Pelgidis mitsopoulos whos to blame for greece; austerity in charge of saving a broken economy (2016)

Who’s to Blame for Greece? Who’s to Blame for Greece? Austerity in Charge of Saving a Broken Economy Theodore Pelagidis NR Senior Fellow, Brookings Institution, USA and Professor of Economics, University of Piraeus, Greece and Michael Mitsopoulos © Theodore Pelagidis and Michael Mitsopoulos 2016 Softcover reprint of the hardcover 1st edition 2016 978-1-137-54919-8 All rights reserved No reproduction, copy or transmission of this publication may be made without written permission No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988 First published 2016 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010 Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN 978-1-349-58058-3 ISBN 978-1-137-54920-4 (eBook) DOI 10.1057/9781137549204 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin A catalogue record for this book is available from the British Library A catalog record for this book is available from the Library of Congress Typeset by MPS Limited, Chennai, India To Elli, Mark and the new baby boy who has arrived the same month as the book! (T.P.) To Georgia and our daughter Veronica (M.M.) Contents List of Figures and Tables xi About the Authors xv Introduction Part I The “Party Period” before the Crisis 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? 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 vii 7 10 11 14 15 16 18 25 26 28 31 31 31 34 34 viii Contents 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 IMF and EU Reports on Greece 4.1 IMF reports during the accession period (’90s) 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 with regard to fiscal consolidation and the content of the related initiatives 4.1.5 References to the reliability of statistics/extrabudgetary expenditure items 4.2 The implementation of the conditionality program: fiscal consolidation and the issue of spending cuts vs 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 35 38 40 40 45 56 56 59 60 62 64 68 68 74 77 80 81 85 Part II Greece’s Free Fall 2010–2013 The Troika Period Reconsidered 5.1 The Greek public finances and debt: a brief overview 93 93 Contents ix 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 to Chapter 5: OECD structural indicators in key network industries 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 101 101 103 107 110 117 117 118 123 127 136 139 140 145 Part III Looking Ahead 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 155 155 156 159 181 192 Giving Greece a Chance to Succeed 195 How to Design a Closer and More Democratic Union 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 205 205 206 x Contents 10 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 209 215 Conclusions 218 Afterword The Greek Bail-out Drama: Is This Time Different? 225 225 Author Index 228 Subject Index 230 List of Figures and Tables Figures 2.1 McKinsey presentation of lack of adjustment mechanism in euro area 12 2.2 Labor migration in key economic areas 13 2.3 Intra-EU and intra-euro area shares of export on total export of the two groups respectively 17 2.4 Divergence of current accounts within the EMU 19 5.1 Net revenue, primary expenditure, and interest expenditure of Greek central government budget 94 5.2 “Interest cover” of Greek general government 96 5.3 OECD structural indicators in key network industries 114 5.4 OECD PMR indicator: Greece and average of euro area countries that are also OECD members 115 6.1 Public and private sector employment to population ratio, 2013 125 6.2 Tax wedge in Greece, 2014 128 6.3 Self-employed to employees ratio, 2014 130 6.4 Compensation per employee, 2014: gross compensation, including all Social Security Contributions and value of benefits, thousands of euro per year 131 Annual gross compensation per employee, including all Social Security Contributions and benefits: thousands of euros per year, 2013 132 Personal income tax (PIT) and Social Security Contribution (SSC) revenue as % of GDP, 2012 133 6.7 Share of employment by company size class, 2013 134 6.8 Gross monthly basic wage per employee (including only employee Social Security Contribution) per company size class, euros per month 134 6.5 6.6 xi 222 Who’s to Blame for Greece? ultimately did not lead to retraction of the Greek economy with respect to the European countries that