Public Debt: reflections on the period 2012-2017

SUMMARY

In this article, I compare the restructuring of the Greek debt that took place in 2012 to the short-term relief measures, as confirmed in the Eurogroup of December 2016. On the one hand, in 2012 it was the nominal value of the debt that was restructured, presenting the largest reduction in sovereign debt worldwide in modern history. On the other hand, the recent short-term measures refer to an additional, conditional reduction in the present value of the debt and will only have a long-term effect.

In view of this analysis, I also raise some issues related to the Greek fiscal debt that have been discussed in the news.

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A national currency will not help Greece regain economic sovereignty

drachma

The Greek version of the article appeared in Capital.gr on June 20, 2018.

SUMMARY

In this article I explain why the return to a national currency is not going to remove the constraints that Greece currently faces regarding the formulation of economic policy. The main reasons are the difficulty of access to private markets in case of Grexit and the already huge debt the country owes. Greece must remain in the Eurozone and negotiate smaller fiscal surpluses. The main condition to succeed is to recover its lost credibility.

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Greek emigration: betrayal or solution of last resort?

emigration.jpg

The Greek version of the article appeared in Capital.gr on June 20, 2018.

I feel the need to publicly express my opposition to Mr Kazakos’ (and others’) view that “the fact that Greek young people emigrate –instead of staying back and fighting to improve the conditions– constitutes a betrayal”.

First of all, Greek immigrants are an integral part of Greek history, while at the same time they play a vital role on the country’s position in the international arena. When we go against Greek immigrants, we are essentially turning against our own existence.

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Why we should not rush back to capital markets

euro-crisis

The Greek version of the article appeared on Capital.gr on May 10, 2017.

SUMMARY

In theory, a return to private capital markets is an indication that the economy has returned to normality. On the other hand, such a development automatically entails a significant increase in Greece’s borrowing costs compared to the current levels. This article analyses why it would be in the interest of Greece to postpone its return to capital markets in 2018 and to continue funding at low interest rates from the ESM for as long as possible.

If Greece were to adopt such a proposal, it would find allies in both the IMF and the European institutions. This is contingent upon an adequate level of political consensus being reached inside Greece, and contingent upon Greece inspiring greater confidence amongst Europeans for the successful completion of the reforms we have already agreed upon.

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The present value of the Greek debt as a basis for negotiation for larger fiscal space

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The Greek version of the article appeared in Capital.gr on June 1, 2017.

SUMMARY

Due to the debt restructuring that took place in 2012 with the PSI/OSI, the present value of Greece’s debt is much lower than its nominal debt. The abovementioned fact has given the impression to many people that if we persuade our creditors that the “proper” representation of our debt should be in present value terms (where the debt appears small) rather than nominal terms (where debt seems unsustainable), Greece will be able to negotiate larger fiscal space and smaller primary surpluses.

This article analyses two reasons why this idea is not feasible.

The only realistic way to achieve larger fiscal space is to view the necessary reforms as our own duty and not as a punishment that is imposed externally.

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