they also have very little taste for the stresses a Northern European lifestyle imposes. Instead of railing against austerity would it not be more sensible to embrace a much simpler lifestyle which their climate makes possible - and which so many stressed-out Northerners go to Greece each year to enjoy as they recover.
A new reply to this comment has been posted.
Roger Merritt Jul 6, 2015

It seems to me that "a successful structural-adjustment program" should be expected to take a long time to start showing results, possibly decades. Also, as is mentioned in passing in the article, and then dismissed as overblown, what the troika see as "a successful structural-adjustment program" the people in Greece see as imposition of draconian punishment for sins they themselves never committed. I might mention here that the IMF did something similar to Thailand in 1997, and the Thai people idolized Thaksin (for a while) for paying off the "loans" early. The feeling here is that the Thai people will never again let their government deal with the IMF or the World Bank.
A new reply to this comment has been posted.
Peter Burgess Jul 5, 2015

My own experience with 'Structural Adjustment Programs' driven by the Washington Consensus has been very negative. My own work suggests that they were problematic because they were based on quite seriously flawed assumptions about how society and the economy needed to function.

It seems to me that the present Greek fiasco has a political elite arguing with a financial elite, while ordinary people get to pay the price. There is a saying in Africa that when elephants fight, its the grass that gets ruined. So it is in modern society.

There is a huge need for structural adjustment. The dominance of money and financial modelling in modern society may work quite brilliantly for the ownership class, but it completely fails to address the big issues that really need to be faced: massive youth unemployment, growing disillusionment by most people in institutions, whether they be political, judicial, financial or educational, not to mention a growing framework of terror that shows little signs of being contained.

Meanwhile, there are significant economic activities that ought to be going on in Greece, not least of which would be work to ensure that deterioration of the ancient landmarks is rapidly remediated. The money cost of doing this would be huge, but the real cost of not doing it would be even greater (but of course this is not the subject of any metrics) and the real value of employing a lot of people would be a big plus for the economy (and that is also ignored in the conventional money cost based analysis).

I am not too good at history, but I think it was Nero that fiddled while Rome burned. The high profile policy analysts and policy makers seem to be functioning a lot like Nero.

Peter Burgess
TrueValueMetrics.org
A new reply to this comment has been posted.
Brent Beach Jul 5, 2015

Rogoff, who is a champion of austerity politics, sees Greece as a reform failure. Others see it as an austerity failure.
Reforms are necessary - no one denies that.
Should the path to reform be determined by IMF economists, who admit themselves they have bungles all of their bespoke interventions for the last 50 years, or by the Greeks. Set mutually agreed upon goals, let the Greeks determine the means.
Having demonstrated his rigid adherence to his neo-liberal ideology, he then derides those opposing him as left-wing ideologues.
That is, people who opinions need not be considered because they arise from ideology, not from current reality.
Rogoff is totally tone-deaf to his complete ideological capture by neo-liberalism.
A completely worthless article, pointing only to failed ideas with nothing looking forward.
A new reply to this comment has been posted.
Ed Walk Jul 5, 2015

The problem in Greece is the elites, not the workers. The elites are the people resisting structural changes, because changes would cut their ability to steal from the Greek Nation, force them to pay their taxes, and lock them up for their crimes.

Rogoff and the Troika punish the people for the crimes of their elites. Typical.
A new reply to this comment has been posted.
Stilianos Mavroulis Jul 5, 2015

Why the reforms failed? The reforms failed for two reasons, a) because the previous Greek government was reluctant to enforce them and the new government is unwilling to do so. and b) because they were the wrong reforms.
What is wrong with Greece? A) An unbelievably huge bureaucracy that eats away close to 1/3 of Greece’s annual budget. One in eight Greeks work for the government. In Germany 3.3% of the population work for the government, in Austria 1.1% and in Belgium .8%. In Greece 8% of the population works for the government. B) Illegal immigration. Last year 50 billion Euros were sent to foreign countries by the illegals who live in Greece. With an average 15% sales tax, every time a Euro is spent in Greece the government collects 15% sales tax. With an average life span of three years, a Euro will return to the government coffers in the form of sales tax and income tax in three years from the time it is released in the market place. Therefore, the 50 billion that leaves Greece annually creates an annual haircut on the GDP of the same amount. A country collects on the average 30 to 40% of its GDP in revenues annually. When that fifty billion leaves Greece, that means the Greek government will not collect any taxes on that money, therefore the direct impact will be as if that money were removed directly from the GDP.
Then Greece pays the Illegal immigrants welfare checks and provides for them free healthcare, free education, and other free services. That is estimated between 11 and 15 Billion annually. Greece can’t afford the illegal immigration, period.
Greece aging population. Around 25% of the Greek population is on pension.
The Europeans tried to address the Greek bureaucracy and the Greek pension system but they found an unwilling government to make such reforms. At that point their focus should have been turned to growth. But even in that area they would find the Greek government unwilling to accept reforms, because of Greece’s unaccountable syndicalism. Greece’s labor laws are an impediment to industrial growth. The Samara’s government made a decent attempt to reform labor law put the new government destroyed all market reforms Samara’s government had done.
So in conclusion those are the areas that could fix Greece and since the Greek system doesn’t allow for any innovation, then the Europeans may need to focus on how to fix the Greek government first before they can make a dent on debt reform.
A new reply to this comment has been posted.
Ronald Calitri Jul 3, 2015

