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Understanding the Greek Crisis

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  • 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.

Suggested Citation

  • Michael Mitsopoulos & Theodore Pelagidis, 2011. "Understanding the Greek Crisis," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 12(1), pages 177-192, January.
  • Handle: RePEc:wej:wldecn:461
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    Cited by:

    1. Jesús Fernández-Villaverde & Luis Garicano & Tano Santos, 2013. "Political Credit Cycles: The Case of the Eurozone," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 145-166, Summer.
    2. Christian Daude, 2016. "Structural reforms to boost inclusive growth in Greece," OECD Economics Department Working Papers 1298, OECD Publishing.
    3. 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.
    4. Vouldis, Angelos, 2015. "Credit market disequilibrium in Greece (2003-2011) - a Bayesian approach," Working Paper Series 1805, European Central Bank.
    5. Chrysoloras, Nikos, 2013. "Rebuilding eurozone's ground zero: a review of the Greek economic crisis," LSE Research Online Documents on Economics 48254, London School of Economics and Political Science, LSE Library.
    6. 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.
    7. 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.
    8. Campos, Nauro F & Coricelli, Fabrizio & Moretti, Luigi, 2014. "Economic Growth and Political Integration: Estimating the Benefits from Membership in the European Union Using the Synthetic Counterfactuals Method," CEPR Discussion Papers 9968, C.E.P.R. Discussion Papers.
    9. Bohn Frank, 2013. "The Politics of Surprise Devaluations: Modelling Motives for Giving Up a Peg," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(5-6), pages 562-574, October.
    10. 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.
    11. 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.
    12. Christos J. Paraskevopoulos, 2017. "Varieties of capitalism, quality of government, and policy conditionality in Southern Europe:Greece and Portugal in comparative perspective," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 117, Hellenic Observatory, LSE.
    13. Dimitrios P. Louzis & Angelos T. Vouldis, 2015. "Profitability in the Greek Banking System: a Dual Investigation of Net Interest and Non-Interest Income," Working Papers 191, Bank of Greece.
    14. Konstantakis, Konstantinos N. & Michaelides, Panayotis G. & Vouldis, Angelos T., 2016. "Non performing loans (NPLs) in a crisis economy: Long-run equilibrium analysis with a real time VEC model for Greece (2001–2015)," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 451(C), pages 149-161.
    15. George Gerapetritis, 2014. "Europe’s new deal: a new version of an expiring deal," European Journal of Law and Economics, Springer, vol. 38(1), pages 91-115, August.
    16. Rebekka Christopoulou & Vassilis Monastiriotis, 2016. "Public-private wage duality during the Greek crisis," Oxford Economic Papers, Oxford University Press, vol. 68(1), pages 174-196.
    17. repec:spr:empeco:v:54:y:2018:i:3:d:10.1007_s00181-017-1247-0 is not listed on IDEAS
    18. Astrid KRENZ, 2014. "Services Sectors’ Concentration And Countries’ Specialization Patterns In The European Union: A Comparative Analysis With A Special Focus On France, Germany, Greece, And The Uk," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 14(1), pages 23-32.
    19. Sebastian Dellepiane & Niamh Hardiman, 2012. "Fiscal Politics In Time: Pathways to Fiscal Consolidation, 1980-2012," Working Papers 201228, Geary Institute, University College Dublin.

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