Brunnermeier, James & Landau, "The Euro and the Battle of Ideas"

The Euro and the Battle of Ideas
Markus K. Brunnermeier, Harold James & Jean-Pierre Landau
Princeton University Press, 2016

Why is Europe’s great monetary endeavor, the Euro, in trouble? A string of economic difficulties in Greece, Ireland, Spain, Italy, and other Eurozone nations has left observers wondering whether the currency union can survive. In this book, Markus Brunnermeier, Harold James, and Jean-Pierre Landau argue that the core problem with the Euro lies in the philosophical differences between the founding countries of the Eurozone, particularly Germany and France. But the authors also show how these seemingly incompatible differences can be reconciled to ensure Europe’s survival.

As the authors demonstrate, Germany, a federal state with strong regional governments, saw the Maastricht Treaty, the framework for the Euro, as a set of rules. France, on the other hand, with a more centralized system of government, saw the framework as flexible, to be overseen by governments. The authors discuss how the troubles faced by the Euro have led its member states to focus on national, as opposed to collective, responses, a reaction explained by the resurgence of the battle of economic ideas: rules vs. discretion, liability vs. solidarity, solvency vs. liquidity, austerity vs. stimulus.

Weaving together economic analysis and historical reflection, The Euro and the Battle of Ideas provides a forensic investigation and a road map for Europe’s future.

Markus K. Brunnermeier is the Edwards S. Sanford Professor of Economics at Princeton University and Director of Princeton's Bendheim Center of Finance. He has written extensively on financial crises and monetary policy. Harold James is professor of history and international affairs and the Claude and Lore Kelly Professor of European Studies at Princeton University. His books include Making the European Monetary Union and Europe Reborn. Jean-Pierre Landau is former deputy governor of the Banque de France and executive director of the International Monetary Fund and the World Bank. He is associate professor of economics at Sciences Po in Paris.

Greek Government, Central Bank Seek to Defuse Tension over Lender

by Stelios Bouras & Marcus Walker

Wall Street Journal
September 18, 2016

Greece’s government and central bank sought to defuse a power struggle over a troubled lender, which has reignited tensions between the central bank and the ruling left-wing Syriza party.

Prime Minister Alexis Tsipras met with Bank of Greece Governor Yannis Stournaras on Saturday in a bid to smooth a row over who should run Attica Bank, a lender that finances public-works contractors, 57% of whose loans are nonperforming.

“There is no plan to sideline me,” Mr. Stournaras told reporters, responding to suggestions that the government was seeking to weaken the independent central bank. A senior government official said there were “no shadows” over relations with the Bank of Greece.

The spat escalated in recent days when police raided a business owned by Mr. Stournaras’s wife, the morning after Mr. Stournaras had told the government he wouldn’t approve its preferred candidate for chief executive of Attica Bank.

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Greek prosecutors raid offices of central bank chief’s wife

by Kerin Hope

Financial Times
September 15, 2016

Greek prosecutors have raided an office belonging to the wife of Yannis Stournaras, the central bank governor, as part of an anti-corruption investigation allegedly linked with the consulting company she owns, a bank official said.

The probe concerns an EU-funded advertising campaign for a Greek state organisation in which Mindwork Business Solutions, a consulting company owned by Lina Nicolopoulou, the governor’s wife, took part as a subcontractor.

Documents and electronic material belonging to Ms Nicolopoulou and her team were seized, according to Proto Thema, a Greek news website that first reported the raid.

Officials at the Athens prosecutor’s office and the government’s anti-corruption department could not be reached for comment.

Ms Nicolopoulou strongly denied wrongdoing. “The real target is my husband who is being attacked in order to serve specific political purposes,” she said.

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Greek foot-dragging on reform hampers rise of EU’s ‘Club Med’

by Tony Barber

Financial Times
September 12, 2016

Just when his government’s indolent attitude to economic reform is again exasperating Greece’s eurozone partners, Alexis Tsipras presided over a mini-summit of southern European leaders that was the diplomatic equivalent of a poke in the eye to Germany and other creditors.

Friday’s seven-nation meeting in Athens, to which the leftwing Greek premier invited representatives of Cyprus, France, Italy, Malta, Portugal and Spain, produced a familiar list of rather unfocused demands for EU economic policies, putting the accent on growth and employment instead of austerity.

In the eyes of Germany, the Netherlands and other northern eurozone nations, the mini-summit was more significant for giving an unwelcome foretaste of how a caucus of southerners might emerge as a vocal lobby in the EU after Britain’s departure reduces the bloc to 27 members.

Markus Ferber, a conservative Bavarian deputy in the European Parliament, voiced concern that “the ‘Club Med’ group, after Britain’s exit, will possess a blocking minority, with which they will obstruct all the laws that don’t suit them”. Mr Ferber described this group as “a strong coalition of reform-resistant redistributors”.

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Tsipras relying on 'political theater'

CNBC
September 12, 2016

Wolfango Piccoli, co-president at Teneo Intelligence, says that Greek Prime Minister Alexis Tsipras' disagreements with financial authorities are unhelpfully "wasting time."

Greece’s Alexis Tsipras Seeks to Revive his Political Fortunes on Economic Promises

by Nektaria Stamouli & Marcus Walker

Wall Street Journal
September 12, 2016

Greek Prime Minister Alexis Tsipras, languishing in polls, sought to reboot his premiership over the weekend. But his economically depressed country has largely given up hope on the imminent change he is promising.

Europe’s most electorally successful populist has become nearly as unpopular as the Greek political establishment he ousted almost two years ago. A recent survey showed only 19% of Greeks view him favorably and 85% are dissatisfied with his government.

Such low approval ratings—familiar to Europe’s least-popular establishment politicians, such as French President François Hollande—reflect how the star of the eurozone’s antiausterity movement has come down to earth.

Because of its deep economic crisis, Greece was ahead of the rest of Europe in the revolt against mainstream centrist parties. Elsewhere, antiestablishment populists of the anticapitalist left and the nationalist right are now on the rise. In Greece, they have been partners in government since early 2015, in a coalition led by Mr. Tsipras’s left-wing Syriza party, and their appeal is on the wane.