Good point about ownership; but turned on its head by insisting IMF monitor structural adjustment. Perhaps later. For now, Greece is an advanced democracy, fortuitously captained by actual economists who seem to have their eyes on a little wider palate for adjustment than is propounded here. Particularly, their industrial organization focus on oligopolistic market failures sounds promising.
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hari naidu Jul 3, 2015

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NEWS 02.07.2015 : 14:16
Declaration of Professors of Economics at Greek Universities on the Referendum

Source: ekathimerini.com

TAGS: Referendum, Euro

The following declaration is signed by 246 professors at Economics Schools and Universities in Greece. By this declaration, we want to express our great distress about the latest developments in our country. We strongly believe that, at this crucial point, it is of paramount importance to avoid excesses, to show national cohesion, to preserve our position in the Eurozone and the EU, and to regain our credibility in the international community. Further, the fiscal consolidation program, drawn jointly with our EU partners and other creditors like the IMF, should be characterized by the lowest possible recessionary consequences and the highest possible level of social protection, aiming at growth and job creation in the private sector as soon as possible. The prolonged political uncertainty has led the economy to a renewed recession, has reversed the decline in unemployment, has lowered tax revenue and has widened the fiscal gap.

Taking into account that the proposals of our creditors and the Greek government were converging until last Friday, we believe that what is really at stake in the coming Referendum, irrespective of the precise formulation of the question, is whether Greece will remain, or not, in the Eurozone and, possibly, whether it will remain in the EU itself.

The funding of the Greek economy by Eurozone countries was suspended last weekend after the Greek government abandoned the negotiations at a time when no alternative funding opportunities seem to be available. We are already at the first stage of a very slippery process that, if not urgently reversed, will lead to a chaotic debt default and exit from the Eurozone. Bank closures and capital controls (that had been so far avoided throughout the deep crisis) constitute only the first rupture from the Eurozone and the EU itself

We believe that the recessionary consequences of debt default and exit from the Eurozone, especially in such a chaotic and superficial way, will be much worse than the effects of a painful compromise with our EU partners and the IMF. A disorderly break of our country from the core of Europe will have disastrous economic, social, political and geopolitical consequences.

Short-run consequences: Bank closures, cut in the value of deposits, sharp decline in tourism, shortages of basic consumer goods and raw materials, black market, hyperinflation, firm bankruptcies and a big rise in unemployment, rapid fall in real wages and the real value of pensions, deep recession and serious problems in the functioning of public health care and defense, social unrest.

Medium-term consequences: international isolation of the country, no access to international capital markets for several years, low growth and anemic investment, high unemployment combined with high inflation rates, suspension of the flow of EU structural funds, significant decline in the standard of living, poor provision of basic public goods and services.

All these developments should not have happened after 5 years of big sacrifices by the Greek people, and a tremendous fiscal adjustment, right at the time when the economy was starting to recover, with favourable expectations for further easing in the terms of our public debt obligations. They should not have happened in a period when the European economy is returning to positive growth rates and other peripheral euro countries start growing and reducing unemployment. They should not have happened in a favorable time for further EU integration that will benefit the South and when the ECB facilitates growth with excess liquidity and zero interest rates.

Leaving the Eurozone, especially with this chaotic and superficial way, would likely lead to a process of leaving the EU too, with unpredictable and disastrous consequences for the national security and the democratic stability of our country.

For all these reasons, Greece must remain in the core of the EU, which is the Eurozone.

For all these reasons, our unequivocal answer to the real question of the referendum is: YES. Yes, to Europe.

