What have policymakers learned from the debt crisis?
As things evolve – both in Europe / the euro area and in Greece – the temptation springs back to have a closer look at the teachings the debt crisis has left behind. Plus, the perspectives that remain to materialize, hopefully.
Nikos Garganas, former Governor of the BoG, in his book Greece’s Sovereign Debt Crisis and its Economic Aftermath: Analysis and Lessons, just published by KERKYRA Publications–economia PUBLISHING, argues:
“As we write this book, policymakers are still struggling – both economically and politically – to address the immediate challenge confronting Greece, i.e. completion of economic adjustment. Recurrent political crises and confidence shocks during the eight-year crisis, associated with the inability of the Greek authorities to sustain the reform effort, resulted in a plight entailing heavy costs for society, with total output declining by more than a quarter and with unemployment and poverty rates remaining much higher than before the crisis. What is more, despite a decline in relation to GDP in recent years, debt remains at very high, possible unsustainable, levels in the longer run.
Some of the public policies put (or not put) in place, in response to the crisis, remain controversial and often subject to a highly partisan and populist public debate. A central issue of this book relates to the conduct of public policy. The crucial questions we try to answer are: What were the historical and global circumstances that led to the seemingly sudden emergence of the crisis? To what extent were past policy errors by Grek governments responsible for the crisis? How have policymakers responded to the crisis? To what extent have the vulnerabilities of the Greek economy been addressed during the adjustment programmes? And, finally, what remains to be done to avoid the country slipping into permanent stagnation?
Finally, the book looks to the future. In 2023, the Greek economy entered an enivonrment fraught with a considerable degree of uncertainty. While one hears proclamations of a robust recovery, the jury is still out on the lessons and the legacies of the turbulent economic events of 2009-2018. During the past twelve years the country has made considerable progress in unwinding its macroeconomic imbalances, but a turnaround in economic performance remains elusive. Risks are still high. However, Greece has now an opportunity to build the foundations of future prosperity. What are the remaining key challenges confronting Greece and what more needs to be done to put the economy on the path of sustainable growth? The immediate challenge facing the country is to complete the process of economic adjustment and to persist with structural reforms. Greece needs to achieve internal and external balance: a sustainable fiscal position coupled with a sustainable external account. A great deal will depend on how the policymakers will manage the economy from now on. Will policies remain firmly focused on macroeconomic stabilization and persisting with much-needed reforms? What have policymakers learned? Will the likely quickly forget? Many needed changes – in our institutions and attitudes – have not been made. What are our remaining vulnerabilities? Even with full implementation of this demanding policy agenda, further debt relief is required to achieve sustainable growth. There are some of the issues that are explored in this book”.
