Current and Recent Activities
Greece and the Euro: From Crisis to Recovery, Fletcher School of Law and Diplomacy, April 12, 2019
Greece and the Euro: From Crisis to Recovery
April 12, 2019, 9:00am-6:30pm,
Cabot Builiding, 160 Packard Avenue, Medford 02155 MA
The conference was organised by Prof. George Alogoskoufis, Karamanlis Chair, Fletcher School, and Prof. Kevin Featherstone, Venizelos Chair, London School of Economics. The conference has been organized with financial support from the Onassis Foundation.
The purpose of the conference was to assess the causes of the Greek crisis and the prospects for the Greek economy after the conclusion of the economic adjustment programs in 2018.
The morning plenary sessions and the afternoon two parallel sessions concentrated on the economics and politics of reform in Greece.
The conference was opened by Prof. Ian Johnstone, Dean of the Fletcher School. The keynote address was by Prof. Lucas Papademos, Member of the Academy of Athens and former Prime Minister of Greece, who was introduced by Prof. Steven Block, Academic Dean of the Fletcher School.
Two panels of speakers provided overviews of the economic, institutional, political and cultural aspects of Greece and the Euro, both before and after the crisis.
These included, in alphabetical order, George Alogoskoufis (former Minister of Economy and Finance of Greece), George Chouliarakis (Alternate Minister of Finance of Greece), Nikos Christodoulakis (former Minister of Economy and Finance of Greece), Kevin Featherstone (Head of the Hellenic Observatory at the LSE), Stathis Kalyvas (Gladstone Professor of Government, Oxford University) and Panagiotis Roilos (Seferis Professor of Modern Greek Studies and of Comparative Literature, Harvard University). The two panels were chaired by Prof. Yannis Ioannides (Max and Herta Neubauer Chair and Professor of Economics, Tufts University) and Prof. Constantine Arvanitopoulos (Professor of International Politics, Panteion University).
The afternoon sessions, in which papers were presented by a number of leading economists, political scientists and other experts, concentrated on more specialized aspects of reform of both Greece and the euro area. The sessions were as follows:
The Euro Area After the Crisis
Chair: George Chouliarakis (Ministry of Finance)
Yannis Ioannides (Tufts), Reforms, Deficits and Debt: a Unifying Framework for a Fiscal and Monetary Union
Athanasios Orphanides (MIT), Overcoming the Euro Crisis.
George Alogoskoufis (Fletcher and AUEB) and Laurent Jacque(Fletcher), Economic and Financial Asymmetries in the Euro Area
George Pagoulatos (AUEB and ELIAMEP), The Euro Area after the Crisis: An Economic and Political Stocktaking
Fiscal, Financial and Labor Market Reforms
Chair: Ploutarchos Sakellaris (AUEB)
Apostolis Philippopoulos (AUEB) and George Economides (AUEB), Fiscal and Institutional Preconditions for a Sustained Recovery
Eleni Louri (AUEB) and Petros Migiakis (Bank of Greece), Financial Preconditions for a Sustained Recovery
Vassilis Monastiriotis (LSE), The Labor Market and Greece’s Unemployment Problem
Productivity, Income Redistribution and Growth
Chair: Nikos Christodoulakis (AUEB)
Nikolaos Leounakis and Ploutarchos Sakellaris (AUEB), Greek Economic Growth: Past and Future
Eirini Andriopoulou, Eleni Kanavitsa and Panos Tsakloglou (AUEB), Income Re-Distribution: From Crisis to Recovery
Institutional Reforms for a Sustained Recovery
Chair: Angelos-Stylianos Chryssogelos (Harvard)
Stella Ladi (Panteion, QMC) and Manto Lampropoulou, Market Regulation via Independent Agencies in Post-Crisis Greece
Calliope Spanou (UOA), Competing Frames and Domestic Discretion: Public administration reform in Greece
Georgia Kaplanoglou (UOA), Fiscal Institutions and the Monitoring Public Finances: The case of Greece
Political Reforms for a Sustained Recovery
Chair: Stathis Kalyvas (Oxford)
Spyros Kosmides (Oxford), Public attitudes towards domestic reform: Continuity and Change
Dimitri A. Sotiropoulos (UOA, Fletcher, Harvard), State-society relations and Domestic Reform Coalitions in Greece in Comparative Perspective
Kevin Featherstone (LSE) and Dimitris Papadimitriou (Manchester), External Discipline and the Greek bailouts: Process makes Politics
Greece’s Foreign Relations after the Crisis
Chair: Stratos Efthymiou (Ministry of Foreign Affairs)
Katerina Sokou (GWU and Kathimerini), Fast Forward: The Return of Geopolitics in US-Greece Relations
Spyros Economides (LSE), Greece’s Foreign Relations after the Crisis
Kyriakos Mitsotakis, Leader of the Opposition in Greece, at the Fletcher School, March 7, 2019
He gave the annual Behrakis Family Lecture. The Behrakis Family Endowed Lecture Series, within the Constantine G. Karamanlis Chair in Hellenic and European Studies, is presented annually to promote the understanding of Greece’s domestic and international affairs.
