E. Marelli and M. Signorelli – Closer fiscal integration is unavoidable if the Eurozone is to survive

EUROPP – Closer fiscal integration is unavoidable if the Eurozone is to survive

A. Orphanides: "The euro area crisis five years after the original sin" : (pdf)

file:///C:/Users/meown/Downloads/SSRN-id2676103.pdf

Abstract

Why did Europe fail to manage the euro area crisis and what lessons can be drawn from this failure for Europe’s future? Studying the EU/IMF program that was imposed on Greece in May 2010—the original sin of the crisis—highlights both the nature of the problem and the difficulty in resolving it. The mismanagement can be traced to the flawed political structure of the euro area that permitted governments of some member states to exploit problems in other member states that share the common currency. Undue influence of key euro area governments compromised the IMF’s role to the detriment of other member states and the euro area as a whole. Rather than help Greece, the May 2010 program was designed to protect specific political and financial interests in other member states. The ease with which the euro was exploited to shift losses from one member state to another and the absence of a corrective mechanism render the current framework unsustainable. In its current form, the euro poses a threat to the European project

Dan Davies comments

What Greece needed was current period, front-loaded financing for its primary deficit. And that’s what it got, in amounts which were totally unprecedented apart from the Marshall Plan.

It actually needed even more than it got, and an analysis of why the program was inadequate would be very interesting, if anyone would ever stop going on about debt/GDP ratios and write one. But the reason why it didn’t get adequate fiscal financing doesn’t look to me like something that can be blamed on the Euroland sovereigns overruling the poor Cassandra-like IMF. The IMF’s fiscal consolidation targets were the part of the 2010 program which everybody, wrongly, agreed on. If the idea is that creating a second banking crisis in Euroland would have made it more possible for the troika to lend money up front, this needs to be argued for. Orphanides doesn’t even assume this; he just shows a graph of the primary balance adjustment and its consequences, then goes away talking about the debt levels as if they were the same thing.

h/t Brad DeLong 

EPC : "The Protocol of Frankfurt: a new treaty for the eurozone"

pub_6229_protocol_of_frankfurt.pdf

How to fix the Eurozone | VOX, CEPR’s Policy Portal

New VoxEU eBook: How to fix the Eurozone | VOX, CEPR’s Policy Portal

Important progress has been made in repairing the design faults that the EZ Crisis revealed. This column introduces a new VoxEU eBook which argues that fixing the Eurozone is a job half done. The eBook, which presents 18 chapters by leading economists that hail from a broad range of nations and schools of thought, is surely the most comprehensive collection of solutions that has ever been assembled.

Download (pdf) or, better still, check out Mark Thoma 's post 

Poul M. Thomsen: Greece: Toward a Workable Program | iMFdirect - The IMF Blog

Greece: Toward a Workable Program | iMFdirect - The IMF Blog

a program must add up: the combination of reforms plus debt relief must give us and the international community reasonable assurances that by the end of Greece’s next program, after almost a decade of dependence on European and IMF assistance, Greece will finally be able to stand on its own.

the past six years have shown that the scope and pace of reforms acceptable to the Greek society is not commensurate with an early improvement of productivity and sustained high growth.

pension reforms cannot be avoided by simply assuming higher tax collections in the future.

Greek budget needs to transfer some 10 percent of GDP to cover the gaping hole in the pension system, compared to a European average of some 2½ percent. Clearly, this is unsustainable.

social pressures have already forced reversals of course—under both the previous and the current government—and Greece is unfortunately much further away from its medium-term goals than it was in mid-2014

We have yet to see a credible plan for how Greece will reach the very ambitious medium-term surplus target that is key to the government’s plans for restoring debt sustainability

 

 

 

 

 

 

Lorenzo Codogno: "Greece: a bumpy road to salvation"

EUROPP – Greece: a bumpy road to salvation

It would not be constructive to threaten again a Grexit, as well as it would not be useful on the part of the Greek government to resist reforms the large majority of which are simply common sense economics. Ultimately Greece deserves to have another chance.

This is the NHS | The Guardian

This is the NHS | The Guardian

The Commonwealth Fund

Is fiscal consolidation self-defeating? A Panel-VAR analysis for the Euro area countries

Is fiscal consolidation self-defeating? A Panel-VAR analysis for the Euro area countries

Abstract

This paper studies the effects of fiscal consolidation on the debt-to-GDP ratio of
11 Euro area countries. Using a quarterly fiscal Panel VAR allows us to trace out
the dynamics of the debt-to-GDP ratio following a fiscal shock and to disentangle the
main channels through which fiscal consolidation affects the debt ratio. We define a
fiscal consolidation episode as self-defeating if the debt-to-GDP ratio does not decrease
compared to the pre-shock level. Our main finding is that when consolidation is implemented
via a cut in government primary spending, the debt ratio, after an initial
increase, falls to below its pre-shock level. When instead the consolidation is implemented
via an increase in government revenues, the initial increase in the debt ratio is
stronger and, eventually, the debt ratio reverts to its pre-shock level, resulting in what
we call self-defeating austerity.

The Challenge of Trade Adjustment in Greece by Costas Arkolakis, Aristos Doxiadis, Manolis Galenianos :: SSRN

The Challenge of Trade Adjustment in Greece by Costas Arkolakis, Aristos Doxiadis, Manolis Galenianos :: SSRN

What Did the Ancient Greeks Mean by Oikonomia?

Retrospectives: What Did the Ancient Greeks Mean by <italic>Oikonomia</italic>?

The Puzzle of the Missing Greek Exports - European Commission

The Puzzle of the Missing Greek Exports - European Commission

Why is Greece such a surprisingly closed economy? We employ a gravity model of trade to explain the appallingly poor export performance of Greece and argue that weak institutional quality accounts for a large part of this shortfall. 

Jacob Funk Kirkegaard : The Grexit that Could Actually Happen

RealTime Economic Issues Watch | The Grexit that Could Actually Happen



COUNCIL REGULATION (EU) No 1053/2013 of 7 October 2013 establishing an evaluation and monitoring mechanism to verify the application of the Schengen acquis and repealing the Decision of the Executive Committee of 16 September 1998 setting up a Standing Committee on the evaluation and implementation of Schengen

Bryan Caplan : "Straight Talk About Economic Literacy" | Mercatus

Straight Talk About Economic Literacy | Mercatus

Stavros Thomadakis : "Prolegomena to the Greek Crisis" (pdf)

GreeSE-No91

The paper reflects a basic premise: Greek participation in the Euro-zone
marked a definitive institutional break in the process of contracting and
managing public debt. Instead of internal debt, used extensively in
earlier decades, euro-denominated sovereign issues were now placed in
the international market. Thus, the Greek state became a net ‘exporter’
of financial claims to an extent unprecedented in its recent history. In
assessing the prolegomena to crisis, I offer a review of the post-junta,
pre-euro period, the forces leading to accumulation of (mostly internal)
debt and the predominance of a ‘money illusion’ in distributional
politics;