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Tsipras seeks influence for Mediterranean states

by Kerin Hope & Jim Brunsden

Financial Times
September 9, 2016

The leaders of five Mediterranean EU member states convened in Athens in the hope of cementing a political alliance that will allow them to exercise more influence over European policymaking on economic growth, regulating flows of asylum seekers and tackling social inequality.

“Our countries were hardest hit by the economic crisis . . . and are now on the front line of the migrant inflows . . . We need a common approach, common positions,” said Alexis Tsipras, the Greek prime minister, who hosted Friday’s gathering of heads of state and government of France, Portugal, Greece, Cyprus and Malta.

For Mr Tsipras himself, who first proposed the idea of an EU “southern front”, with the backing of François Hollande, the French president, the summit was an opportunity to play a new role.

The Greek premier has recast himself within days from radical opponent of austerity policies to a European statesman committed to building a broad-based regional initiative.

Left-of-centre leaders across the continent, many of them hit by falling approval ratings, seized on Mr Tsipras’s proposal. It was first aired two weeks ago in Paris, where Mr Tsipras was attending a meeting of European socialist leaders as an observer.

Yet Greece’s lacklustre record on economic reform suggests that Mr Tsipras may lack credibility in his new role.

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Syriza Strains Greece’s Credibility

by Yannis Palaiologos

Wall Street Journal
September 7, 2016

Independent institutions remain anathema to the government in Greece. Two cases that have dominated the headlines in recent weeks demonstrate how the country’s populist government, led by the hard-left Syriza party, continues to put politics before reform and refuses to learn the right lessons from the country’s recent past.

The criminal case against economist Andreas Georgiou returned to the spotlight last month when it was reopened by the country’s Supreme Court. A longtime official with the International Monetary Fund, Mr. Georgiou had been appointed six years ago to head the independent Hellenistic Statistical Authority, or Elstat. The prime minister at the time, George Papandreou, created Elstat as a response to the discovery that the government under his predecessor, Costas Karamanlis, had underreported the country’s fiscal deficit.

After an exhaustive review, Mr. Georgiou revised the 2009 deficit figure upward to 15.4% of gross domestic product from 13.6%. Elstat’s European Union counterpart, Eurostat, fully accepted the result, as it did all subsequent figures produced by Elstat during Mr. Georgiou’s five-year term. The age-old practice of putting asterisks of doubt next to Greece’s budget numbers ceased after 2010.

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‘Game Over’ by George Papaconstantinou

by Peter Spiegel

Financial Times
September 5, 2016

George Papaconstantinou had already resigned as Greece’s finance minister and was holidaying with his Dutch wife’s family near Amsterdam when he received the news: the so-called Lagarde list of wealthy Greeks with secret Swiss bank accounts had allegedly been interfered with. Three names had been deleted. They were all Papaconstantinou’s relatives. The implications were clear.

“Certain moments in life are kept in the memory for ever, in every vivid detail,” he writes of accusations he tampered with the list while in office. “I still remember the shock and disbelief, the dizziness, the anger.”

For the next two years, the UK and US-educated economist would be at the centre of the highest-profile Greek political show trial in a generation. Ultimately, a special court would acquit him of all but a misdemeanour charge after investigators found the tampered USB stick was not the one he handed to Greek financial investigators. But the trial, concluded last year, is sadly relevant once again.

Game Over, Papaconstantinou’s memoirs of the six-year debt crisis, became a bestseller when published in Greece this year. The arrival of the English-language edition could not be better timed: Athens is again gripped by the impending trial of a political figure blamed for dragging the country into its pernicious eurozone bailout. Now in the dock is Andreas Georgiou, a former International Monetary Fund economist hired by Papaconstantinou in 2010 to set up a statistics agency as part of an effort to bring discipline to the government books.

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The Hidden Costs of Volunteering in Greece

by Jacqueline Kantor

Pacific Standard
August 31, 2016

It’s been weeks since Heidi Liedtke left Greece, and still she dreams about the run-down room in an abandoned hospital where she taught English to a group of pregnant teenagers from Aleppo. Even now, her Facebook feed remains a constant stream of updates from Athens, most of her notifications from volunteer groups. Almost every day, she messages her friends back in Greece to make sure they’re all right and safe. Though Liedtke keeps looking up airfare to return, she knows going back will make it harder to leave a second time.

One month after graduating from American University, Liedtke flew to Greece in search of an opportunity to use her Arabic skills and understanding of the Middle East to help, in any way, with one of the biggest humanitarian crises of our time. As one of thousands of independent volunteers, she found herself in one of the most unusual aid situations to date, one that has led to under-qualified individuals handling complex issues.

People come to Greece in search of the opportunity to make some sort of dent in an issue that seems limitless; weeks later, when they emerge from the insular world of refugee volunteering, they find themselves out of their element and out of support.

“Typically I don’t talk about it [to family] because there’s so much to say that I don’t know where to begin,” Liedtke says. “What do I prioritize? The time I distracted a group of children’s attention from a fight on the other side of a caravan? The issues with voluntourism? I can’t sum it up in one conversation.”

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Greece Auctions Off Broadcast Licenses

by Nektaria Stamouli & Marcus Walker

Wall Street Journal
August 31, 2016

Greece was auctioning off broadcast licenses on Wednesday in a move the left-led government says will clean up a corrupt media sector but that critics say is a bid for political control of TV.

Gathered in a government building in the Greek capital, executives from eight companies started the auction early Tuesday, with offers beginning at €3 million ($3,341,250) and increasing in increments of €500,000.

The sale, which will reduce the number of national private television stations from seven to four, was expected to continue until late Wednesday or early Thursday. Existing broadcasters who don’t win a license are required to go off the air within three months, the government has said.

Under the country’s bailout plan with international creditors, the government promised to auction broadcast licenses for the first time. Licenses have been granted without charge since Greece first allowed private broadcasting in 1989.

The decision by the ruling left-wing Syriza party to license only four channels, however, has outraged Greek media officials and the opposition, who accuse Prime Minister Alexis Tsipras of seeking to forge political alliances with favored business groups.