He was introduced by Professor Ian Johnstone, Dean ad interim of The Fletcher School, while Professor George Alogoskoufis moderated the conversation.
Athens News Agency
March 7, 2019
Describing the economy as the issue that will determine the outcome of the forthcoming elections, main opposition New Democracy (ND) leader Kyriakos Mitsotakis on Thursday estimated that 2019 will be a decisive year for the country’s path to recovery.
During his speech at Tufts University, the leader of the main opposition party argued that the country needs a “political change” to achieve stronger growth that would be sufficient to actually improve the daily lives of Greek citizens.
Mitsotakis said that he hopes that 2019 will be a year of significant and substantial political change. “I am not saying this because it is my obligation to do so as opposition leader but because I fundamentally believe that political change is now a prerequisite for Greece to face the future with sustainable optimism,” he added.
Mitsotakis estimated that for the first time markets view the possibility of elections as a positive development that will help consolidate stability.
Moreover, he analysed the main pillars of his economic programme, which, he said, focuses on investment and aims at growth.
“I am very worried about inequality,” he said and added: When I proposed the development plan for the next day, I was always talking about growth without exclusions. Therefore, growth in Greece today must be driven by investment. It can no longer be driven by consumption, as was the case in the past. And in order to promote growth through investment, some basic conditions must be created.
Regarding how Greece will become an attractive investment destination, Mitsotakis noted that he will “aggressively” move to improve the business environment through the methodical implementation of targeted reforms that will correct the systemic causes of corruption and bureaucracy.
A Seminar with President Hollande at the Harvard Kennedy School, March 10, 2019
Professor George Alogoskoufis chaired a seminar with Francois Hollande, President of the French Republic 2012-2017, on the European Union and the transatlantic relation, at the Harvard Kennedy School of Government, on Sunday, March 10, 2019.
The seminar was organised in the context of the annual Europe Conference of students from Harvard and the Fletcher School, Tufts University, and was attended by both faculty and students from the two institutions.
President Hollande made an opening speech, and there was an extensive Q&A session coordinated by Professor Alogoskoufis. The discussion revolved around issues such as migration, enlargement, the economy, trade, and the governance of the European Union and the Euro Area.
The Euro Area at Twenty: A Reality Check, Talk at Harvard, December 4, 2018
All periods of monetary cooperation in the European Union were characterized by significant macroeconomic and financial asymmetries among member states in the core and the periphery, but also by different degrees of monetary integration.
With the deepening of monetary cooperation, in the evolution from the snake to the euro, some of these asymmetries were addressed, while others were not.
The main asymmetries addressed by the EMS and the Euro were nominal asymmetries, such as asymmetries in inflation rates.
When the euro was created, very little was done to address the remaining real and financial asymmetries, effectively shifting the burden of adjustment to individual euro area members and their fiscal systems.
In the first ten years since the creation of the euro, real asymmetries resulted in the build up of significant external imbalances between the core and the periphery of the euro area, and, eventually contributed to the eruption of the euro area crisis.
The main financial asymmetric shock appears to have been the creation of the euro itself, which initially brought about the convergence of nominal and real interest rates between the periphery and the core. Nominal and real interest rates in the periphery converged very quickly to the lower levels that existed in the core, as the premium due to exchange rate risk disappeared. In fact, as inflation rates converged much more slowly than nominal interest rates, real interest rates in the periphery fell even more. This convergence resulted in a widening of savings and investment imbalances in the periphery, which up until then had relatively high nominal and real interest rates.
The convergence of interest rates brought about the widening of external imbalances, the buildup of external debt by the countries of the periphery, and created the pre-conditions for the euro area financial crisis.