also faced a crisis, contrary to what the IMF was arguing And after 1994 they led to a strong upward swing that allowed Greece to join the EMU with credible prospects to deal with its deficiencies, and beyond Many other countries, like Finland, Ireland, and Sweden, also have implemented in the past fiscal consolidation efforts that were, successfully, matched with growth-enhancing reforms Thus even now, insisting on tapping into the significant growth potential that can be unlocked in Greece through an aggressive structural reform agenda, can help to turn around the fortunes of the country, and is actually a necessary condition to doing so if the current unfavorable economic and social dynamics are to be turned around Such an agenda has to build on the reforms already implemented and that by now are no longer negligible It has to give priority to reforms that will be highly visible to markets and it has to assist Greece with respect the administrative capacity, which was clearly higher in the countries cited previously Secondly, it is imperative that the performance of the Greek government should no longer be set as a precondition to the European prospects of the whole country While such a strategy might have had a rationale to try to coerce successive Greek governments into a more constructive stance, forcing them to face the enormity of the consequences for the whole country of failing to so, the strategy had two severe shortcomings Not only did this strategy effectively expel the productive part of the Greek economy from the euro area, given the flight of capital from the country and the high country risk premium More importantly, it actually played into the hands of the interest groups that had captured the government, and that saw in the conditionality program a threat to their privileges, while at the same time undermining those that tried to push for reforms Relatively, it made the protected interest groups even better-off An effort to cash in on the impact of the, non-negligible, reforms Greece has already implemented, and to build support for the reforms that still need to be implemented to build the critical mass of reforms to that which will be able to match the size of the fiscal and structural challenges at hand, needs to be based on the solid commitment that the European future of Greece will not be questioned At least as long as the current depression threatens so gravely economic and social dynamics in the country In addition, one has to acknowledge that traditional debt sustainability exercises are essentially pointless at this time While Greek governments, and possibly the Greek people who have been voters in a rather flawed democracy, share a large part of the responsibility for Conclusions 223 the current situation, the stance of the official sector lenders during the past years implies that they also share, now, a non-negligible responsibility for the current dismal situation, both because they supervised the partial implementation of the MoU and because they have contributed to the uncertainty regarding the European prospects of the country Instead of insisting that a depressed economy, that furthermore has to deal with the fallout of the ill-advised PSI of October 2011 and now the legacy of the capital controls imposed in July 2015, fulfills the criteria set by technical projections made by models constructed to perform during calm economic circumstances, they should devise a plan to use financial engineering as a means to bridge a financing gap till the country can recover Such an exercise should be benchmarked against the growth potential implemented and pending reforms can secure for Greece Such a plan, given that the credibility of the Greek government currently is so low, and with markets so suspicious with regard to the prospects of the country, has to make the most of financial engineering tools, like the EUREKA project and its variants and as envisioned in the emerging third MoU Also it will be necessary to incorporate the spirit of the positions championed for by the IIF in early 2011 in the tools to bridge over the period between implementation and the appearance of the first concrete results that can convince markets Trust and confidence by depositors and investors will be hard to win back, especially given the legacy of the PSI, capital controls, the legacy of Cyprus, and the track