1. Adam Αntonis University of Ioannina

2. Aggelidis Timotheos University of Peloponnese

3. Alexakis Christos University of Pireaus

4. Alexakis Panagiotis Athens University

5. Anagnostou Aggeliki University of Thessaly

6. Andoniou Fabio University of Ioannina

7. Andronikidis Αndreas University of Macedonia

8. Androutsopoulos Ion Athens University of Economics and Business

9. Androutsopoulos Κonstantinos Athens University of Economics and Business

10. Apergis Νikolaos University of Pireaus

11. Apostolopoulos Thodoros Athens University of Economics and Business

12. Argouslidis Paris Athens University of Economics and Business

13. Arvanitis Stelios Athens University of Economics and Business

14. Atsalakis George Polytechnic of Crete

15. Avlonitis George Athens University of Economics and Business

16. Balios Dimitris Athens University

17. Ballas Apostolos Athens University of Economics and Business

18. Baltas Georgios Athens University of Economics and Business

19. Baltas Nikolaos Athens University of Economics and Business

20. Basiakos Ioannis Athens University

21. Bellou Victoria University of Thessaly

22. Benos Nikos University of Ioannina

23. Benos Theofanis University of Pireaus

24. Billias Ioannis Athens University of Economics and Business

25. Bitros Georgios Athens University of Economics and Business

26. Blavoukos Spyros Athens University of Economics and Business

27. Bourantas Dimitris Athens University of Economics and Business

28. Bourantonis Dimitris Athens University of Economics and Business

29. Bournova Eugenia Athens University

30. Brisimis Sofoklis University of Pireaus

31. Chalamandaris George Athens University of Economics and Business

32. Chalkias Ioannis Athens University of Economics and Business

33. Charitakis Nikos Athens University

34. Chletsos Michael University of Ioannina

35. Chlomoudis Kostas University of Pireaus

36. Chortareas George Athens University

37. Chouliaras Asteris University of Peloponnese

38. Christopoulos Dimitris Panteion University

39. Christopoulou Sofia University of Macedonia

40. Christou George Athens University of Economics and Business

41. Damianos Dimitris Agricultural University of Athens

42. Dedoulis Manolis Athens University of Economics and Business

43. Delipalla Sofia University of Macedonia

44. Demoirakos Efthymios Athens University of Economics and Business

45. Demos Antonis Athens University of Economics and Business

46. Demousis Michalis University of Patras

47. Dialla Violetta Athens University

48. Dimeli Sofia Athens University of Economics and Business

49. Dimitriadi Zoi University of Macedonia

50. Dotsis Georgios Athens University

51. Doukidis Georgios Athens University of Economics and Business

52. Drakos Anastasios Athens University of Economics and Business

53. Economides George Athens University of Economics and Business

54. Economidou Claire University of Pireaus

55. Economou Athina University of Thessaly

56. Efstratoglou Sofia Agricultural University of Athens

57. Eleftheriou Kostas University of Pireaus

58. Fountas Stylianos University of Macedonia

59. Gaganis Chrysovalantis Univiversity of Crete

60. Gatsios Konstantinos Athens University of Economics and Business

61. Genakos Christos Athens University of Economics and Business

62. Genius Margarita University of Crete

63. Georgiou Andreas University of Macedonia

64. Georgoutsos Dimitrios Athens University of Economics and Business

65. Giaglis Georgios Athens University of Economics and Business

66. Giamouridis Daniel Athens University of Economics and Business

67. Giannakopoulos Nikos University of Patras

68. Giannelis Dimitrios University of Pireaus

69. Giannelis Νikos University of Crete

70. Giotopoulos Ioannis University of Peloponnese

71. Glavinis Panayotis Aristotle University of Thessaloniki

72. Griva Krina University of Ioannina

73. Hassid Josef University of Pireaus

74. Hatziantoniou Damianos Athens University of Economics and Business

75. Hatzipanayotou Panos Athens University of Economics and Business

76. Hatzis Aristides Athens University

77. Iatridis George University of Thessaly

78. Ifantopoulos Ioannis Athens University

79. Indounas Konstantinos Athens University of Economics and Business

80. Ioannidis Antonis Athens University of Economics and Business

81. Ioannidis Stavros Panteion University

82. Ioannou Georgios Athens University of Economics and Business

83. Iordanoglou Chrysafis Panteion University

84. Ireiotis Nikolaos Athens University

85. Kainourgios Dimitris Athens University

86. Kalamboukis Theodoros Athens University of Economics and Business

87. Kalogirou Ioannis Metsovio Polytechnic University

88. Kalyvitis Sarantis Athens University of Economics and Business

89. Kammas Pantelis University of Ioannina

90. Karagiannis Ioannis University of Macedonia

91. Karamanis Konstantinos Athens University of Economics and Business

92. Karaveli Eleni Athens University of Economics and Business

93. Karkalakos Sotiris University of Pireaus

94. Kasimatis Konstantinos Athens University of Economics and Business

95. Katranidis Stelios University of Macedonia

96. Katsimi Margarita Athens University of Economics and Business

97. Kavousanos Emmanouil Athens University of Economics and Business

98. Kazakos Panos Athens University

99. Koen Sandra Athens University of Economics and Business

100. Kollias Christos University of Thessaly

101. Konstantinou Panagiotis Athens University of Economics and Business

102. Konstantopoulos Panos Athens University of Economics and Business

103. Kontouli Maria University of Peloponnese

104. Korliras Panagiotis Athens University of Economics and Business

105. Kosteletou Nikolina Athens University

106. Kostis Kostas Athens University

107. Kotsios Stelios Athens University

108. Kottaridi Konstantina University of Pireaus

109. Koundouri Phoebe Athens University of Economics and Business

110. Kouretas Georgios Athens University of Economics and Business

111. Kritikos Manolis Athens University of Economics and Business

112. Kyriazidou Katerina Athens University of Economics and Business

113. Kyriazis Nikolaos University of Thessaly

114. Kyriazis Dimitris University of Pireaus

115. Kyritsis Ioannis Aristotle University of Thessaloniki

116. Kyrkillis Dimitris University of Macedonia

117. Ladi Stella Panteion University

118. Lekakos Georgios Athens University of Economics and Business

