The book “Greece and the Euro: from crisis to recovery” carefully edited by Alogoskoufis and Featherstone (2021) is the product of a workshop in December 2018 at the LSE and a conference in April 2019 at Tufts University. Although these two events took place after Greece exited the third adjustment programme, they were before the Covid crisis. A new unexpected challenge appeared in 2020 with the pandemic radically changing the background on which policy measures and growth scenarios were based.
Understanding the extent of the new crisis the editors gave the authors the opportunity to revise and update their contributions until mid-2021, as this last emergency was posing new threats for the Greek economy and society.
A defining characteristic of the book is that the editors have invited a large number of scholars from different fields of social sciences to contribute, giving the book a broad focus covering economics, institutions, society and politics. Thus, a serious and inclusive debate about the past deeds and the future actions of the country is taking place in these pages.
The broad coverage of the book brings to mind Maynard Keynes in his Requirements for an Economist, where he defined how a good economist should be. He wrote … No part of man’s nature or his institutions must lie outside his regard….he must understand symbols and speak in words …..he must study the present in the light of the past for the purposes of the future… The book follows exactly that advice.
Another noteworthy characteristic of the book is the choice of the editors to produce it in the form of an e-book, which means that the book can be broadly accessed in a much shorter time than with any hard form production.
So, we have a book which provides us with broad, profound and timely analysis and enriches the discussion for intelligent and efficient policy-making, urgently needed to propel Greece forward in the post- financial crisis, post-pandemic era. Our country seems on course to exit a 10-year period of consecutive crises, which have taken their toll on growth, GDP, employment, social cohesion and even on demographics. Maybe it is too early to claim definitive victory as uncertainty looms, but the recent figures are encouraging.
As growth returns after the disastrous 2020 (with expectations for GDP in 2021 to exceed 8% and to soon reach its 2019 value) and with unemployment falling, Greece needs not only crisis-management but vision and plan. It needs to set ambitious targets based on a deep understanding of the roots of the disfunctions, the misfires, the problems of the past and of the optimal way forward. Greece 2.0 Plan aspires to bring about most of these changes.
The Greek state securities are close to reaching investment grade again and the positive outlook expressed by many rating agencies needs to be supported by appropriate investment decisions, which will improve the efficiency of capital allocation towards a sustainable growth model. This is an ideal time to leave uncertainty behind and “make change happen by design”.
Europe seems decided not to allow another disastrous austerity round. Fiscal rules are eased and public spending has kept economies alive. The Next Generation EU recovery programme provides a decisive break from the past and a massive opportunity for growth, especially beneficial for over-indebted countries, like Greece. By mobilising an astonishing amount of resources, which together with the multi-annual financial framework exceed 1.8 tr euro and for Greece exceed 80 bn euro until 2027 (much more than its share in European GDP or population), this is a once-in-a generation investment opportunity and should not be misused.
It seems Europe has decided to aggressively increase GDP (the denominator in the debt/GDP ratio) using the jointly issued and acquired funds, and not impose another austerity plan by suppressing the nominator as it did during the financial and sovereign debt crises. Such a large boost to investment, if correctly directed to produce the necessary structural reforms, will create the conditions for opportunity and prosperity.
The president of the Commission, Ms Von der Leyen, maintained that such a heavy investment plan should shape a new world “served by an economy that cuts emissions, boosts competitiveness, reduces energy poverty, creates rewarding jobs and improves quality of life”. A world, where we use digital technology to build a healthier, greener and more equal society.
The European economy is expected to grow by 5% in 2021 and almost the same in 2022, more than anticipated six months earlier. Of course, the growth outlook is uncertain and highly reliant on the evolution of the pandemic. High growth is expected to be accompanied by a temporary increase in inflation by 2.2% in 2021, moderating to 1.7% in 2022.
As the president of the ECB, Ms Lagarde, explained, “after a highly unusual recession, the euro area is going through a highly atypical recovery leading to high growth but also to supply bottlenecks appearing unusually early in the economic cycle causing inflation to rebound as the economy opens.”
Financing investment to increase the supply of the goods and services most demanded, especially tradeable goods, achieve scale and increase productivity will help reduce inflation created by the combination of supply side covid disruptions with strong demand in the post-vaccination phase.
Profound structural changes have already taken place. For example, McKinsey estimates that the pandemic has accelerated the process of digitalisation in Europe by 7 years. Climate-change problems have become easily observable and deeply felt, convincing policy makers to direct resources towards green transition and sustainability. So, the major guidelines for investment and growth are set for all European countries.
What Greece should also aim at, following the analysis of the book, is enhancing training and education, especially of the digital sort, boost technology advances especially those that increase competitiveness and wages, improve institutions and their efficiency and reduce distressing and counterproductive administrative burden and red tape. Finally, as finance is necessary to achieve all these goals, Greece should also preserve a healthy banking sector and sustain accommodative bank lending conditions in order to finance the promising new direction of the economy.
Read the e-book here.
The Hellenic Observatory organised a virtual e-book launch on 30 September. For more information, please visit the event page.