New York Times
October 22, 2011
At this point Greece almost seems like a sideshow. Yet the scale of its coming default matters, especially with some players still denying that such a default is conceivable. So I would be remiss not to mention the awesomely depressing report of European Commission economists, which is marked “strictly confidential” but has, of course, gone viral.
The opening:
Since the fourth review, the situation in Greece has taken a turn for the worse, with the economy increasingly adjusting through recession and related wage-price channels, rather than through structural reform driven increases in productivity.That in itself is quite a revelation; did they really believe that structural reform was going to save the day? Even aside from doubts about Greek ability/willingness to carry through on promises, the fact is that nobody knows how much if any payoff microeconomic reforms will yield, and nobody in his right mind builds such payoffs into a fiscal plan.
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