119. Leledakis Georgios Athens University of Economics and Business

120. Leventakis Ioannis Athens University of Economics and Business

121. Liargovas Panagiotis University of Peloponnese

122. Liaropoulos Lykourgos Athens University

123. Loizidis Ioannis Athens University of Economics and Business

124. Lolos Sarantis Panteion University

125. Louri Eleni Athens University of Economics and Business

126. Louridas Pangiotis Athens University of Economics and Business

127. Malevris Nikos Athens University of Economics and Business

128. Malliaris Petros University of Pireaus

129. Matsagganis Manos Athens University of Economics and Business

130. Mergos Giorgos University of Athens

131. Metaxas Theodoros University of Thessaly

132. Miaouli Natasha Athens University of Economics and Business

133. Milliou Chrisovalantou Athens University of Economics and Business

134. Mylonas Nikolaos Athens University

135. Mylonidis Nikos University of Ioannina

136. Nikas Christos University of Macedonia

137. Nikolaou Ioannis Athens University of Economics and Business

138. Nikoleris Theodoros Athens University

139. Nikolopoulos Andreas Athens University of Economics and Business

140. Nikolotsa Daphni University of Crete

141. O’Donnel Owen University of Macedonia

142. Pagkratis Spiros Athens University of Economics and Business

143. Pagoulatos Giorgos Athens University of Economics and Business

144. Palis Thanos Aegean University

145. Palivos Theodoros Athens University of Economics and Business

146. Panagiotopoulou Lida Athens University of Economics and Business

147. Panagiotou Dimitris University of Ioannina

148. Panagopoulos Andreas University of Crete

149. Pantelides Theologos University of Macedonia

150. Papachristou Giorgos Aristotle University of Thessaloniki

151. Papadakis Vassilios Athens University of Economics and Business

152. Papadamou Stephanos University of Thessaly

153. Papadimitriou Stratos University of Pireaus

154. Papadopoulos Hrisoleon Aristotle University of Thessaloniki

155. Papadopoulos Konstantinos Aristotle University of Thessaloniki

156. Papalexandri Nancy Athens University of Economics and Business

157. Papanastasopoulos Giorgos University of Pireaus

158. Papandreou Andreas Athens University

159. Papapanagos Harris University of Macedonia

160. Papastathopoulou Polina Athens University of Economics and Business

161. Papathanassiou Iason University of Macedonia

162. Papavasiliou Nikolaos Athens University of Economics and Business

163. Papoulias Dimitris Athens University

164. Paraskevopoulos Christos University of Macedonia

165. Pasiouras Photis Polytechnic of Crete

166. Patronis Vassilios University of Patras

167. Patsouratis Vassilis Athens University of Economics and Business

168. Pechlivanos Lampros Athens University of Economics and Business

169. Peka Oikonomou University of Pireaus

170. Pelagides Thodoris University of Pireaus

171. Petrakis Manolis University of Crete

172. Petridou Evgenia Aristotle University of Thessaloniki

173. Philippopoulos Apostolis Athens University of Economics and Business

174. Pittis Nikitas University of Pireaus

175. Polemis Michalis University of Pireaus

176. Pollalis Ioannis University of Pireaus

177. Pournarakis Efthimios Athens University of Economics and Business

178. Pragidis Ioannis Democritus University of Thrace

179. Pramatari Katerina Athens University of Economics and Business

180. Psaltopoulos Dimitris University of Patras

181. Psarianos Jacob University of Thessaly

182. Psillaki Maria University of Pireaus

183. Raikou Katerina University of Pireaus

184. Repas Panagiotis Panteion University

185. Repoussis Panagiotis Athens University of Economics and Business

186. Riginos Michalis Athens University

187. Rigopoulou Eirini Athens University of Economics and Business

188. Roumanias Kostas Athens University of Economics and Business

189. Sakellaris Ploutarxos Athens University of Economics and Business

190. Sakellis Yiannis Panteion University

191. Samitas Aristides Aegean University

192. Sarris Alexandros Athens University

193. Sartzetakis Efthimios University of Macedonia

194. Sideropoulos Moissis Aristotle University of Thessaloniki

195. Siourounis Grigoris Panteion University

196. Siris Vasilios Athens University of Economics and Business

197. Sklavou Helen Athens University of Economics and Business

198. Sklias Pantelis University of Peloponnese

199. Skordile Sofia Harokopio University

200. Skountzos Theodoros University of Pireaus

201. Skouras Athanassios Athens University of Economics and Business

202. Skouras Dimitris University of Patras

203. Skouras Spyros Athens University of Economics and Business

204. Soderquist Klas Athens University of Economics and Business

205. Sorros Ιoannis University of Pireaus

206. Sotiropoulos Dimitris Athens University

207. Spinellis Diomidis Athens University of Economics and Business

208. Spyrou Spyros Athens University of Economics and Business

209. Stamatopoulos George University of Crete

210. Stathakopoulos Vlasios Athens University of Economics and Business

211. Stavrakoudis Athanassios University of Ioannina

212. Symeonidis Spyros University of Ioannina

213. Tarantilis Christos Athens University of Economics and Business

214. Tatsos Nikos Panteion University

215. Thalassinos Lefteris University of Pireaus

216. Thomadakis Stavros Athens University

217. Thomakos Dimitrios University of Peloponnese

218. Tinios Plato University of Pireaus

219. Topaloglou Nicholas Athens University of Economics and Business

220. Toumpis Stauros Athens University of Economics and Business

221. Tragaki Alexandra Harokopio University

222. Tsakanikas Angelos Metsovio Polytechnic University

223. Tsakiris Nikos University of Ioannina

224. Tsakloglou Panos Athens University of Economics and Business

225. Tsamourgelis Ioannis Aegean University

226. Tsintzos Panagiotis Democritus University of Thrace

227. Tsionas Efthymios Athens University of Economics and Business

228. Tsipouri Lena Athens University

229. Tsiritakis Emmanuel University of Pireaus

230. Tsoukalis Loukas Athens University

231. Tzavalis Elias Athens University of Economics and Business

232. Tzelepis Dimitrios University of Patras

233. Tzionas Ioannis University of Macedonia

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Stamatis Kavvadias Jul 3, 2015