This process was exacerbated by the “home” bias of banks in the countries of the euro area, due to the fact that the euro area was not a banking union.
The euro area crisis was essentially an “external” debt crisis in an economic and monetary union with a single currency, but major economic and financial asymmetries and significant governance problem areas.
As a result, the euro area crisis of the 2010s was, at the end of the day, no different than other regional financial crises involving indebted economies, such as the Latin American crisis of the 1980s and the Asian crisis of the 1990s.
The ‘sudden stop’ led to a significant crisis rather than a more manageable problem since EA members could not devalue and the ECB could not bail out the governments of the periphery.
A confidence crisis followed, first about the countries of the periphery, but later about some of the core countries, regarding their ability to service their public and private external debts. This was exacerbated by the delayed and unsuccessful initial efforts to address the problem.
The proximate causes of the crisis – imbalances and lack of effective crisis management mechanisms –tell us that there are really three sorts of underlying causes:
- Design and policy failures that allowed the imbalances to develop and get so large
- Lack of institutions to absorb shocks at the EA level.
- Crisis mismanagement
Some of these failures involved unanticipated events. Others were systemic and others were due to a failure to implement the provisions of the treaties.
The major systemic problem areas included,
- Major differences in the product mix between the core and the periphery
- Fragmented national labor markets and low cross border labor mobility
- Widely different fiscal systems
- Imperfect financial integration and lack of effective cross border financial regulation
- An extremely low federal budget that would act as an automatic stabilizer through transfers from booming economies to economies suffering from recession
- Lack of a lender of last resort to banks and sovereign governments it times of crisis.
A result of the major asymmetries and other economic and governance problems of the euro area is the fact that adjustment efforts since the crisis have shifted the burden exclusively towards the weaker economies in the periphery of the euro area, which suffered deep recessions, a significant rise in unemployment, continuous tax rises, exorbitant social costs for young workers and old age pensioners, and rises in government debt to GDP ratios.
The euro area is in urgent need for additional fiscal, financial and labor market reforms.
The most important one is a significant EA budget, through a moderate and appropriately targeted increase in the EU budget. This would help smooth out the asymmetric impact of macroeconomic shocks through the operation of automatic fiscal stabilizers. It would also help EA countries in recession face fewer fiscal and financial consequences of such recessions, and would also partly address labor market fragmentation.
A significant part of the fragmentation of labor markets in Europe is the result of the lack of a cross border system of unemployment and health insurance. This could be addressed in a reform that would allow for a moderate increase in the EU budget targeted to euro area wide unemployment and health insurance.
The objections of net contributors to a moderate increase in the EU budget could in principle be overcome by an appropriate rules based fiscal reform that would address moral hazard and other coordination problems that are usually evoked as counter-arguments.
The EU and the EA are already transfer unions, through the operation of the single market and the monetary union. They encourage significant economic transfers from weaker and less competitive sectors and economies in the periphery, to stronger and more competitive ones, as suggested by the macroeconomic performance of the core and the periphery following the creation of the Euro area.
A fiscal transfer union, which would result from an increase in the EU budget, would partly correct the effects of such transfers through fiscal redistribution, and is a logical counterpart of the single market and the monetary union.
At the same time the banking union should proceed as planned, national reform efforts should be strengthened, especially in the periphery, and the stability and growth pact should be strictly enforced.
Greece and Europe: A Troubled Economic Partnership. Alogoskoufis in the Huffington Post, October 13, 2016
It is rumored that Constantine Karamanlis, the Greek statesman who was the architect of Greece’s participation in the European Union, once remarked, “I am throwing the Greeks into the sea, and they will have to learn to swim.”
Thirty-five years down the road, it is still uncertain whether the Greeks, able sea navigators throughout their history, can prove to be good swimmers in the European seas.
The crisis of 2010 in addition to earlier mini crises and near misses of the late 1980s and early 1990s are indicative of the roughness of the seas that the Greeks have had to navigate and their well-documented resolve to do things “their way.”
What is to be done now? The first priority is to acknowledge the limitations and the weaknesses of the current Greek adjustment program. The second is for the troika (EC Commission, ECB, IMF) and the Greek authorities to cooperate on the design of a new mutually acceptable adjustment program to be adopted by a wider political spectrum in Greece than just the current government. The revised adjustment program must enjoy wide political legitimacy in Greece itself, which is something that does not apply to the current program. The third priority is the consistent application of the program in a way that inspires confidence that the program is there for the medium term.