The Greek crisis continues to take centre stage in policy debates. This column provides insight on the topic using evidence from three recent IMF studies. A suggested programme for Greece includes debt relief (debt equal to 50% of GDP and payable over 40 years), scaling down the banking system, and setting a flat 0.5% of GDP primary surplus over the next three years.
Ashoka Mody, Thursday, June 18, 2015
Andreas Müller, Kjetil Storesletten, Fabrizio Zilibotti, Wednesday, May 27, 2015
In the policy circles, there are confronting positions regarding Greece’s assistance programme and the structural reforms it should implement. This column argues that the best response is pragmatism and sequential compromise. Efficiency requires an assistance programme providing the country with debt relief with an intervention of an institution such as the IMF. Thus, misconceived economic principles could bring large welfare losses for Greece and renewed financial instability in the Eurozone.
Biagio Bossone, Marco Cattaneo, Tuesday, May 26, 2015
Introducing a currency in parallel to the euro could help Greece repay its external debt and resume economic activity. This second column in a two-part series evaluates the different options and their effects on aggregate demand and fiscal sustainability. The authors propose a tax credit certificates programme, which they argue could generate new spending capacity and avoid the adoption of new austerity measures.
Biagio Bossone, Marco Cattaneo, Monday, May 25, 2015
To prevent it from defaulting on its debt, the Greek government might need to introduce a new domestic currency, in parallel to the euro. This column, the first in a two-part series, compares the current proposals for a parallel currency and discusses how such a policy instrument could promote economic recovery.
Miranda Xafa, Wednesday, June 25, 2014
The 2012 Greek debt restructuring was the largest one in the history of sovereign defaults. This column discusses the lessons from this historically unprecedented episode. Delaying the restructuring implied that externally held debt remained higher than it would have been otherwise. Supportive crisis management is necessary for smooth restructuring to take place in a currency union.
Peter Allen, Barry Eichengreen, Gary Evans, Friday, February 28, 2014
Greece needs debt reduction. This column argues that instead of offering another lengthening of maturities and reduction in interest rates, Eurozone leaders should seize the occasion and implement debt-for-equity swaps that would encourage foreign investment, speed privatisation and jumpstart the Greek economy.
Vasiliki Fouka, Hans-Joachim Voth, Wednesday, October 23, 2013
The EZ crisis increased north-south conflicts between bailout providers and recipients – especially between Germany and Greece. This column shows evidence that political conflict directly translated into losses of market share for German car producers in Greece – especially in areas where German armed forces committed massacres during World War II. Six decades later, memories of conflict are never far from the surface in Europe.
Charles Wyplosz, Monday, September 23, 2013
Greece is in dire straits; it will need more debt relief. This column argues that Greece is suffering because northern EZ countries kicked the can down the road by forcing crisis countries to borrow rather than restructure their debts early on. It is time for the ‘generous’ lenders to face the consequences of their short-sightedness. The bad news that Chancellor Merkel ought to break now to her people is that official debt restructuring is inevitable.
Olivier Blanchard, Friday, March 23, 2012
The Greek package has cheered up markets. In this column, the IMF’s Chief Economist Olivier Blanchard argues that the programme deals squarely with the two most fundamental issues facing Greece – high debt and low competitiveness. And it is also fair, asking for sacrifices of both Greece and its creditors.