Mr Rogoff starts citing his recent article on VOX, where he claims that because of 106 billions of debt write-down, Greece had 91 billions net inflows from 2010 to 2013. Lets assume that Greece would have to pay the full 106 billion in these 3 years. Mr Rogoff may be a good accountant (rumours on a recent publication of his even deny this), but he is definitely not an economist. He suggests that the total of the *private* (see PSI) debt write-down was a (net) inflow, even though ***it was announced*** as a transient default. I will remind to Mr Rogoff that a failed debt contract has three parties responsible. It is totally arbitrary on his part to expect a full payment from the Greek side and account non-payment as a net inflow. I will also remind Mr Rogoff and like-minded neo-liberals that Greece could have defaulted on its own to get these "European inflows".

Then, Mr Rogoff attempts to make clumsy arguments:

__ "Breaking down dual labor markets that are excluding young workers [...] is very different from making it easier to fire all workers."
__ "Making pension systems sustainable does not amount to making them stingier."
__ " Making tax systems simpler and fairer is not the same as raising all taxes."

All these arguments are made, at best, from a comfortable office that shields him from any relation to Greek reality, or, at worst, is fully detached from what are the actual demands raised by the IMF.

Despite false neoliberal pretence of the author that it's just that the public sector must be meritocratic, the IMF has both required shrinking down the state and not taxing the rich, as well as not reversing the already imposed abolition of collective bargaining rights (which SYRIZA has promised). So, this argument is a complete hypocrisy, or the author is detached from reality (because he is otherwise very well informed, so as to manipulate the data).

Regarding the pension system, the author, comfortably, forgets that pension funds have gigantic loses from PSI, which are being disregarded, to reduce the officially accepted loses of the banking system. But, it is not the pensioners fault that the state had to use their reserves --and save the lenders of more bailout funds for the banks--, so, now, it is the Greek state's responsibility not to put the pressure on the the pensioners but on the rich benefiting from the banking system. This is not allowed --it is reversed in SYYRIZA government proposals-- supposedly by the IMF. In other words, the "fairer tax system" is only after the IMF and the author conveniently forget that all the costs of the crisis are being born by the weak and the indefensible, since the government is defused by the IMF!
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Spiros Travlos Jul 2, 2015

I find this approach much more down to earth compared with Mr. Stieglitz earlier article in this blog on the same subject. However, the conclusion to offer just humanitarian aid is flowed as the most probable outcome will be "aid dependence". We should reconsider the way we approach reform. The process is deeply politicised and thus requires time effort and considerable communication skills. In the case of Greece reforms under the MoU were hastily implemented without proper preparation and explanation. Conditionality was nominal as large chunks of legislation were just pushed through parliament without much debate and any impact assessment. I accept that the political cycle is relentless especially in a time of crisis as the average time of government survival is about 24 months. Greece should now concentrate on a small number of major reforms (pensions and business environment) instead of a widespread reforms prescribed to the finest detail. There is no domestic management capacity for the latter. Meanwhile remaining in the euro is critical otherwise Greece is likely to drift with successive devaluations and loss of direction. We have a long history of such failed policies. No need to repeat them.
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M M Jul 2, 2015

Here we go again….. 48 hours before the January 2015 Greek elections, the ECB announces € 1Tr QE (Greece excluded of course). Today, 48 hours before the Greek Referendum, the IMF announces that Greece requires extra €50B + Debt Haircut and accusing the current Greek Government of spending it? How…..that is €10B a month, without bailout money and without a banking system? Are they serious..…. This is called robbery in broad daylight! Lagarde and Draghi must be sacked and humiliated. They are acting as politicians instead of independent central bankers. They have breached every rule on this planet.
- Stamatis Kavvadias Jul 3, 2015
  
  We agree on this, for exactly the opposite reasons.
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T Selvakumaran Jul 2, 2015

Keep in mind that with Greece having defaulted on its IMF loan this week and with the possibility of a 'No' vote in this Sunday's referendum in Greece becoming a reality, European leaders would have to make good on their promise of Greece exiting the Euro (so called 'Grexit'). The legal implications of trying to eject Greece from the Euro, even while the elected government of Greece is insisting on staying in the Eurozone, is something that carries huge risks for the global economy:

The expected route for Greece from its default, on its loans to its Troika creditors, to Grexit would be charted closely by the ECB, which would steadily shut off access to Greece on its various currency assistance programs (ELA, EFSF, ESM, etc), every time Greece fails to pay on time for the outstanding loans. This is because there is no provision in the EU/Euro treaties for a nation to exit the Euro currency zone except voluntarily.

While on the other end, ECB undertaking Quantitative Easing at an increasing scale for the other countries in the Eurozone, then this leads to a highly contentious situation legally. With QE, the ECB would be departing from all the treaties, including the 1992 Maastricht treaty, that underlie the framework of the EU and Euro, particularly the requirements of balanced budgets and sound money. Whereas shutting off assistance programs to Greece is based on a re-emphasis of just these balanced budget/sound money policies advocated in these treaties. And this contentious situation could prolong for several years till Grexit.