record of Greek political leaders This means that the margin to err again during policy design and implementation is non-existent at this point and that every step has to aim, above all, towards restoration of trust and confidence Finally, it may be necessary for the official sector to acknowledge that, by now, it has a share of the responsibility for the current situation This does not mean an outright haircut on the loans offered by the official sector, especially given that such a step would not work towards the building of trust and confidence Instead, it suggests measures to maintain the interest and capital payments that will flow outside the country every year at levels that are compatible with economic growth on the one hand and political stability in the country on the other hand Last, but not least, Europe has to adopt a strategy that will no longer put in question the ability of the Union to survive That is not because it will not survive a possible expulsion, direct or indirect, of the country that questioned the “no bail out clause,” but because a Union that is not willing to preserve its integrity will be exposed to numerous other risks over time 224 Who’s to Blame for Greece? References Mitsopoulos, M and T Pelagidis (2011), Understanding the Crisis in Greece, London: Palgrave/MacMillan, Second Revised Paperback Edition Pelagidis, T and M Mitsopoulos (2006), Analysis of the Greek Economy: Rent Seeking and Reforms (in Greek), Athens: Papazisis Publishing House Pelagidis, T and M Mitsopoulos (2010), The Turning Point for the Greek Economy How a Progressive Pragmatism Can Put it Back on a Path of Growth (in Greek), Athens: Papazisis Publishing House Afterword The Greek Bail-out Drama: Is This Time Different? After the NO prevailed in the referendum of July 2015, Tsipras made a 180° U-turn1 and after a couple of weeks reached an agreement with the creditors, substantially surrendering to their demands Now, after that preliminary deal, economists and analysts around the world, believing a Grexit almost inevitable just a month ago, insist that the proposed deal between the Greek government and the creditors is only band aid for Greece’s economy and so, it will not work Of course, after five years of depression, having the troika back in Athens to discuss a new package of what we call “reform austerity” is not the easiest thing in the world However, this time it seems those preconditions for a viable solution are well in place – with one big “if.” Let us explain why First, it seems that the Greeks have now understood that there are no easy or viable policy alternatives to a deal, so any reactions to the agreement are expected to be rather mild Voters not (at least by mid-summer 2015) recognize the last five months as a disaster for the economy and, instead, they seem to believe that Prime Minister Alexis Tsipras did the best he could to negotiate effectively with the creditors So, if Mr Tsipras cannot deliver something better for them, nobody can Second, the Europeans now understand that only Mr Tsipras – a leftleaning, highly popular at least for the time being, Prime Minister – can not only pass the bills of the prospective agreement but more importantly guarantee implementation with minimum social unrest Some commentators will caution that Mr Tsipras openly expresses doubts about the political orientation of the agreement and questions the “social fairness” of it, but what you expect a politician to tell voters? That he is enthusiastic about the program? Third, the Europeans this time seem to be determined to use the “carrot and stick” method The carrot is called “reforms for money” and “reform for some debt forgiveness, of any kind.” If the creditors play well, the program might deliver results this time The stick is called “a temporary Grexit” and will be used to convince not only the government but also the domestic political system as a whole that it must comply with the rules of the prospective agreement 225 226 Afterword Fourth, the Europeans seem now to agree on some kind of re-profiling of the Greek debt This will serve as a victory for Mr Tsipras in the eyes of domestic voters and protect his popularity This is indispensable if the creditors want reforms to pass and, this time, to see them efficiently implemented in the real economy The creditors now understand that the focus should be on the real