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Greece May Face Aid-Payout Delay as EU Warns on Backsliding

by Jonathan Stearns

Bloomberg
August 29, 2016

Greece’s finance chief said the next international aid payout to the country may be delayed as the European Union stepped up warnings about domestic political meddling in the Greek state.

Finance Minister Euclid Tsakalotos raised the possibility of the government in Athens failing to qualify on time for a 2.8 billion-euro ($3.1 billion) disbursement due in September from the euro area. That’s what remains of a 10.3 billion-euro tranche that finance ministers approved in principle three months ago.

“If there is a delay, it’ll be days not weeks,” Tsakalotos told Bloomberg News in Brussels on Monday before a meeting with EU Economic Affairs Commissioner Pierre Moscovici. “Part of the reason for the meeting is to discuss the process to ensure there aren’t delays.”

Slipping timetables have been a regular feature of loan payouts to Greece since it first turned to the euro area and the International Monetary Fund for a rescue in 2010. Now in it’s third bailout, the country faces continued creditor warnings about backsliding on overhauls that are a condition for aid.

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Former Greek chief statistician gets backing from Brussels

by Arthur Beesley

Financial Times
August 24, 2016

Brussels has urged Athens to repudiate claims that Greece’s national statistics agency produced false data under its former chief, intervening in a domestic criminal case that has angered the country’s international lenders.

The European Commission’s call for Greece to back Elstat, the country’s statistical body, has also raised questions over its bailout loans. Athens is required to uphold public support for the country’s statistics as a condition for international aid.

The commission stopped short of demanding a halt to criminal proceedings against Andreas Georgiou, who faces trial over allegations that Elstat inflated deficit figures, which supported the case for years of harsh austerity in a succession of bailouts. Mr Georgiou has denied any wrongdoing.

“The commission and Eurostat continue to have full confidence in the quality and reliability of the data delivered by Elstat during the term of office of Mr Georgiou,” the commission said in a letter to Athens on Wednesday.

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Former Greek Statistics Chief Embattled at Home but Backed by EU

by Viktoria Dendrinou & Nektaria Stamouli

Wall Street Journal
August 24, 2016

The European Union urged Greece’s government to do more to protect the independence of its statistics agency, saying the country’s fiscal data in recent years had been accurate.

The row goes back to a case that lay at the heart of Greece’s economic and financial crisis. Greece has pledged repeatedly to ensure the statistics agency’s independence as part of its bailout programs in recent years. Failure to follow through on those commitments could potentially endanger future bailout payments.

In August, Greece’s Supreme Court ruled that Andreas Georgiou, the former head of statistics agency Elstat, should face trial over charges that he had artificially inflated figures for Greece’s 2009 budget deficit. The upward revision of the deficit numbers forced the government to undertake even deeper austerity measures as part of its 2010 bailout package

If convicted, Mr. Georgiou faces a prison sentence of up to 10 years. He has vigorously denied the allegations, saying he simply applied EU accounting standards.

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Turkish soldiers asylum case strains Athens and Ankara relations

by Kerin Hope and Mehul Srivastava

Financial Times
August 19, 2016

The first of eight Turkish military officers who fled the country after a failed coup appeared before a Greek asylum committee on Friday in a case that has strained relations between Athens and Ankara — and within the ruling Syriza party.

The officers flew a military helicopter across the border after the attempt to topple President Recep Tayyip Erdogan last month.

Turkey is ratcheting up pressure on Alexis Tsipras, the Greek prime minister, to return the junior officers. While Turkish officials have pushed ahead with a formal extradition demand for the soldiers, they have not made any public statements criticising Greece.

This is in stark contrast to its near-daily attacks on the US for its refusal to extradite Fethullah Gulen, the self-exiled preacher blamed for the coup.

It is not known when the formal extradition hearings will be held, but two Turkish officials said this week that the return of the soldiers would show that Greece and the EU were serious about helping Turkey find the perpetrators of the coup. But the officials also made clear that their return was a symbolic issue, rather than a requirement to complete the investigation.

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Greek Villagers Rescued Migrants. Now They Are the Ones Suffering.

by Liza Alderman

New York Times
August 17, 2016

Stratis Valamios revved the motor on his small white boat and steered under a thumbnail moon out of the harbor of this fishing village, perched on the northern tip of Lesbos, Greece’s third-largest island.

Skies were clear enough to see the purple mountains of Turkey a short distance across the Aegean Sea. It would be easy on this tranquil evening to catch calamari. These days, he needed a good haul to make ends meet.

A year ago, he and other fishermen in the tiny village, Skala Sikaminias, were making a more unusual catch: thousands of sea-drenched asylum seekers who streamed across the Aegean to escape conflict and poverty in the Middle East and Africa.

As one of the landfalls in Greece that is closest to Turkey, Skala Sikaminias, with its 100 residents, fast became ground zero for the crisis, the first stop in Europe for people trying to reach Germany in a desperate bid to start new lives.

“I’d be in the middle of the sea, and I would see 50 boats zigzagging toward me,” Mr. Valamios said, gazing across the narrow channel. “I would speed toward them, and they would throw their children into my boat to be saved.”

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James Angelos, "The Full Catastrophe Travels Among the New Greek Ruins"

Penguin, 2015

A transporting, good-humored, and revealing account of Greece’s dire troubles, reported from the mountain villages, idyllic islands, and hardscrabble streets that define the country today

In recent years, small Greece, often associated with ancient philosophers and marble ruins, whitewashed villages and cerulean seas, has been at the center of a debt crisis that has sown economic and social ruin, spurred panic in international markets, and tested Europe’s decades-old project of forging a closer union.

In The Full Catastrophe, James Angelos makes sense of contrasting images of Greece, a nation both romanticized for its classical past and castigated for its dysfunctional present. With vivid character-driven narratives and engaging reporting that offers an immersive sense of place, he brings to life some of the causes of the country’s financial collapse, and examines the changes, some hopeful and others deeply worrisome, emerging in its aftermath. A small rebellion against tax authorities breaks out on a normally serene Aegean island. A mayor from a bucolic, northern Greek village is gunned down by the municipal treasurer. An aging, leftist hero of the Second World War fights to win compensation from Germany for the wartime occupation. A once marginal group of neo-Nazis rises to political prominence out of a ramshackle Athens neighborhood.