Moreover, one would then end up in a world where the Federal Reserve in the US has completed substantial amount of QE over the last seven years, and even while the ECB has started QE much later, the legal difficulties that ECB would face in its QE program on account of its ongoing shutting off activities in Greece. This would indeed be a world full of surprises and imbalances for the markets and the governments. The failure of the Greek bailout which the IMF has managed to engineer with its ignorance would seem like chump change in comparison.
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M M Jul 2, 2015

The best solution would be for Germany to annex physically all Eastern European countries that are supportive to the German leadership policies and generosity! (After all, they are used to being subjected to what the Greeks are currently being subjected to), have France as well as a bonus (which they had and seem to have retaken anyway), disband the Euro under its current form and keep the EU as a semi political state to maintain a relative degree of stability. The current EZ/EU model has failed miserably.
- Stamatis Kavvadias Jul 2, 2015
  
  I suppose, Russia and China will stand back, watching, until they are consumed. And then, neoliberal capitalism will give 99,9% of all wealth to the 0,1% and the 99,9% will live on credit from US and Germany.
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jagjeet sinha Jul 2, 2015

The European Central Bank doesn't appear to have the powers that Central Banks have.
The European Union doesn't appear to have a Capital that has to keep doors open to migration - that is guaranteed in the absence of Investment Equalization. Regional disparities due Capital and Credit flow needs to balanced - by Public Investment - when Private flows exacerbated the economic disparities.
The Euro doesn't appear to be a Currency of a Sovereign Union that is real - without the powers of Sovereign taxation.
Supposedly a political union, it is apparent there are faultlines that cannot be glossed over.
Unlike the United States or the United Kingdom, the provinces within unable to seek redress from a Real Capital, a Real Central Bank, and a Real Political Union. Neither is Greece perhaps the epitome of perfection.
One has to ponder then at the perspicacity behind the Billions that are at Risk - when discipline is politically not enforceable, when the Capital is unable to craft a solution, and the problem festers for five years.
Looks like a larger Yugoslavia - and not even force can keep it together it seems.
Sieges are applied to enemies - not to constituents who supposedly own the Union.
Downright ludicrous - to watch the endless tragedy.
If it was Third World - perhaps would be dismissed as highest risk, and exposure limited to a few millions or maybe billions.
But this meltdown already costing trillions.
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Zsolt Hermann Jul 1, 2015

This article as many others prove that modern humans managed to create the strongest religion, blind faith ever: the supernatural belief in a human being that is outside of the system of nature, that can do whatever it wants, create laws, build any structures, institutions and can base life and measure it solely based on productivity, consumerism, GDP figures and of course profit.

The human bubble we live in has absolutely no natural foundations, we exist in a coordinate system that was made up out of greed and the desire to triumph over others at their expense. We have been trying to prove that cancer-like existence has the evolutionary edge over mutually complementing cooperation.

And now when the structure is falling apart we enter complete denial and continue praying for a miracle that by repeating the same already failed "solutions" somehow things will turn around.
But they can't because at the end of the day we still exist within a natural system with unbending, iron laws. And unless we accept those laws binding and adapt to them we will continue sleepwalking into a global disaster.
- Andrew Zimin Jul 2, 2015
  
  It’s too right!
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T Selvakumaran Jul 1, 2015

Q. Why would debt write down for Greece not work?

A. Many economists, including Professors Kenneth Rogoff, Larry Summers, Joseph Stiglitz, and Jeffrey Sachs, have called for debt write down for Greece. However, there is a clear distinction between the 53% debt write-off undertaken by the private banks earlier before they transferred Greece’s debt to the so-called Troika [ECB, EC, IMF], and the current creditors writing down their debt. The 53% debt write-off of the private banks wasn’t really actual losses. It was just whittling down of paper profits the banks had made by buying Greece’s bonds at very low prices before it joined the Euro currency. And then immediately after Greece joined the Euro, the yields on these bonds dropped drastically.

Whereas in the current situation the creditors have to take actual losses, and it also leaves open the question of writing down the debt of other peripheral countries. Thus, the original 53% write-down was simply a "reset to reality" after the period of euphoria of forming a common currency in the period 1992 -- 2008, when yield on Greece's debt suddenly dropped after it joined the Euro. Whereas current losses on Greek debt would put the EU countries in serious risks on their future economic performance. This is the reason the Troika is so intransigent about discussing debt write-downs.
- T Selvakumaran Jul 3, 2015
  
  Mr. Stamatis Kavvadis, the debt-write down proposed as a solution by many famous economists, might be very appealing to you. But you have given no reason for why it would work. As I explained in my post above, any further debt write-down would have to come from actual losses to the taxpayers in the other Euro-zone countries. And why would they agree to it, without questioning where all the money went in Greece? When they do raise this question, the answer they come up with is to impose more austerity on Greece to prevent their hard-earned money from being squandered away. This is a very complicated problem.
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- Stamatis Kavvadias Jul 2, 2015
  
  Your answer just explains why it will not happen --in which I do not agree with you. In any case, this does not imply it would not work.
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T Selvakumaran Jul 1, 2015

The VoX article referred by Professor Rogoff here (http://www.voxeu.org/article/modern-greek-tragedy), makes essentially two points: [1] more money has been poured into Greece by the creditors than has been taken out by them since the bailout package began in 2010. [2] the creditors along with the IMF made a sincere attempt at structural reforms of Greece, but since the government did not buy into it wholeheartedly, only partial results were achieved.