implementation of reforms, most of which were very effectively described in the IMF 5th review from summer 2014, and which are still waiting to be applied in the real economy Fifth, this time the external environment is much better than it was two or four years ago Eurozone growth rates are steadily improving, the European Central Bank’s Quantitative Easing (QE) program continues to mutualize the Eurozone’s debt (that will hopefully include Greek bonds), and French President Francois Hollande’s proposals last week regarding the urgent need for a “eurozone government”2 show that European leaders now understand that the multiples deficits—institutional, democratic, and financial—of the euro have to be addressed this time immediately and substantially Delays in effecting such changes will only favor the extreme political forces arguing not only for the dismantling of the euro area, but for a break-up of the entire EU project Now for the “if.” As July 2015 data reveal a large drop in private sector employment, the point made by European Council president, Donald Tusk, during his interview to the European media on 17.7.20153 regarding the importance of youth unemployment with respect to the prevalence in Europe of a mutual support between the far right and the far left, sounds particularly relevant for Greece This mutual support Mr Tusk, a pragmatic politician and historian, argues has been observed before all calamities Europe has gone through As Mr Tusk correctly pointed out, the voice of extremist that questions everything resonates easily in challenging environments like the one Europe faces today This places particular demands on the voice, arguments, and policies adopted by political leaders who have to safeguard on the one hand austerity that paradoxically in the long-term secures prosperity, and to fence off the voices of populism As argued in Chapters and 2, the incompleteness of the Union has generated a self-fulfilling prophecy in Greece Disrupting the expectations that drive this process goes beyond the technical agreement and the details of it and is the responsibility of politicians—Greek and European Therefore without determined political leadership, like the one suggested by Mr Tusk, any technical agreement will not suffice to restore Greece to growth In order to save the day, political leadership has to make bold steps not in 2025, but now Only then will Greek and European leaders rise above the final Afterword 227 resting place of the tax-paying Greek private sector and have their own “Gettysburg Address moment” in European history This is something that especially German leaders and opinion makers should realize sooner rather than later, as an increasing number of Greek companies seek to migrate to neighboring EU countries discovering awe struck in the process what a reasonable country risk, friendly business environment, and predictable taxation really mean In spite of this big “if” and the evaporation of growth during the past months, Greece has a genuine chance to attract foreign investment, upgrade the value of its national assets, get more money from privatizations, increase the value of collateral holdings by the banks, and create more jobs and income and, thus, at last recover strongly With Greece and the Troika back at the negotiating table, this time could well be different Notes Mr Tsipras, an engineer with a degree and master’s from the National Technical University of Athens, famously had claimed, on May 23, 2015 during a speech to the Central Committee of his party, that SYRIZA had made a 360° turn, suggesting that Syriza had made a U-turn (which is a 180° turn) turning its back on the Memorandum http://youtu.be/fxWAy29anbg http://www.bloomberg.com/news/articles/2015- 07- 19/france- s- hollandeproposes-creation-of-euro-zone-government http://www.ekathimerini.com/199654/article/ekathimerini/news/ tuskeurope-was-close-to-catastrophe-over-greece Author Index Abowd, J., 11 Acemoglu, D., 149 Alcidi, C., 124, 191 Alesina, A., 12, 20n6, 75, 76 Anderson, J., 203 Ardagna, S., 76 Arestis, P., 14 Arghyrou, M., 15, 16 Azariadis, C., 202 Frankel, J., 21n10 Frieden, J., Giavazzi, F., 16 Giuliodori, M., Gros, D., 124, 162, 191 Guichard, S., 76 Habermas, J., 205, 206, 212 Hamilton, A., 143 Hausmann, R., 149 Bachmann, R., 146 Baldwin, R., 8, 9, 16, 21n11 Barroso, J M., 138 Batini, N., 76 Bayoumi, T., 9, 14 