The Full Catastrophe goes beyond the transient coverage in the daily headlines to deliver an enduring and absorbing portrait of modern Greece.

Why the fate of Greece’s chief statistician matters

Financial Times
Editorial
August 15, 2016

No one loves the messenger who brings bad news. The sentiment expressed by Sophocles is as much in evidence as ever in Athens, where Andreas Georgiou, the former chief of Greece’s statistical agency, faces criminal charges of “undermining the national interest” — because he applied EU rules to produce an accurate calculation of the country’s budget deficit. The figures were validated by EU statisticians, but his critics accuse him of colluding with Eurostat to inflate the debt, and say Greece was forced to accept bigger loans and harsher austerity as a result.

There are many people at fault in this latest twist in the Greek debt crisis but Mr Georgiou is not among them.

First and foremost is the government led by Costas Karamanlis from 2004 to 2009 — responsible for the worst excesses of over-borrowing in the run-up to the global financial crisis, and for its persistent under-reporting. The campaign against Mr Georgiou looks like a vindictive attempt to shift the blame for Greece’s financial collapse from a discredited political class that still hopes to make a comeback.

The socialist government that succeeded Mr Karamanlis showed a similar suspicion of Mr Georgiou’s work. They appointed him to head Elstat, an independent statistical agency set up as a condition of Greece’s first bailout, but also installed two political appointees on its board to keep him in check — one of whom will soon go on trial charged with hacking Mr Georgiou’s computer.

Alexis Tsipras, the prime minister, pledged to reform Greece’s corrupt political system when he brought his radical Syriza party to power but he too appears content to see the case against Mr Georgiou go ahead. The statistician, who spent more than two decades at the International Monetary Fund, is too convenient a scapegoat for a party ideologically opposed to all the IMF represents. Above all, Mr Georgiou’s prosecution reflects a political culture in which facts and figures are a matter of negotiation and convenience, and not of objective reality. If statistics can be massaged and manufactured, then an unwelcome number must be an act of hostility — and it becomes easy to believe that a former IMF official implementing European rules is serving the interests of Greece’s creditors.

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Greek statistician Andreas Georgiou hits back at criminal charges

by Kerin Hope

Financial Times
August 14, 2016

Statistics experts are open to criticism if the numbers fail to add up. But Andreas Georgiou, former chief of Greece’s statistical agency, says he is living in an upside-down world where he is being prosecuted for consistently getting them right.

Mr Georgiou and two colleagues are to face trial on criminal charges of undermining the “national interest”, according to a ruling last week by the Greek supreme court overturning their acquittal by a lower court.

The charges concern the alleged “inflation” of the budget deficit and debt figures for 2009, the year in which Greece plunged into an unprecedented financial crisis that prompted the first of three bailouts by the EU and the International Monetary Fund.

The case has sparked outrage from economists and statisticians worldwide who believe Mr Georgiou has become a scapegoat for Greece’s political class, which refuses to accept responsibility for the country’s financial collapse or take ownership of a bitterly contested seven-year programme of fiscal and structural reform.

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Aid and Attention Dwindling, Migrant Crisis Intensifies in Greece

by Liz Alderman

New York Times
August 13, 2016

As her young children played near heaps of garbage, picking through burned corn cobs and crushed plastic bottles to fashion new toys, Shiraz Madran, a 28-year-old mother of four, turned with tear-rimmed eyes to survey the desolate encampment that has become her home.

This year, her family fled Syria, only to get stuck at Greece’s northern border with Macedonia in Idomeni, a town that had been the gateway to northern Europe for more than one million migrants from the Middle East and Africa seeking a haven from conflict. After Europe sealed the border in February to curb the unceasing stream, the Greek authorities relocated many of those massed in Idomeni to a camp on this wind-beaten agricultural plain in northern Greece, with promises to process their asylum bids quickly.

But weeks have turned into months, and Mrs. Madran’s life has spiraled into a despondent daily routine of scrounging for food for her dust-covered children and begging the authorities for any news about their asylum application. “No one tells us anything — we have no idea what our future is going to be,” she said.

“If we knew it would be like this, we would not have left Syria,” she continued. “We die a thousand deaths here every day.”

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A year after the crisis was declared over, Greece is still spiralling down

by Helena Smith

Observer
August 13, 2016

In a side street in the heart of Athens, two siblings are hard at work. For the past year they have run their hairdressing business – an enterprise that was once located on a busy boulevard – out of a two-bedroom flat. The move was purely financial: last summer, as it became clear that Greeks would be hit by yet more austerity to foot the bill for saving their country from economic collapse, they realised their business would go bust if it continued operating legally.

“We did our sums and understood that staying put made no sense at all,” says one sibling. “If we didn’t [offer] receipts, if we avoided taxes and social security contributions, we could just about make ends meet.”

They are far from being alone. A year after debt-stricken Greece received its third financial rescue in the form of international funding worth €86bn, such survival techniques have become commonplace. For a middle class eviscerated by relentless rounds of cuts and tax rises – the price of the country’s ongoing struggle to avert bankruptcy – the draconian conditions attached to the latest bailout are invariably invoked in their defence. Measures ranging from the overhaul of the pension system to indirect duties – slapped on beer, fuel and almost everything in between – and a controversial increase in VAT are similarly cited by Greeks now reneging on loan repayments, property taxes and energy bills.

Against a backdrop of monumental debt – €320bn, or 180% of GDP, the accumulation of decades of profligacy – fatalism is fast replacing pessimism on the streets. “Our country is doomed,” sighs Savvas Tzironis, summing up the mood. “Everything goes from bad to worse.”

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Greek Crisis, the Book. Or Actually Several of Them.

by Landon Thomas Jr.

New York Times
August 10, 2016

In May last year, James K. Galbraith, a left-leaning American economist, sent an email to Greece’s finance minister, Yanis Varoufakis, in which he argued that an exit from the eurozone would benefit Greece.

Mr. Galbraith, who was advising Mr. Varoufakis at the time, made the case that a new currency would wash away the country’s debts, solve Greece’s competitiveness problem and ultimately create what he called a “good society.” Though the step was opposed by most Greeks, he had drawn up a contingency plan for Greece under Mr. Varoufakis’s direction, in the event the country was forced to leave the currency zone by its creditors.

