Who's to blame for Greece? : life after bankruptcy : between optimism and substandard growth

This expanded and enlarged third edition of Theodore Pelagidis and Michael Mitsopoulos’ popular Who’s to Blame for Greece? covers almost a decade of Greece's economic crisis from 2009 to 2019, as well as recent developments in the first months of 2020. It provides an overview of recent developments in the Greek economy and outlines the most important obstacles to a return to robust and sustainable growth rates. It considers the new optimism being developed in Greece after the crisis, but also the policy challenges facing Greece emanating from a deeply hurt economy in the aftermath of the crisis and the structural problems that persist. The book covers the most recent issues that affect the Greek economy including, the migration crisis at the borders with Turkey as well as a faltering global economy hit by the Covid-19 pandemic. This book will appeal to researchers, practitioners and policy makers interested in the EU and the political economy of Greece and offers valuable updates on the second edition. Contents About the Authors List of Figures List of Tables Chapter 1: Introduction References Part I: The “Party Period” Before the Crisis Chapter 2: The Costs and Benefits for Joining a Common Currency with Emphasis on Weaker Member States: The Pre-crisis Debate 2.1 Potential Sources of Conflicts/Costs: De-synchronization of Business Cycles 2.2 Demand Disturbances and Trade 2.3 Responses to Labor Market Rigidities 2.4 Shortage of Money Stocks for the Peripheral Countries 2.5 External Imbalances 2.6 The Effect of a Monetary Union on Trade Between Member States 2.7 Ten Years of EMU (2000–2009): Convergence or Divergence Prevailed? References Chapter 3: Greece Before the Crisis: The Critical Years in Domestic Politics 3.1 The Discussion in the Greek Parliament Ahead of the Ratification of the Maastricht Treaty 3.1.1 References to the Strategic Advantages of EMU Membership and Issues that Relate to the Common Currency Area and the Chances of Success of the Country in It 3.1.2 References to the Impact on Employment 3.1.3 References to the Impact on the Macro-environment 3.1.4 References with Regard to Institutions, Structural Reforms, and the Role of the State in the Economy 3.1.5 References with Regard to Tax Evasion and Tax Reforms 3.1.6 References with Regard to the Issue of Fiscal Consolidation 3.2 Various Other Debates and Key Speeches in the Greek Parliament During the Term of the Government That Brought the Maastricht Treaty for Ratification by the Greek Parliament 3.2.1 The Role of Greece in Europe and the Chances of Success 3.2.2 Employment and Education 3.2.3 Growth-Enhancing Structural Reforms, Privatizations, and Infrastructure Projects and the Role of the State in the Economy 3.2.4 Fiscal Stabilization 3.3 Overall Assessment References Chapter 4: IMF and EU Reports on Greece 4.1 IMF Reports During the Accession Period (1990s) and the 2000–2009 “Golden Years” 4.1.1 Assessment of the EMU Accession 4.1.2 References to Labor Market Policies 4.1.3 Recommendations for Structural Reforms in Product Markets and Professional Services and the Content of These 4.1.4 References to the Reliability of Statistics/Extra-budgetary Expenditure Items 4.2 The Implementation of the Conditionality Program: Fiscal Consolidation and the Issue of Spending Cuts Versus Revenue Increases 4.2.1 Research with Regard to the Policy Mix of Fiscal Adjustments 4.2.2 IMF Progress Reports on the Greek Conditionality Program 4.3 European Union Bodies’ Reports and Decisions 4.3.1 Annual Country-Specific Recommendations by the Council, and European Commission Recommendations to the Council 4.3.2 The Decision to Admit Greece to the Euro Area References Part II: Greece’s Free Fall 2010–2013 Chapter 5: The Troika Period Reconsidered 5.1 The Greek Public Finances and Debt: A Brief Overview 5.2 The Run-Up to the Memorandum 5.3 What the Memorandum Initially Provided 5.4 Implementing the Memorandum as of September 2011 and the Medium Term Fiscal Strategy 5.5 Incentives and Unraveling the Impasse Appendix: OECD Structural Indicators in Key Network Industries References Chapter 6: Assessing the Intentions of the Government(s) Since the Ratification of the Maastricht Treaty 6.1 The 1990–1993 Program, Design, and Implementation 6.2 The 2010 Program: Design, Implementation, and Comparison with the 1990–1993 Approach 6.3 The “Internal Devaluation” Fallacy of 2010–2012 6.4 The Other Side of the Internal Devaluation Fallacy: The Approach to the Labor Market Deregulation During 2010–2012 6.5 The Lack of a Strategy to Enhance Growth: In Greece and in Europe 6.6 The Private Sector Death-Trap: Undermining the Financial Sector, Jeopardizing Macroeconomic Stability, and Questioning the European Future of the Country 6.6.1 The Private Sector Involvement (PSI) 6.6.2 Euro Area Exit References Part III: Looking Ahead Chapter 7: Greece: Why Did the Forceful Internal Devaluation Fail to Kick-Start an Export-Led Growth? 