Beetsma, R., Blanchard, O., 11, 16, 76 Bordo, M., 9, 14 Bordogna, B., 200 Böwer, U., 170 Burtless, H., 119 Jonung, L., 9, 14 Kempf, H., Kenen, P., Krueger, A., 9, 13 Lambertini, L., Leigh, D., 76 Cacciatore, M., 74, 119 Chortareas, G., 15, 16 Cohen, D., 11 Colomer, J M., 208 Cooper, R., De Grauwe, P., 18, 20n8 DiNino, V., 21n11 Dixit, A.K., Draghi, M., 139, 150, 167, 203, 212, 213 Dunn, R., Duval, R., 110 Malliaropoulos, D., 109, 126 Masson, P., 14 McKinnon, R., 7, 10, 20n2 Michou, V., 170 Micossi, S., 212, 214 Mitsopoulos, M., 1, 26, 38, 59, 107, 108, 109, 124, 127, 136, 155, 162, 167, 169, 170, 175, 178, 182, 192, 196, 197, 198, 220 Mundell, R., 7, 14 Nicoletti, G., 107 Obstfeld, M., 8, 9, 13, 20n6, 21n9 Eichengreen, B., 8, 9, 14 Elmeskov, J., 110 Emerson, M., 10 Engel, C., 10, 21n8 Eurostat, 20n3, 20n7 Featherstone, K., 26, 53 Feldstein, M., Papadimitriou, D., 26, 53 Pelagidis, T., 1, 18, 20n5, 26, 38, 59, 107, 108, 109, 124, 127, 136, 155, 162, 167, 169, 170, 178, 182, 192, 196, 197, 220 Peri, G., 13, 20n6 Pisani-Ferry, J., 205, 213 228 Author Index 229 Ramaswamy, R., 15 Robinson, J., 149 Rose, A., 8, 10, 16, 21n8, 21n10 Trichet, J.- C., 150, 214 Tsibouris, G., 75 Sachs, J., 14 Sala-i-Martin, X., 14 Sapir, A., 150, 212, 214 Scarpetta, S., 107 Sloek, T., 15 Stallings, J., 203 Stanley, T.D., 8, 10, 21n10 Van Rompuy, H., 138 Venizelos, E., 140, 143, 144 Véron, N., 212 Ungerer, C., 170 Wolfers, J., 11 Wolff, G., 150, 212, 214 Xafa, M., 212 Subject Index abuse of office, 26, 27, 120 accession, euro area, 25, 80, 167 adjustment program, 75, 77, 80, 162, 197 administrative burden, 34, 97 administrative cost, 147, 149, 170, 171 agreements, 44, 60, 62, 98, 100, 167, 179, 193 airport, 32, 44 Airways, 43, 52, 95, 120 Annual Macroeconomic Database, AMECO, 197, 199 arbitration, 60, 80, 193 asymmetric shocks, 7–8, 12–13, 18 Atlas of Economic Complexity, 149 austerity, 27, 39, 40, 68, 78, 139, 155, 219–20 bake-off, 59, 104 bakeries, 52 balance sheets, 32, 141, 145, 195–6, 198, 200–1 Bank of Greece, see BoG banks, 32, 43, 64, 144, 196–200 BoG (Bank of Greece), 141, 196, 200, 201 bonuses, 163–4, 166, 179, 193 budget, 30, 32, 35, 45–6, 68–9, 71, 94–6, 122, 207, 211 central government expenditures, 93, 96 central government revenue, 95 Bureau van Dijk, see BvD buses, 33 business cycle, de-synchronization of, 7–10 business environment, 41–2, 51, 58, 62, 74, 81, 83, 103, 147 business sector, 41–2, 51–3, 58, 62–4, 74, 81, 83, 103, 147 see also private sector BvD (Bureau van Dijk), 170, 182 CA, see current account collateral, 143–4, 201–2 collectives, 44, 46, 117 common currency, 7, 9, 11, 13, 15, 17–19, 27, 30, 36, 81, 139 common currency area, 17, 20, 26–9, 59, 150, 205, 211 common decision making, 150 communications, mobile, 49, 59 Community, 82 companies larger, 133, 135, 175 smaller, 104, 175–6 compensation, 129, 131–2 of employees, 98, 100, 129, 159–62, 167, 172, 181 competition, 32, 36, 41–3, 49, 52, 58, 85, 107, 147, 182 Competition Commission/Authority, 63–4, 83, 103 conditionality program, 77, 138 conflicts/costs, potential sources of, 7–10 coordinated policies, 139 corruption, 26, 34, 49, 109, 120, 122, 155, 205–6, 216 COSMOTE, mobile communications subsidiary of OTE, 49 cost competitiveness, 60, 62, 170, 192 costs average, 179–80 cost cutting, 27, 36–8, 46, 58, 69, 72, 75, 77, 79, 81, 103, 106–7, 118, 142, 143, 219, 221 social, 28–9 wage, 61, 148–9, 183 Council, 2, 81, 86–8, 207 Council Decision, 87, 140 Council recommendations, 81–5, 218 crisis financial, 19, 197 fiscal, 197, 200 international, 39 230 Subject Index 231 currency, 8, 11, 149–50 current account (CA), 15–16, 19, 57, 73, 126–7, 189 debt business sector, 197, 200, 201–2 dynamics, 35, 87 gross, 98, 100 private, 200 public, 34–5, 93, 96, 140, 191 ratio, 84, 86 see also loans decree, 41, 48, 49, 50, 119 Delors package, 30 demand disturbances and trade, 10–11 Democracy, 208–9 democratic, 139, 146–7, 150, 206–8, 210, 215 demonstrations, 53 deposits, 138, 145–6, 195–7, 201 depression, 74, 118–20, 135, 142, 146, 148, 199–200, 202, 220–1 devaluation, 1, 8, 123–36, 143, 145, 148–9, 155–93, 198, 221 distribution of employees, 176–8 EA (Euro Area), 1, 8, 10–11, 13–20, 25, 52, 72, 76, 80, 82, 85–7, 93, 102, 107, 119, 121, 129, 132, 145–50, 157, 161, 167, 169, 170, 181, 190, 192, 195, 198, 201, 203, 205, 219, 220, 222 EC, see European Commission ECB (European Central Bank), 1, 7, 