But the main point is that if the central bank is doing QE to the tune trillions of euros in the EU core, but only a couple of dozens of billions of euros is net inflow into the periphery, then that is a sure path for loss of credibility for the Troika. Any serious negotiations between Greece and the Troika would need to address the free money printing in QE, which is a departure from the sound money/balance budgets of the pre-2008 market fundamentalist capitalism, which served as a bulwark in Europe against the Iron Curtain of the communist countries.
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Ed Rector Jul 1, 2015

Dr. Rogoff tells us the solution to the financial problems of Greece is more 'structural reforms'?? So How many more workers should lose their jobs. how many more businesses should close down, how much longer should Greek young people face lives with greatly reduced prospects of lives with no useful employment or purpose??
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Carlo Grancini Jul 1, 2015

This articles sheds light on the obsessive "Reform" mantra which we experience in Italy. It is the international institutions which ask for reforms. Regrettably our politicians exploit this pressure to push forward the reforms which consolidate their power insetad of the reforms the country needs. Reforms has almost become an evil concept here, not because citizens oppose them to defend privileges, but becouse they have been misused to pursue special interests.
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Marc Freed Jul 1, 2015

The desire of private creditors to avoid capital losses, and their ability to persuade public sector lenders to postpone them have only changed the timing of inevitable defaults. The primary consequence of central bank intervention in debt markets has been to prolong and worsen the adjustments that Greece and other sovereign debtors (e.g. Puerto Rico) will ultimately have to make even after their creditors recognize their losses. The failure of some borrowers to repay their debts is an appropriate outcome in competitive capital markets. It is well past time for creditors to recognize that.
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Alessandro Daliana Jul 1, 2015

Productive capital has always been the name of game. The only variations on it come from what portion of the value which is created goes to the capital owner, the worker, and the state: capitalism, socialism, communism, ... in all their various nuances.

The ability for a community to develop productivity gains is entirely incumbent on their relationship to property - man's relationship with property, to be exact - within the context of their belief system.

In Europe, there is a noticeable demarkation between north and south along the lines of Protestantism and Catholicism. Not a new story. Greece follows the Orthodox Christian tradition making it an outlier to the other two. However, since 1989, with the fall of communism, the Protestant approach to capitalism has washed over the world in the form of Globalization causing innumerable conflicts large and small. In the aftermath of the financial crisis, Italy had to impose an autocratic government, represented by Mario Monti and his ministers, to force a change toward this dominant economic paradigm. Since then, I don't think any of the successive Italian governments has been elected. The Italian experience has been anything but joyous for the Italian people even as they continue to make their way toward this reality. For Greece, once again, it is more challenging given its belief system and the bargaining power brought about by its relative size.

This brings me back to productivity gains. First of all, the country requires a legislative framework which can define various asset classes and their transferability, amongst other rights and obligations. Second, the economic system needs to provide a framework by which those assets can be exploited and the value derived so that it can be decided who gets what portion: capital owner, labor, and state.

America is able to make an asset class out of just about anything. And, derivative products follow close behind. But not all countries can for the very simple reason that man's relationship to property is different. As we move from West to East, relationships are much important for survival than property.

The bailout failed because the structural changes addressed the institutions that kept the system working in specific way but did little to put in place new mechanism which ultimately might fail because they are based on an alien concept of man and property.
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Michael Public Jul 1, 2015

Finally, some level-headed practical thinking on the matter.
- Albert Aftoora Jul 5, 2015
  
  We should have learned that without the "consent of the governed" no program to improve productivity, reduce public benefits, and increase the willingness to support the government can possibly succeed. It is time that Greece leaves the euro currency regime.
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Jerry hough Jul 1, 2015

Economic analysis must lie on firm political analysis.

The Euro was part of the German export strategy within Europe and was intended to price competitors out of the market. It was combined with pressure on banks to lower lending standards to create demand in the poorer periphery--and perhaps with promises to bail them out, if necessary.

Politicians in the periphery, like Bill Clinton and George W. Bush in the US, have a strong interest to keep the good times rolling during their brief time in office. Let successors worry about the consequences.

The way to get reform in the last five years has been to link the pain with nationalism. One can doubt that it needed to take six years to reach this point and leave the Euro, but that is where we are. The Greek governments can now take that pain and will.

The West now will have to help in that effort because of the fear of Putin. If the West has been smart, it has wildly exaggerated in its description of Putin to set the stage for this. But anyone who thinks political leaders act--or can act--with this type of sophistication is normally quite wrong.
- Albrecht Hof Jul 3, 2015
  
  The EURO was simply the price Germany had to pay for it´s own unification. There was never any other strategy behind, especially no export strategy.
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Paul Daley Jul 1, 2015

It seems this lecture should be addressed to the IMF itself. If Greece is such a bad risk, then why is the IMF on the hook for so much in Greece?
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T Selvakumaran Jul 1, 2015

Why did the Greek bailout fail? The Greek bailout failed because IMF economists had been advising the EU officials based on a static analysis that took only economics into consideration. Whereas a dynamic interplay between law and economics has been going on all the while:

The treaties that constitute the European Union, that were signed into law, between 1950 and 2000, were based on the expectations and assurances provided by certain economic models. These economic models advocated balanced budgets among the member states, with specific limits on their budget deficits. Continuing these same expectations, when the Euro currency was designed and introduced in the late 90s, sound money policy was the basis for the economic models that were used for policy analysis. From there on, the EU institutions believed that they had codified these economic models into a legal framework through treaty obligations, rules and regulations binding the member states.