7.1 Introduction 7.2 Employment 7.3 Wages and Earnings 7.4 Labor Cost Indexes and Exports 7.5 Conclusions and Further Remarks References Chapter 8: Giving Greece a Chance to Succeed: Think About the Private Sector, for a Change 8.1 Introduction 8.2 The Greek NPL Problem 8.2.1 The Challenge of the NPLs and How to Deal with It from a Legal Point of View 8.2.2 Problems Related to the NPL Resolution and Company Restructuring: Liabilities of Managers 8.2.3 Problems Related to the NPL Resolution and Company Restructuring: State Super-priority and the “Out of Court” Business Debt Resolution Mechanisms 8.2.4 Problems Related to the NPL Resolution and Company Restructuring: Tax Issues 8.2.5 Problems Related to the NPL Resolution and Company Restructuring: A Bankruptcy Code and Process that Undermines Lender’s Rights and Encourages a Slow Liquidation Process that Destroys Value 8.3 Overtaxation in Greece Today with an Emphasis on Labor 8.3.1 Property Taxes 8.3.2 Taxes and the Structure of the Economy 8.4 What a Useful Solution Would Look Like and How It Would Be Paired with a Stronger and More Democratic Union References Chapter 9: Structural Differences Ensure Permanent Shock Trends That Play into the Above. A Closer and More Democratic Union to Heal Economic Asymmetries and Help Southern European Countries Such as Greece 9.1 The Compromise of the Euro Area: Common Monetary, National Fiscal, and Structural Policies 9.2 Evaluating the Current Structure of Powers and Democratic Mandates 9.3 How Changes in the Structure of the Democratic Mandates Can Secure a “Closer and More Democratic” Union 9.4 The Role of European Parties References Part IV: How Populism (2015–2017) Destroyed a Country with High Potential Chapter 10: The Rise of Populism in Greece and the Impact on the Economy 10.1 Introduction 10.2 The Rise of Nationalistic Populism 10.3 Radical Nationalistic Populism Takes Over Power 10.4 The Authoritarian Streak 10.5 The Policy Context 10.6 Crisis and the Political Market 10.7 Tough Times for the Foreseeable Future? References Chapter 11: Latest Developments as of December 2017 11.1 IMF and Greece 11.2 Once Again, Politics as Sand in the Wheels of Economic Recovery 11.2.1 Politics Leading to Economic Crisis? Europe and the Threat of “Exits” 11.3 Primary Fiscal Balance 3.5% of GDP. Is It Really an Obstacle for Growth? 11.4 On Debt Again and Greece as Puerto Rico of Europe 11.5 Greece Out in the Markets Again? References Chapter 12: Conclusions References Part V: Life After Bankruptcy: Between Optimism and Substandard Growth Chapter 13: How “More Europe” Can Heal the Current Institutional Divergence Hurting in Particular Weaker Member States Like Greece 13.1 Why a Deeper Unification Is Urgently Needed 13.1.1 Introduction 13.1.2 A Dysfunctional European Status Quo 13.1.3 Political Uncertainty, Economic Underperformance 13.1.4 Political Edges Are Gaining Ground 13.1.5 The Way Forward 13.2 The Price of Diverging Institutions 13.3 Conclusion: COVID-19 Is Speeding Up Europe’s Japanification or It Constitutes an Opportunity for Europe to Complete Itself? References Chapter 14: From Viking Kleptocratic Pressure Groups to State Capture Through Populism: Buying Votes Through Rent Seeking Clientelistic Partitocracy 14.1 Introduction: The Inconvenient Truths About the Greek Regime. Lessons for the Creditors 14.2 The Macroeconomic Stability, the Efforts to Return Back to Normal 14.3 A Note on Debt Sustainability and Growth 14.4 The Recovery of the Job Market 14.5 Conclusions Appendix 1: Tax Developments in Greece Before and During the Crisis Period References Chapter 15: In Defense of Manufacturing 15.1 Introduction: Why Manufacturing Still Matters 15.2 Why a Revival of Greek Manufacturing Is a Prerequisite to Ensure a Prosperous Future for the Country and How to Achieve It 15.2.1 Introduction 15.2.2 The Link Between Manufacturing and the Path to Prosperity for European Countries 15.2.3 A Revival of the Productive Base as a Prerequisite for the Survival of Greece 15.2.4 The Importance of a Close Collaboration Between the Private and Public Sectors to Support the Productive Base of the Country and Its Growth 15.3 Conclusions Appendix: Employment and Wages in Manufacturing References Chapter 16: Greece’s Comparative Advantage as China’s Backdoor to Europe 16.1 The Silk Road Project 16.2 EU: To Create or Divert Trade with China? 16.3 Piraeus as a Backdoor? Chapter 17: Taxing Ourselves to Death: Greece’s Tax Regulations 17.1 Introduction 17.2 The Combined Effect of Uncertainty Along with High and Very Progressive Taxation on the Private Sector Wage Bill 17.3 Where Is the Missing Tax Revenue? It Is Not Only Tax Evasion: It Is Also the Tax Base That Is Missing Because of the High and Progressive Taxation of Private Sector Salaried Labor 17.4 Conclusions Chapter 18: How to Finance a Tax Wedge Cut in a Way That Supports Work and Families Appendix References Chapter 19: The Greek Economy After Populism: Between Optimism and Substandard Growth 19.1 Economic Optimism for the Second Half of 2019 19.2 The New Government Policy Recipe 19.3 What Explains GDP Persisting Weakness? Out of the Doldrums but Structural Problems Still There 19.4 Greece’s Economy Facing COVID-19 in a Darkening International Economic Environment Chapter 20: Final Remarks Author Index Subject Index