8, 9, 15, 29, 31, 38, 75, 76, 79, 80, 101–2, 140–2, 150, 195, 218 ECJ, see European Court of Justice (ECJ) economic activity, 7, 9, 97, 107, 143, 213 economic asymmetries, closer and more democratic union to heal, 205 economic growth, 11, 16, 197, 223 economic policy, see policy Economic Policy Conditionality, 101–2 Economist, The, 133, 146 economy, 1, 16, 33, 36–7, 39, 45, 63, 97, 108, 109, 123, 143, 162, 180, 219 competitive, 17, 103 depressed, 221, 223 global, 42 international, 48, 190 market, 109, 179–80 private, 33, 45, 93, 109, 142, 179, 182, 221 productive, 39, 135, 183, 201, 221 real, 146, 196–7 EEAG, see European Economic Advisory Group (EEAG) EFSF (European Financial Stability Fund), 141, 144 election rules, 207, 209–10 elections, 38, 44, 51, 82, 93, 120, 146, 148, 207, 208, 210–11 elections, European, 208–10, 215 electricity, 43, 51, 63, 111, 114, 144, 183–5, 193 electricity markets, 51–2, 64 ELSTAT, Hellenic Statistical Authority, 59, 106 EMI, see European Monetary Institute (EMI) employee contributions, 176–8 employees, 40, 43, 129, 134–5, 156–7, 159–67, 175–80, 192–3 full-time, 135, 175–6 salaried, 28, 124, 126, 135, 162, 166 tax-paying non-government sector, 109 total compensation of, 159, 167 employers, 40, 45, 61, 110, 137, 179, 193 employment, 7, 8, 9, 12, 26, 31, 37, 40, 60–2, 66, 67, 77, 78, 83, 84, 108, 109, 110, 119, 123–4, 126–7, 129, 132, 133, 135–6, 156–9, 162, 167, 175, 178–9, 186, 203, 221 and education, 40 in government and pensioners/ former government employees, 158 EMU, see European Monetary Union (EMU) 232 Subject Index energy, 32, 104, 129, 149, 175, 183–4, 186–9 energy cost, 175, 184–6 energy prices, 183–4, 187–8, 193 enterprises public, 33, 67 state owned, 32–3, 43, 46, 48, 51, 64, 68, 117, 126 see also companies and businesses EOF National Medicine Authority (Greek public entity that licences medicines), 47 EU (European Union), 80–1, 137, 146, 148, 206–8, 215 EU law (European laws), 206–11 EUREKA project, 127, 144, 223 Euro Area, see EA euro area crisis, 12 euro area exit, 107, 119, 145–6, 148 Europe, people of, 207–10 European bodies, 206–7, 211 European Central Bank, see ECB European citizens, 148–50, 208 European Commission (EC), 69, 75–6, 80–1, 83–4, 102, 132, 159–61, 170, 207–10 European Community, 29–30, 35, 37, 39, 41, 44, 47, 54 European Council, 97, 101, 207, 211, 218 European Court of Justice (ECJ), 208, 210 European Economic Advisory Group (EEAG), 73 European Monetary Institute (EMI), 87 European Monetary Union (EMU), 7–14, 16, 18–19, 30, 85 European Parliament, 207, 209–15 European Parliament election, 207, 209, 211 European parties, 215 excise taxes, 183, 185, 193 expenditure, 32–3, 35, 66, 68–9, 74–6, 95–8, 100–1 items, 66, 95–6, 137 primary, 82, 94 exports, 9, 17, 19, 181–91 energy intensive, 184, 186, 187 non energy intensive, 186, 187 expressions, 56–7, 61, 63, 65–8, 73, 77 external imbalances, 15–16 fertilizer, 50, 52 financial assistance, 80–1, 101, 140, 216, 219–20 financial institutions, 140–1, 198, 201, 203 financing, 79, 142, 145, 190, 196–7, 199, 201–3, 220 financing gap, 69, 106, 223 fiscal adjustments, 25, 35, 67, 74–5, 221 fiscal consolidation, 27, 34, 36–9, 64–5, 67–8, 72, 81–3 effort, 27, 35, 38, 57, 72, 74–6, 101, 142, 222 strategy, 74–5, 80, 137 fiscal policy, see policy Presidents report, 212, 214, 215 fuel, 52, 127, 143, 186–9 full-time employment, 176–7 GDP (Gross Domestic Product), 9–13, 30, 86, 93–5, 100, 133, 159–61, 170–1 estimated, 70 ratio, 34, 85, 94–5, 97, 198–9, 221 general government, 79, 96, 98, 100, 102, 132, 136–7, 157–8, 169, 195 general government entities, 79, 95, 102, 123, 192 government, 27, 33, 35, 37, 39–49, 51–4, 57–8, 69–70, 72, 82, 86, 101–2, 106–8, 117–18, 120, 138–47, 150, 197, 222 balances, 84 central, 93–6, 137 coalition 26, 29, 46, 100, 107, 196 control, 54, 57, 66, 72, 84, 93 deficit, 86, 101 employees, 109, 120 employment, 126, 158 expenditure, 1, 70, 105 intervention, 37, 63, 205 new, 36, 41, 49, 77, 93 personnel costs, 35 policies, 14, 49 revenues, 70, 94, 97 Subject Index 233 services, 109, 174 strong, 41, 82 subsequent, 48, 52 successive, 123, 129 successor, 50, 94 government bonds, 145 government budget, 42, 57, 94–6, 103, 137, 158, 197, 221 central, 94, 96 general, 96, 137 ordinary central, 96 government debt, 76, 95, 143–4, 198–9 general, 94, 96, 198–9 restructuring Greek, 143 government’s statements, 52 Greece