Who’s to Blame for Greece?

Theodore Pelagidis is a non-resident senior fellow at the Brookings Institution, USA, and Professor of Economics at the University of Piraeus, Greece. He has also been a NATO scholar at the Center for European Studies at Harvard University, USA; an NBG fellow at the London School of Economics, UK; and a Fulbright professorial fellow at Columbia University, USA. He also has served as an expert to the International Monetary Fund in the Independent Evaluation Office, USA. Michael Mitsopoulos holds a PhD in Economics from Boston University, USA. He is an economist at the Hellenic Federation of Enterprises, Greece, and has taught at the University of Piraeus and the Economic University of Athens, Greece. He has published extensively in academic journals and is the co-author with Pelagidis of Understanding the Crisis in Greece: From Boom to Bust (Palgrave, 2011) and of Greece: From Exit to Recovery? (2014).

List of Figures List of Tables 1. Introduction PART I: THE 'PARTY PERIOD' BEFORE THE CRISIS 2. The costs and benefits for joining a common currency with emphasis on weaker member-states 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? 3. 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 3.2. 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 4. What the IMF and EU bodies were reporting for Greece during the accession period ('90s) and the 2000-2009 golden years, as well during the implementation of the conditionality program, in particular with respect to the fiscal consolidation policy mix 4.1. IMF reports during the accession period ('90s) and the 2000-2009 'golden years'. 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. PART II: GREECE'S FREE FALL 2010-2013 5. The Troika period reconsidered 5.1. The Greek public finances and debt. A Brief overview 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 5: OECD structural indicators in key network industries 6. Assessing the intentions of the government(s) since the ratification of the Maastricht treaty 6.1. The 1990-93 program, design and implementation 6.2. The 2010 program. Design, implementation and comparison with the 1990-93 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 2010-12. 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 PSI 6.6.2. Euro area exit PART III: LOOKING AHEAD 7. 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. Labour cost indexes and exports 7.5. Conclusions and further remarks 8. Giving Greece a chance to succeed 9. Structural differences ensure permanent shock-trends that play into the above. A closer and more democratic union to heal economic asymmetries helping southern member-states 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 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 10. Conclusions Index