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From Indecision to Fast-Track Privatisations: Can Greece Still do it?

Published online by Cambridge University Press:  26 March 2020

Nicos Christodoulakis
Nicos Christodoulakis*
Affiliation:
Athens University of Economics and Business, Department of International and European Economic Studies
*
e-mail [email protected]
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Abstract

This paper explains how the collapse of growth after 2008, in combination with soaring public and external deficits, led to the escalation of Greek debt, while the government's delay in responding to the crisis increased the cost of borrowing and necessitated the bail-out agreement with the IMF and the European Union. One year later, Greece is struggling to harness fiscal deficits amidst a deep recession and rising social tension. Debt sustainability has not yet been ensured and another tranche of loans has been negotiated under new terms and conditions, including higher taxes and extensive privatisations of public companies and property. The paper discusses the main failures of the bail-out agreement and why the lack of growth so far has undermined efforts at stabilisation. As an alternative, the paper suggests that with a modest return to growth, combined with fast-track privatisations, the prospects of debt sustainability improve substantially. In light of the recent debate on the European Stability Mechanism, the paper suggests that the bail-out facility should avoid the debt seniority condition, so that Greece could return to normal market borrowing after 2013 without raising new fears of ‘haircuts’ on private sector obligations.

Keywords

Debtfiscal policyGreeceH60H61
Type
Research Articles
Information
National Institute Economic Review , Volume 217 , July 2011 , pp. R60 - R74
Copyright
Copyright © 2011 National Institute of Economic and Social Research

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Footnotes

∗

I have benefited from various comments in seminars at the LSE Workshop on Greece organised by the Hellenic Observatory in November 2010, and from the AUEB-DIEES Research Day, in June 2011, where an earlier version of the paper was presented. Proposals on how to deal with the Greek debt and views expressed in this article are solely those of the author, and do not implicate or represent any other person or organisation.

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