and average of euro area countries, 115 economic policies in, 81 education, 40 employment, impact on, 31, 40 euro area, 157 Europe and the chances of success, 38–40 fiscal consolidation, 34–5, 45–52 golden years, 56–9 and Greek companies, 146 labor costs, 179 Maastricht treaty, 26–31 macro-environment, 31 and Portugal Source, 188 structural reforms and, 31–4, 40–5 tax evasion and reforms, 34 Greek crisis, 156, 195 GREXIT, 149, 197, 201 see also euro area exit Gross Domestic Product, see GDP gross monthly wage, 176–8 growth prospects, 37, 68, 119, 122, 138, 178 growth rates, 11, 16, 18 guidelines, 81–4 GVA (Gross Value Added), 172 Hellenic Republic, 106 Hellenic Telecoms, 59 hospital, 46, 47, 49, 78, 95 hotel, 149 households, 143, 195–6, 198–200 ICT (Information and Communications Technology), 34, 46, 60 IIF (Institute of International Finance), 143, 144, 223 IKA (Idryma Koinonikon Asfalisevn), primary private sector social security fund, 175–9 IMF (International Monetary Fund), 1, 28, 36–8, 46, 49, 54, 56–87, 101, 102, 108, 120, 127, 137, 140, 142, 148, 169, 178, 218–20, 222 industry, 129, 180, 183, 184, 187, 189 inflation, 7, 35, 40, 57, 80, 87, 197 Information and Communications Technology, see ICT infrastructure, 30, 34, 39, 40, 41, 43, 44, 50, 57, 60, 64, 117, 121, 122, 144, 155, 174 innovative/innovation, 57, 117, 135 interest, 32, 34, 69, 76, 95, 96, 148, 211 interest rate, 15, 29–31, 35, 72, 74, 76, 84, 87, 93, 98, 197, 198, 202 interest rate government, 84, 198 interest rate private sector, 197 internal devaluation, 8, 123–7, 155, 157, 159, 161, 169, 170, 173, 175, 179, 181, 183, 187, 189, 191, 192 International Monetary Fund, see IMF labor costs, 60, 120, 162, 167, 181–91 labor flexibility, 12, 19–20 labor market policies, 60–2 labor market reforms, 60, 61, 78, 80, 81, 108, 155, 175, 221 labor market rigidities, 11–14 law bankruptcy law, 64, 195 election law, 41, 82 EU, 207, 209–11 layoffs, 40, 43, 51, 74, 109, 120, 158, 175, 176 liquidity, 79, 143, 197, 199 liquidity, crisis, lists, closed, 208, 209, 215 lists, open, 209 loans to corporations, 159, 191 to household, 143, 195–6, 198–200 234 Subject Index loans – continued to non financial companies, 173, 191, 198–9 non-performing, (NPL) (NPL’s), 200–2 Main Financial Institutions, see MFI management, human resources, 54, 109, 118, 120 mandate, 29, 31, 136, 139, 147, 150, 207, 208, 210 manufacturing, 120, 149, 169, 174–5, 189 media, 53, 141 Medium Term Fiscal Strategy (MTFS), 69, 71, 77, 103–7 Memorandum of Understanding (MoU), 58, 101–2 metro, 32, 44 MFI (Main Financial Institutions), 196, 199 minimum wages, 61, 179 monetary policy, see policy monetary union, 9–10, 16–18 monopoly, 49 MoU, see Memorandum of Understanding MP (MP’s) Members of Parliament, 28, 33 MTFS, see Medium Term Fiscal Strategy National Reform Program, 83 ND (New Democracy), Greek political party, 28, 31, 100 net revenue, 94–5 network industries, 51–2, 81, 83, 103, 108 NFC (non financial companies), 198 non financial companies, see NFC OCA, see Optimum Currency Area OECD (Organization for Economic Development and Cooperation), 28, 49, 51, 63, 69, 74, 76, 110–15, 124, 128, 148, 183 OECD average, 69, 128 OECD Countries, 110 OECD Economics Department Working Papers, 114 OECD PMR index, 111–15 OMEDGreek mediation and arbitration organization, 179, 180 Optimum Currency Area (OCA), 7, 15 Organization for Economic Development and Cooperation, see OECD OTE Hellenic Telecommunications Company, 33, 44, 49, 51, 120 see also Hellenic Telecoms Parliament, 25–7, 35–6, 72, 101 PASOK Panhellenic Socialist Movement, Greek political party, 25, 28–30, 35, 41, 44, 53, 100 pension, 57, 64, 66, 83, 85, 94, 101, 123–4, 128–9, 136, 137, 155, 158, 169, 192 see also social security pension reform, 57, 64, 66 peripheral countries, shortage of money stocks for, 14–15 petroleum products, 188 pharmacies, 119 PIT Personal Income Tax, 101, 133 PMR, see Product Market Regulation (PMR) policy economic, 25, 27, 36, 81–4, 102, 139, 150, 208 fiscal, 8, 14, 27, 29, 30, 76–7, 78, 83, 205, 206, 213 monetary, 8, 9, 11, 18, 29, 139, 205, 211 structural, 215 policymakers, 2, 26 poll, 52 price stability, 32, 86–7 private sector economy, 145 employees, 108, 109, 124, 161 employment, 123, 125–6 lenders, 126, 141, 143 wages, 155, 170 Private Sector Involvement (PSI), 44, 196–7 privatizations, 27, 40, 43, 51, 62, 64, 66, 79, 87, 108 