In the end, there was not a so-called Grexit. One year ago this month, after the polarizing finance minister left his post, Greece agreed to its third bailout with Europe, accepting yet another round of brutal austerity measures as the price for a new round of loans.

Mr. Galbraith’s vision of a sun-kissed utopia of powerful unions, small businesses and cultural exchanges was published in June in his book of essays, speeches and assorted memorandums (Welcome to the Poisoned Chalice; Yale University Press) describing the five months he spent as an unofficial member of Mr. Varoufakis’s inner policy circle.

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N. Christodoulakis, "An Economic Analysis of Conflicts With an Application to the Greek Civil War 1946-1949"

Springer, 2016

This book provides a quantitative framework for the analysis of conflict dynamics and for estimating the economic costs associated with civil wars. The author develops modified Lotka-Volterra equations to model conflict dynamics, to yield realistic representations of battle processes, and to allow us to assess prolonged conflict traps. The economic costs of civil wars are evaluated with the help of two alternative methods: Firstly, the author employs a production function to determine how the destruction of human and physical capital stocks undermines economic growth in the medium term. Secondly, he develops a synthetic control approach, where the cost is obtained as the divergence of actual economic activity from a hypothetical path in the absence of civil war. The difference between the two approaches gives an indication of the adverse externalities impinging upon the economy in the form of institutional destruction. By using detailed time-series regarding battle casualties, local socio-economic indicators, and capital stock destruction during the Greek Civil War (1946-1949), a full-scale application of the above framework is presented and discussed.

The Greek crisis: An autopsy

by Pierre-Olivier Gourinchas, Thomas Philippon & Dimitri Vayanos

Vox
August 5, 2016

The Greek crisis is one of the worst in history, even in the context of recorded ‘trifecta’ crises – the combination of a sudden stop with output collapse, a sovereign debt crisis, and a lending boom/bust. This column quantifies the role of each of these factors to better understand the crisis and formulate appropriate policy responses. While fiscal consolidation was important in driving the drop in output, it accounted for only for half of that drop. Much of the remainder can be explained by the higher funding costs of the government and private sectors due to the sudden stop.

For its sheer intensity and duration, the Greek crisis has been quite unprecedented. One measure says it all – real income per capita declined every single year between 2007 and 2013, a cumulated drop of 26%. Since then, it has barely risen.

To put the Greek crisis in perspective, we compare it in Figure 1 with the sample of all ‘Trifecta crises’ since 1980 – the combination of a sudden stop with output collapse, a sovereign debt crisis, and a lending boom/bust. This is the who’s who of financial crises, a distinguished group that includes Argentina and Turkey in 2001, Ecuador in 1999, Indonesia and Russia in 1998, Chile and Uruguay in 1983, and Mexico in 1982. Greece's drop in output was significantly more severe and protracted than any of these episodes.

Figure 1 Greece versus the universe of all `Trifecta crises’ since 1980

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Feeding Greece’s Tax Addiction Is Starving Its Economy

by Yannis Palaiologos

Wall Street Journal
August 4, 2016

The relative calm in Greece this summer compared to last year’s chaos may lead outside observers to believe that the country’s financial problems are on their way to being resolved. After all, the national government, led by the far-left Syriza party, seems committed to implementing the bailout program it signed last year. And negotiations are already under way for a deal on debt relief.

But these negotiations will likely take a long time. No one expects a meaningful restructuring of Greece’s debt before the next German government is formed at the end of 2017. Until that happens, Athens will labor under requirements for budget surpluses that will suffocate the economy.

This has made a bad situation on the ground even worse. The combination of overambitious fiscal targets and widespread tax evasion has led, throughout the bailout period but especially under Syriza, to constantly rising tax and insurance-contribution rates, which leave even law-abiding, relatively well-off Greeks unable to meet their obligations.

According to calculations recently released by the Kathimerini newspaper, once the full array of new tax and insurance-contribution increases come into effect early next year, real-estate owners who rent out their property may be forced to pay more than 100% of the income they earn in personal and property taxes. Self-employed individuals who make as little as €10,000 ($11,195) a year will have to pay 60% to 74% of it in taxes and insurance contributions. Private-capital firms—a new category of company, introduced during the recent crisis and designed to boost entrepreneurship—will have to hand over 43% to 60% of their profits to the state, even for earnings as low as €5,000 a year.

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Greece to press ahead with criminal trial for ex-statistics chief

Financial Times
August 2, 2016

The former chief of the Greek statistics agency is to face criminal trial for undermining the “national interest” after he allegedly overstated the country’s budget deficit.

Greece’s supreme court ruled that Andreas Georgiou should face charges that carry a prison term of up to 10 years despite concern inside Greece that the radical left government is politicising independent institutions.

The case has also prompted concern among officials at the European Commission and the European Central Bank, who accepted without reservation the accuracy of data produced by Elstat, an agency set up in the wake of Greece’s first international bailout.

“The situation is clear. It is not a pleasant case. The commission and ECB have been watching this and have reacted very negatively to the case,” said a high-level eurozone official.

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IMF internal probe exposes failings in response to Greek crisis

by Arthur Beesley

Financial Times
July 28, 2016

An unsparing assessment of the International Monetary Fund’s intervention in the eurozone debt crisis prompts new questions over its approach to Greece, the origin of the saga and its epicentre.

At issue is an IMF decision expected this autumn on whether to take part in a third bailout of Greece, which has been under international tutelage for six long years. Germany has threatened to stop lending to Athens if the fund pulls out.

The IMF has warned repeatedly that it cannot participate in any further bailout without meaningful debt relief. Amid ructions in Turkey after a failed military coup two weeks ago, the US has stepped up pressure on European creditors of Greece to settle its finances so it can serve as a regional anchor. But this remains deeply contentious in the eurozone, where Germany leads resistance to far-reaching debt forgiveness.

The report by internal IMF inspectors makes clear that this question goes right back to the beginning of the crisis in 2010, when the fund was drawn into Europe’s chaotic campaign to shore up the single currency. A succession of huge bailouts for Greece and other weaker states followed. It paints a picture of poor pre-crisis surveillance, followed by problems in the design and execution of rescue programmes. Improvisation was the order of the day and rules were stretched, not least in the IMF where there was doubt from the outset about the Greek rescue.