This legal framework is what the EU institutions adopt as the basis of their policies. They do not go by the preferences expressed by elected governments, nor do they allow for any changes in the economic models. Policies/treaties that were already committed by the member governments forms the basis of any discussions that these EU institutions undertake. Thus in the case of Greece, the baseline scenario that the so-called Troika [ECB, EC, IMF] would consider earlier commitments made by previous governments -- a steady state of 4.5% primary surplus, cuts in pensions, raising retirement ages, tax raises, etc. Any self-righteous protestations by the newly elected Syriza government that the GDP has contracted 25% since the time the austerity program began five years ago, would be acknowledged respectfully, but the Troika officials would not know what to do with that information. The economic models that were frozen into a legal framework between the 18 Eurozone countries does not deal with these situations. Starting with the baseline, the current phase of negotiations from February to June of 2015 would have only allowed for minor deviations from the baseline. Thus, the Greek government had little chance from the beginning.

However, the situation with the economic models changed drastically after the economic crisis of 2008. Following the unconventional monetary policy experiments tried by the Federal Reserve in America, the ECB realized that it would have to abandon its sound money policy. Instead, it would have to do QE. At this point, the institutional inertia of the Troika still did not allow for any recognition that the original economic models based on so-called market fundamentalism were proven terribly inadequate after the economic crisis of 2008.

As a result, even while all the goodies of QE that were obtained by unlimited money printing were to be shared among the EU Core countries, the Troika continued to insist on austerity for the peripheral countries. This post-2008 disconnect between law and economics ended up undermining the credibility of the Troika. This is the main reason why no matter how much the Greek government would have bought into the reform program proposed by the Troika, it would not have succeeded.
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hari naidu Jul 1, 2015

If you've had any connection to Greece, including tourism, you know it is run by a monumental corrupt power structure - from ancient times. The walls of power are as corrupt as those outside...EU bailout (since 2010) has already poured E320 billion and counting. Money of course is necessary to avoid total breakdown of Greek society - but why is there no political partner on the other side to (1) do the required structural reforms and (2) mend the ways of accountable governance in Athens....
Greece will soon become a basket case and go down in EU history as a classical case study - ie. EU institutions were not
built to deal with Greece type of political irredentism & incapacity to function as a sovereign.
It's a very sad day for Greek people who have not been able to reject their post-war corrupt political establishment and start from a new paradigm.
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Paul Dix Jul 1, 2015

Structural reforms etc are part of the issue, but surely the deflationary effect of the creditors' demands render the Troika's approach untenable. Demanding budget surpluses for debt write-down from an economy on its knees is not credible.
- Shoshon Tama-Sweet Jul 2, 2015
  
  Agreed- squeezing money from a collapsing economy is not a credible plan for inducing 'growth'. But then, its more about power, who uses it, and how, than economics.
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Robert O'Regan Jul 1, 2015

Surely you are embarrassed by this pathetic attempt to paper over the problem. This arrogant distortion of the activities, condoned by you and your tribe, is reflective of the rot in the underpinnings of the global economy. Wheeee!
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Robert Flood Jul 1, 2015

We knew this would happen when the ECU was proposed w/o fiscal shock absorbers - not Greece in particular, but we knew there would be problems. Some default on official debt is a second best to cross-state fiscal adjustment
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M M Jul 1, 2015

The situation in Greece today has gone by far beyond economics, politics, history, geopolitics and so forth. There is a calamity being created today and everyone is pointing the finger of blame at the other and at various scenarios that may or may not have taken place in the past and even if they did, the circumstances under which they would have done were totally different than today’s times. We live in a very fast moving world. Rigidity does not work. A shoe seller from England, a country outside the Eurozone, was able to come up with one solution. Where have they been all these political leaders, big financial brains, high achievers, etc. all this time? Not even one single workable solution? Disaster, to say the least..….
- Odysseas Argyriadis Jul 2, 2015
  
  As a Greek, I would agree on the calamity part. This week we are experiencing black propaganda in favor of one of the referendum votes from the media and government oposition parties. An older person described the talk in media as "worse than civil war rhetoric". It seems people are being propped up for a civil war : /
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Adrian Lucas Jul 1, 2015

It is difficult not to go along with this analysis: the Greek electorate as a whole has never seemed willing to admit that a dual labour system (i.e. government jobs for life; precarity for everyone else), protection of professionals and existing businesses (i.e. excessive regulations to stem competition), and early retirement, are not fair to the Greek demos as a whole. One day an academic (Stella Ladi?) needs to explain why Greece's various attempts (e.g. the Politeia program started before the financial crisis) to introduce new public management did not deliver the transformational changes expected of them. What we will probably learn is that post-2010 Greece only implemented cost-cutting reforms, but no quality reforms.
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