privilege, 107, 136, 180, 220 Subject Index 235 procurement, 29, 44, 45, 67, 83, 95 product market, 58, 59, 62, 82, 97, 105, 119, 170 product market reforms, 58, 62, 97, 105 product market regulation (PMR), 114, 170 professional services, 62, 64, 74, 81, 83, 103, 104, 108, 155, 162 program, 48, 51–2, 69, 72, 74–5, 77–80, 170 property, tax, 69, 143, 196 prophecy, self-fulfilling, 146 provisions, 30, 53, 104, 118, 122, 138, 144, 180, 201, 202, 210, 219 PSI, see Private Sector Involvement (PSI) public finances, 2, 93–110 public-private partnerships, 64 public sector employees, 54, 108–9, 121, 123, 126, 136 employment, 66, 108, 124 Public Telecom Company, 44, 49 see also OTE (Organismos Tilepikoinonion Ellados) railroad, 43, 52, 54, 102, 113 recession, 2, 9, 15, 18, 29, 37, 69, 74, 75, 77, 78, 79, 96, 97, 105, 118, 119, 142, 175, 220 Recommendations, Commission, 81 refineries, refinery, 42 reforms labor market, 60, 61, 78, 80, 81, 107, 108, 155, 175, 221 product market, 58, 62, 97, 105 structural, 25, 30, 31–3, 38, 40, 53, 54, 57, 58, 62, 63, 74, 76–80, 82, 87, 103, 105, 155, 167, 170, 220, 221, 222 request for financial assistance, 80–1 restructure, 33, 36, 79, 121 revenue, 69 road haulage, 54, 113, 119, 182 salaried labor, 129, 133, 136 salary, 43, 126, 161, 167, 176, 179 sectorial agreements, 179–80 self-employed, 124, 127, 129, 130, 136, 156, 157 self-employment, 126, 129, 135, 192 shipping, 60, 174 shipyard, 32, 43, 45 shop opening hours, 48 Siemens, 44–5 Single Market, 32, 211 social security, 33, 36, 40, 85, 97, 102, 103, 128, 129, 132, 136, 197 social security funds, 87, 93 social security system, 14, 47, 96, 107, 117 solar farms, 59, 144 solidarity, 94 SSC (Social Security Contributions), 128, 131–4, 136, 166, 169 statistics, 17, 47, 68, 126, 180 steel, 184–8 strike, 40, 43, 51, 53, 82 structural differences ensuring permanent shock-trends democratic mandates, 208–12 European parties, role of, 215–16 national fiscal and structural policies, 205–6 powers and democratic mandates, 206–8 structural reforms, 25, 30, 31, 33, 38, 40, 53, 54, 57, 58, 62, 63, 74, 76–80, 82, 87, 103, 105, 155, 167, 170, 220, 221, 222 structural policy, see policy subsidiarity, principle of, 212 Synaspismos, coalition of radical left political parties, Greek political party, 29, 33, 34, 44 SYRIZA, Coalition of radical left political parties, Greek political party successor to Synaspismos, 44 salaried, 129, 133, 136, 159, 161–2, 175 salaried employment, 124, 127, 129 tax authorities, 28, 34, 94 base, 124, 126, 132, 162 236 Subject Index tax – continued evasion, 34 high, 148, 183 TAXIS ICT system of the Greek tax authorities, 94 wedge, 128 taxpayer, 42 telecommunications, 32, 33, 42, 44–5, 48, 49, 51, 52, 63, 114 TEU (Treaty for the European Union), 146, 207, 211 textiles, 186, 187, 189, 190 TFEU (Treaty for the Functioning of the European Union), 118, 140, 211 tourism, 53, 60, 61, 149 transfer, 13, 14, 19, 30, 35, 49, 74, 209 fiscal, 12, 19 transport, 54, 113, 119, 182 see also road haulage treaty Maastricht Treaty, 26–9, 35, 39, 48, 72, 117, 140, 145, 148, 218 Treaty for the European Union, see TEU Treaty for the Functioning of the European Union, see TFEU Troika, 2, 38, 61, 68, 75, 93–115, 135–6, 155, 157, 161, 162, 170, 181, 183 see also EC, ECB, IMF UK (United Kingdom), 44, 45, 52 uncertainty, 1, 10, 16, 59, 72, 106, 110, 127, 140, 142, 145–7, 149, 150, 174, 175, 196–8, 203, 223 unemployment, 31, 221 unemployment benefit, 37, 40, 61, 74, 120, 137 UNICEN, see Union of Industrial Consumers of Energy (UNICEN) Union of Industrial Consumers of Energy (UNICEN), 184 US (United States), 13, 30, 143, 210 wage moderation, 60–2 wages basic, 162, 176–8 and earning, 159–80 gross, 171, 177–8 work arduous, 60 clandestine, 60 undeclared, 30, 144 Zavvos Committee, 50 ... trade transactions within a currency union and thus, take advantage of a common currency area Baldwin’s calculations for the increase of trade transactions within euro area have shown hardly a. .. concerned, labor flows of euro area nationals remained significantly low Indeed, net EMU-national and non-EM national migration to EMU has been sharply curtailed since the internal market was inaugurated... criteria with an additional one referring to the balance of the current account The main focus of the Maastricht criteria was on nominal variables An effort to meet such criteria was perceived to