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Read the Report

How the refugee crisis turned waiters into goatherds on the Greek islands

by William Booth

Washington Post
July 27, 2016

This is a story about war and waiting tables, about how a line can be drawn between the chaos in Syria and why Theodore Kourniaris lost his job on the Greek island of Lesbos.

In the eastern isles of Greece, the hidden face of the European refu­gee crisis is an everyday dude like Kourniaris, who suspects he has been cheated — not only by Syrian President Bashar al-Assad, who drops barrel bombs on his own people, but also by leaders such as German Chancellor Angela Merkel, who threw open the door to refugees and then slammed it shut.

Kourniaris, 27, is a Greek waiter who lives with his mom. He has spent every summer season since he was a kid humping bottles of chilled retsina and plates of grilled octopus to German and British and Dutch ­merry-makers in packed tavernas in his picture-postcard-perfect village on the sea.

The tourists?

“They’re gone, man,” said Kourniaris. The April-to-October trade that sustains the island has — poof! — vanished, as middle-class European pensioners and young families with children decided they would not spend their holidays on an island that hosted 600,000 war refugees and economic migrants over the past 18 months.

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Erdogan Should Look Across the Aegean

by Nikos Konstandaras

New York Times
July 27, 2016

Military coups have been an integral part of politics through most of the modern history of Greece and Turkey, shaping them domestically and determining relations between them. If war is diplomacy by other means, in these two neighbors and NATO allies, military coups were politics by other means. The recent attempt by military forces to overthrow Turkey’s elected government underlines the different course the two countries have taken in the past few decades. What follows may lead them even further apart.

Turkey’s president, Recep Tayyip Erdogan, appears determined to use the failed coup as an opportunity to wipe out opposition from every quarter, ordering a sweeping purge of the military, the judiciary, the police, academia, the civil service and some journalists.

Before the July 15 mutiny, Mr. Erdogan was already showing increasingly autocratic tendencies: curbing media freedom, cracking down on anti-government demonstrators, flirting with Islamist extremists, cultivating tension with his country’s Kurdish minority, deposing his own prime minister for not being enthusiastic enough in his support, allowing readings of the Quran in the Hagia Sophia museum — formerly the greatest cathedral of eastern Christendom.

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Greece loosens capital controls to win back deposits

by Kerin Hope

Financial Times
July 25, 2016

Greece’s central bank has loosened capital controls it imposed 13 months ago in the hope that depositors will return some of the cash they pulled from banks during last year’s panic.

George Chouliarakis, deputy finance minister, said he expected that lifting various restrictions on cash withdrawals would soon attract some €3-4bn in fresh deposits.

The controls were imposed in June last year to stem a run on Greek banks as the government’s negotiations with its international creditors foundered and many feared the country was poised to crash out of the euro. Among other measures, they set strict limits on how much money depositors could withdraw from their accounts each week.

Lifting the controls will pose a critical test of confidence in the leftwing Syriza-led government of Alexis Tsipras, the prime minister. Specifically, it will show whether Greeks now feel safe holding their cash in the country’s banks.

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Tsipras Loses Bid to Apply New Rules in Next Greek Election

by Eleni Chrepa

Bloomberg
July 22, 2016

Greece won’t immediately implement new electoral rules which scrap a 50-seat bonus for the winning side after Prime Minister Alexis Tsipras failed to raise enough support to make the changes effective immediately.

Tsipras’s Syriza government failed to secure a majority of 200 lawmakers in the 300-seat chamber to make the new rules, approved in a session that ended early Friday, effective immediately. A total of 179 lawmakers voted to abolish the bonus, with 83 voting against and 19 abstaining. That means the bonus remains in place for Greece’s next election, scheduled for 2019, and will be scrapped for the subsequent vote.

With the bonus seats still in play, “the scenario of snap elections now looks completely distant, as it would only move Syriza further from governance,” said Aristides Hatzis, a professor of law and economics at the University of Athens. Syriza has struggled in recent opinion polls, which show that rival New Democracy could finish first if elections were held now.

“Greece dodged the worst,” by voting to maintain the old system for the next election, Hatzis said. Given political divisions in the country, any parliament formed under the new law “would be so fragmented it could be impossible to form a government.” Coalitions under the new law would likely consist of “many partners with vetoes to block any decision they don’t like.”

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Greece was once the fast lane to Europe for refugees. Now it’s a grim waiting room.

by William Booth

Washington Post
July 7, 2016

The human traffickers who brought a million desperate asylum seekers through Turkey to the Greek islands have been stopped. Where once thousands a day were smuggled by the mafias on cheap rubber rafts, very few are making the trip this summer.

To shut down the Eastern Mediterranean route, countries such as Macedonia, Hungary and Bulgaria acted independently and threw up razor-wire fences along their southern borders, defying Europe’s central authority in Brussels.

The European Union itself struck a deal that threatens to send the migrants back to Turkey from Greece en masse.

It wasn’t pretty.

Human rights activists called it cruel.

But it worked.

The unimpeded flow of humanity, dominated by Syrians, Iraqis and Afghans, to Europe is over, at least for now. Arrivals in the Greek islands are down 97 percent.

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Marinopoulos: decline and fall of a retail giant

Economist
Intelligence Unit
July 7, 2016

On July 1st the Athens Court of First Instance handed a temporary reprieve to supermarket operator Marinopoulos in the face of bankruptcy claims by its creditors. The retail giant won temporary protection from bankruptcy until September 21st, when the court will consider its petition for a reorganisation process. The privately owned group, which employs more than 12,500 people and runs more than 800 stores, had sought protection from creditors to allow for a restructuring of its business. The decline and fall of the retail giant mirrors the travails of the Greek economy since 2010. If Marinopoulos goes under it is likely to worsen the country's already dire economic plight.

