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Understanding the Greek Crisis

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Author Info

  • Michael Mitsopoulos
  • Theodore Pelagidis

Abstract

This paper focuses on the distortions that the Greek public debt has imposed on the Greek banking system, and suggests how these can be unwound. The low level of competitiveness of the Greek economy, which is well below the competitiveness of the developed countries, poses a great challenge for the Greek banks. At the same time it puts at risk Greece’s economy ability to service both the private and public debt, which, as an aggregate, are comparable to the indebtedness of the developed nations. An adjustment of economic activity to match the current low level of competitiveness will increase the risks faced by the financial system and make an orderly servicing of the debt of the economy very challenging. It follows that only one reasonable policy option remains: to increase the competitiveness of the economy through an aggressive reform agenda, so that it will match its level of indebtedness, and through the resulting growth shift the excessive debt of the public sector to the private sector.

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Bibliographic Info

Article provided by World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE in its journal World Economics Journal.

Volume (Year): 12 (2011)
Issue (Month): 1 (January)
Pages: 177-192

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Handle: RePEc:wej:wldecn:461

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Cited by:
  1. Markantonatou, Maria, 2013. "Diagnosis, treatment, and effects of the crisis in Greece: A 'special case' or a 'test case'?," MPIfG Discussion Paper 13/3, Max Planck Institute for the Study of Societies.
  2. Giorgos Argitis & Stella Michopoulou, 2013. "Studies in Financial Systems No 4 Financialization and the Greek Financial System," FESSUD studies fstudy04, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
  3. Sebastian Dellepiane & Niamh Hardiman, 2012. "Fiscal Politics In Time: Pathways to Fiscal Consolidation, 1980-2012," Working Papers 201228, Geary Institute, University College Dublin.
  4. Frank Bohn, 2013. "The Politics of Surprise Devaluations: Modelling Motives for Giving Up a Peg," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 233(5-6), pages 562-574, October.
  5. Alice O. Nakamura & Leonard I. Nakamura & Masao Nakamura, 2012. "Building the Innovation Union: Lessons from the 2008 Financial Crisis," Working Papers 12-17, Federal Reserve Bank of Philadelphia.
  6. Nikos Chrysoloras, 2013. "Rebuilding Eurozone’s Ground Zero. A review of the Greek economic crisis," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 66, Hellenic Observatory, LSE.
  7. Beáta Farkas, 2012. "The Impact of the Global Economic Crisis in the Old and New Cohesion Member States of the European Union," Public Finance Quarterly, State Audit Office of Hungary, vol. 57(1), pages 53-70.

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