The Marinopoulos family's first foray into business was in the form of a pharmacy, back in 1893, the year that the then prime minister, Charilaos Trikoupis, famously declared Greece bankrupt. The pharmaceutical business developed independently and the family started its first supermarket much later, in 1962—another landmark year for Greece, as its association agreement with the EU came into force. In 1999 the family entered into a partnership with a French multinational retailer, Carrefour, and the business grew to the extent that Marinopoulos became a leading retailer. The partnership ended on the eve of Greece's second general election in 2012, when Carrefour pulled out, although it sanctioned continuing use of the brand. By 2015 Carrefour had slipped into second place behind Belgium's Delhaize in terms of market share, but still had a sizeable 6.3% share of the Greek retail market.

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Opposition leader Mitsotakis warns Greek tax rises will stifle growth

by Kerin Hope

Financial Times
June 22, 2016

Kyriakos Mitsotakis, Greek opposition leader, has a blunt message for the country’s international creditors and Alexis Tsipras, its leftwing leader: tax rises that the prime minister insists are central to Greece’s recovery are a costly mistake.

He said the fiscal measures rolled out this month as part of a €5.4bn austerity package agreed with the EU and the International Monetary Fund in return for more bailout cash will stifle growth, cut revenues and push many more Greeks into tax evasion and the black economy.

“What you have is the cumulative impact of taxation that goes well beyond … capacity [to pay]”, Mr Mitsotakis told the Financial Times. “After five years, many people have literally run out of money.”

Following a warning from the Greek central bank that “excessive emphasis” in higher taxes could backfire, Mr Mitsotakis insisted the government should have focused on structural reforms, such as to the public sector, which would have made tax increases unnecessary.

“This country has both a culture and considerable expertise in tax evasion,” Mr Mitsotakis said. “That’s why the Tsipras [plan], which the EU ended up approving, isn’t going to work.”

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Greek Startups Say Tsipras’s Taxes Are One More Reason to Leave

by Paul Tugwell

Bloomberg
June 14, 2016

Greek startups have weathered political turmoil, violent riots, a withering economy and brinkmanship that nearly drove the country out of the euro. Now, a new round of tax increases may be the last straw for fledgling companies with dreams of making it big.

What startups need is a break, says Vassilis Sioros, chief executive officer of Ardustech P.C., a small company with big plans for the use of olive oil in the pharmaceuticals, food and cosmetics industries.

“No startup is asking the government for money,” he said in an interview from Athens. “The state can invest without giving money by allowing startups to pay no tax or social security contributions for one year, or at least reduce them. This can help give at least another year of life to a startup allowing for the creation of one or two more jobs.”

Startups have become a key piece of any revival for Greece’s economy, which has shrunk by more than a quarter since 2008 and where almost 25 percent of the workforce is without a job. The number of such firms has almost doubled each year since 2010. With many still struggling to find funding, startups see the taxes and charges agreed to between Prime Minister Alexis Tsipras’s government and European creditors as adding yet another wrinkle to their already difficult environment.

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Greece needs a new deal with its European partners

by Yannis Stournaras

Financial Times
June 13, 2016

Greece is the only country in Europe that still remains under an adjustment programme. The Greek political system failed the country in the second half of the previous decade. Successive Greek governments promised to fix the tax collection system, uproot the deeply entrenched vested interests and implement ambitious reforms and privatisations. But, with few exceptions, they did not deliver.

At the same time, our European partners have yet to deliver on their commitment to provide further debt relief. They agreed to it in November 2012 and it should have occurred in 2014 after Greece achieved, with considerable pain, a primary surplus of €1.5bn in 2013. It never happened. The decision was delayed due to the domestic electoral cycle of various European countries. The same happened on May 24 this year when the eurogroup of finance ministers yet again postponed the relevant decision, to 2018, despite the fact that it explicitly recognised the need to keep the Greek government’s gross financing needs at manageable levels and the ratio of debt to gross domestic product at a declining trend.

It should be stressed that the eurogroup postponed the decision for debt relief in spite of the following: first, that the Greek government had honoured its commitments; and second, that current market interest rates are very favourable to debt relief decisions for both borrower and lenders. In addition, the threat of Grexit, used against Greece by a number of eurozone politicians whenever negotiations seemed to stall, weighed heavily on sentiment, further fuelling uncertainty and negatively affecting the economic and social climate in Greece.

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Move over Croatia, this year festival goers are heading to Greece

by Tess Reidy

Guardian
June 8, 2016

Clubbing in Greece has come a long way since the days of drinking ouzo and climbing partially lit mountain trails to listen to Cretan music in ancient ruins. This summer, there are quality electronic music festivals taking place, with lineups including DJ Harvey, Midland and Jeremy Underground. You can snorkel in the day, party on the beach at night and even hike down a gorge to recover if you want.

Could Greece’s music scene restore its reputation as a tourist hotspot after years of economic downturn, social unrest and the human crisis that has led to overcrowded refugee camps?

Sean Tipton, from the Association of British Travel Agents, says yes. “More than 2 million visits were made to Greece from the UK last year and so far bookings for 2016 are looking set to overtake this figure,” he explains. “It is really positive for Greece after some years of decline.”

One explanation is to be found in the revival of dance music. The electronic music scene is the driving force behind a whole host of events this summer such as Odyssia festival in Alepokhóri, Attiki, Rhythmatic open air festival in Pelion and Reworks festival in Thessaloniki.

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Tsakalotos Says Greece Will Soon Qualify for ECB’s QE Plan

Bloomberg
June 8, 2016

Greek bonds will soon become eligible for the European Central Bank’s asset-purchase program, paving the way for an easing of capital controls, and the gradual recovery of investor confidence, Finance Minister Euclid Tsakalotos said.

The continent’s most indebted state is currently excluded from the quantitative easing program, while its lenders have lost access to regular financing lines, as a quarrel between Prime Minister Alexis Tsipras and Greece’s creditors in 2015 raised doubts about its solvency and place in the euro area. The flow of bailout loans keeping Greece afloat is slated to resume this month, after the government committed to additional austerity.

“QE could follow as soon as July’s maturing debt is paid,” Tsakalotos said in an interview, referring to a July 20 payment of notes held by the ECB. “I feel confident Greek debt will be eligible” by September, he said.

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IMF Go Home

by Daniel Gros

Project Syndicate
June 8, 2016

The curtains are up on another act of the Greek debt drama. Eurozone finance ministers and the International Monetary Fund have agreed with Greece to begin, per the IMF’s demands, providing some debt relief to the country, and to release €10.3 billion ($11.6 billion) in bailout funds. Greece, for its part, has agreed to another round of austerity and structural reform.

Until recently, the IMF insisted that it would participate in the next Greek rescue program only if it deemed Greek debt to be sustainable. Based on the IMF’s most recent debt sustainability analysis, that is not the case. Germany, however, insisted that the IMF remain on board – and, with the latest deal, it seems to have prevailed, in exchange for agreeing to debt relief that it opposed.

The victory may well not have been worth the sacrifice. In fact, it would have been better to let the IMF pull out, for two reasons. First, the IMF’s assessments of debt sustainability in Greece are undermined by a deep conflict of interest. Second, and more important, IMF credits are too expensive.

In a normal bailout procedure, the IMF acts as an impartial judge of the troubled country’s debt sustainability; then, if it so chooses, it can step in as the lender of last resort. This is what happened in 2010, when the private sector wanted to flee from Greece and a systemic crisis loomed.

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Painful choices still hang over Greece

by Martin Wolf

Financial Times
June 7, 2016

Is there a path towards making Greece a successful self-financing economy within the eurozone? What would be required to put it on that path? These are the big questions about the economic plight of Greece and its ghastly relations with its partners. Neither has much to do with what is going on, which is “extend and pretend”: the eurozone pretends Greece is not in default; Greece pretends it will reform; and both play for time. What would an honest reckoning look like?

A starting point must be with the latest debt sustainability analysis from the International Monetary Fund. One can sum this up simply: we would like to apologise for the mess we have made.

The fund admits that the programme agreed in 2010 was wildly unrealistic. Moreover, even the debt relief imposed in 2011-12 was insufficient, unless one believed in the plausibility of the “very ambitious targets for growth, the fiscal surplus, and privatisation” proposed by the Greek government, with support of its eurozone partners.

Subsequent events, however, demonstrate that these targets were indeed unachievable. Finally: “In all key policy areas — fiscal, financial sector stability, labour, product and service markets — the authorities’ current policy plans fall short of what would be required to achieve their ambitious fiscal and growth targets.”

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EU sees progress on Greek reform, '95 percent' of work done to unlock funds

Reuters
June 6, 2016

The European Commission is confident that Greece will conclude the reforms needed to unlock bailout funds before next week's meeting of euro zone finance ministers, top officials said on Monday.

Greece and its international lenders wrapped up the bulk of reforms needed for badly needed bailout cash in May, but left some loose ends which must be tied up before Athens can receive instalments of 10.3 billion euros ($11.48 billion) by September.

"The Greek authorities have done 95 per cent of changes necessary but not all is finalised. Some changes have to be made in the coming hours," Economic Affairs Commissioner Pierre Moscovici told EU lawmakers in Strasbourg.

"I am confident Athens will use the time before the Eurogroup to finalise the limited issues that are still open," Moscovici added, saying that a disbursement of a first tranche of 7.5 billion euros could be decided as early as next week and be made this month.

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ECB holds back on ultra-cheap loans to Greek banks

Financial Times
June 2, 2016

The European Central Bank has dealt a blow to Greece’s attempts to rehabilitate its ailing financial system, saying it would wait at least three more weeks before allowing Greek banks access to its ultra-cheap loans.

The delay came at Thursday’s ECB meeting in Vienna where policymakers left interest rates on hold even though they marginally raised forecasts for eurozone growth and inflation. The cautious stance defied market expectations of a more robust upgrade in economic projections.

Senior officials in Athens had believed the ECB governing council would use the Vienna meeting to reinstate a waiver that allows the central bank to accept Greek government bonds as collateral for their cheap loans, despite the bonds’ junk credit rating. Greek optimism stemmed from last week’s deal to release €7.5bn in EU bailout funds next month after a long stand-off.

Instead Mario Draghi, the ECB president, said while the council discussed the waiver, no decision would be made until Athens had completed all elements of the first review of its €86bn bailout, a prerequisite to getting the €7.5bn tranche.

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Greece and Creditors Spar Over Legislation Changes

by Nektaria Stamouli

Wall Street Journal
May 30, 2016

Greece is arguing with its international creditors about a few small but politically sensitive measures creditors want implemented before they release some €7.5 billion ($8.4 billion) of badly needed bailout funds.

A teleconference between Greek officials and representatives of the country’s lenders failed on Sunday to reach agreement on whether and how Greece should amend recent legislation to comply with the conditions of its bailout program.

Creditors, represented by the European Commission, other eurozone institutions, and the International Monetary Fund, say Greece must make specific changes to recent laws on areas including banking regulation, retiree benefits, and privatization. But Greek Finance Minister Euclid Tsakalotos has written a letter to the commission, the IMF and the European Central Bank saying his government can’t carry out all of the lenders’ demands, according to Greek officials, citing political obstacles.

Greece needs its bailout funding by mid-July at the latest, when it must repay heavy debts, including bonds held by the ECB. Considering the amount of legislation that has already passed, it is unlikely the deal would be scuttled over the issues.

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European Money Doesn’t Like Greece

by Mark Whitehouse

Bloomberg
May 30, 2016

Greece and its creditors may have averted a crisis by agreeing on the release of another dose of bailout money, but the deal does little to address a deeper problem: Europeans still don't want to put their money there.

The flow of capital between the rest of the euro area and Greece offers a useful indicator of confidence in the integrity of the currency union. It can be tracked by looking at the Bank of Greece's liabilities to other central banks in the currency union -- a number that rises, for example, when concerns that Greece will abandon the euro prompt people to move currency out of the country.

The ascendance of Prime Minister Alexis Tsipras's leftist Syriza party to power, and its prolonged standoff with creditors, prompted an exodus: During the year through June 2015, an amount equivalent to more than 40 percent of Greece's annual economic output fled the country. This stopped after Tsipras did a U-turn in July, agreeing to harsh deficit-reducing measures in return for more loans. Not much private money, though, has come back since then -- reflecting both the effect of capital controls and persistent concerns about whether Greece will remain in the euro area.

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