How the world sees Greece
How Greek Financial Crisis Is Bringing Out The Good In People Huffington Post While the Greek economy survives on rescue loans, the unemployment rate hovers around 26 percent, and the public sector protests against the government's austerity measures, Greek citizens are coming together to turn their country around. Many Greeks ... |
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| READ THE ORIGINAL POST AT www.huffingtonpost.com |
Supporters of excessive austerity have made overcoming the eurozone crisis more difficult and costly
The eurozone had been contracting for eighteen months since the second half of 2011. Though recent news is better, the European Central Bank projects Eurozone GDP will decline by 0.6% in 2013. The UK economy is not doing much better in terms of economic growth. Future growth is further threatened by the sharp fall in investment, especially pronounced in the UK and Southern Europe.
Eurozone unemployment is horrendously high at over 19 million people, and a rate of 12%. In Spain and Greece unemployment is over 26% and youth unemployment over 50%. In the whole of the EU, 26 million people are unemployed.
"Austerians" have argued that the policies followed were necessary to reduce the debt overhang. However, the ratio of debt to GDP has risen in all EU regions since 2008, and especially in the UK and the eurozone periphery where austerity has been practised most rigorously. Due to bad economic analysis and worse arithmetic, supporters of excessive austerity have made overcoming both the crisis of debt and of growth more difficult and costly.
Are there alternatives to achieve quick recovery of growth and employment? Clearly yes! In Germany, the government should encourage higher wages which would boost consumption , and encourage higher imports from the rest of Europe. Wages recently started to increase In Germany, but too slowly. It is surprising that Germany, an advanced economy, has no minimum wage policy. Encouragingly both the Social Democrats (SPD) and the Greens are proposing a minimum wage policy.
Fiscal consolidation in Germany is being adopted far too quickly at the federal and state levels. Particularly harmful is the policy that in the states (Länder) no new public debt is allowed from 2020. Ideally this policy should be modified. If this is not possible, then consolidation should be achieved by increasing taxes to maintain – or increase - investment in sectors like green infrastructure. Recent modelling shows such investment would encourage growth and employment in Germany and the rest of Europe.
The case for slower fiscal consolidation in the UK is also extremely clear. Bagaria, Holland and Van Reenen at the National Institute have shown that if fiscal consolidation in the UK was postponed till growth was restored, aggregate GDP would be at a significantly higher level by 2021 than with the current excessive austerity policies. The reason is that too early fiscal austerity is particularly inappropriate, as the IMF has emphasised, when fiscal multipliers are very high during or after crises and private bank lending is insufficient due to risk aversion. Again, higher UK growth would boost, via trade, growth in the rest of Europe, replacing vicious circles with virtuous ones.
The pace of fiscal consolidation needs to also be reduced in the European periphery countries. The troika should allow slower fiscal consolidation, and support measures to encourage growth and employment, via financing economically viable projects. Most urgent is the case of Greece, where GDP has fallen by a quarter.
Though national measures are clearly important, more needs to be done at European level. The doubling of the paid-in capital of the European Investment Bank, Europe's public development bank, was a visionary act by EU leaders. But till now it has not been sufficiently used. Indeed it was counter-productive that EIB lending actually fell in 2012, when private bank lending was falling in much of the EU. It is important that EIB lending increases rapidly. EIB lending to small and medium enterprises is growing quite substantially; this has to be further expanded as SMEs are an important source of employment. It needs to be complemented by the EIB increasing financing of investment in decentralised projects, such as those that foster innovation and increase energy efficiency.
It is particularly effective if EIB loans are co-financed by national development banks, as this will increase the multiplier effect of EIB loans, and leverage national public resources. Germany has a large, effective and profitable development bank – KfW. France just created a public development bank; the Labour party is proposing a British investment bank to fund both infrastructure and SMEs. Crisis-hit countries like Greece and Ireland also urgently need to create national development banks. The EU budget needs to be restructured to increase the proportion going to investment and growth. Particular emphasis should be placed on measures to increase youth employment immediately.
There are clear policies to create growth, jobs and hope in Europe. All we need is for politicians and policymakers to have the vision and courage to pursue them.
• Professor Stephany Griffith Jones is financial markets programme director at the Initiative for Policy Dialogue at Columbia University
• Matthias Kollatz is former vice president of the European Investment Bank
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| READ THE ORIGINAL POST AT www.theguardian.com |
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| READ THE ORIGINAL POST AT www.sfgate.com |
How Greek Financial Crisis Is Bringing Out The Good In People Huffington Post While the Greek economy survives on rescue loans, the unemployment rate hovers around 26 percent, and the public sector protests against the government's austerity measures, Greek citizens are coming together to turn their country around. Many Greeks ... |
|
| READ THE ORIGINAL POST AT www.huffingtonpost.com |
ATHENS, Greece (AP) — Greek authorities have temporarily suspended a trolley bus service in western Athens ahead of a planned protest over the death of a youth during a ticket inspection.
Police said the Peristeri service was expected to resume later Friday.
Left-wing groups and friends of the dead teenager were planning a protest march in Peristeri ahead of the funeral later Friday.
The 19-year-old man was killed when the trolley bus doors unexpectedly opened and he fell out, following an altercation with an inspector because he had not canceled his ticket. The circumstances of Tuesday night's incident are being investigated.
Greece's main opposition party, the Syriza Radical Left Coalition, linked the death with the economic crisis, saying the victim was unemployed and could not afford the 1.20-euro ($1.60) fare.
Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
This article is published under the terms of the News Licensing Group, LLC.
privacy policy, in addition to the terms of use and privacy policy for this website.
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| READ THE ORIGINAL POST AT www.neurope.eu |
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| READ THE ORIGINAL POST AT www.greekherald.com |
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| READ THE ORIGINAL POST AT www.greekherald.com |
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| READ THE ORIGINAL POST AT www.greekherald.com |
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| READ THE ORIGINAL POST AT www.greekherald.com |
Supporters of excessive austerity have made overcoming both the eurozone crisis more difficult and costly
The eurozone had been contracting for eighteen months since the second half of 2011. Though recent news is better, the European Central Bank projects Eurozone GDP will decline by 0.6% in 2013. The UK economy is not doing much better in terms of economic growth. Future growth is further threatened by the sharp fall in investment, especially pronounced in the UK and Southern Europe.
Eurozone unemployment is horrendously high at over 19 million people, and a rate of 12%. In Spain and Greece unemployment is over 26% and youth unemployment over 50%. In the whole of the EU, 26 million people are unemployed.
"Austerians" have argued that the policies followed were necessary to reduce the debt overhang. However, the ratio of debt to GDP has risen in all EU regions since 2008, and especially in the UK and the eurozone periphery where austerity has been practised most rigorously. Due to bad economic analysis and worse arithmetic, supporters of excessive austerity have made overcoming both the crisis of debt and of growth more difficult and costly.
Are there alternatives to achieve quick recovery of growth and employment? Clearly yes! In Germany, the government should encourage higher wages which would boost consumption , and encourage higher imports from the rest of Europe. Wages recently started to increase In Germany, but too slowly. It is surprising that Germany, an advanced economy, has no minimum wage policy. Encouragingly both the Social Democrats (SPD) and the Greens are proposing a minimum wage policy.
Fiscal consolidation in Germany is being adopted far too quickly at the federal and state levels. Particularly harmful is the policy that in the states (Länder) no new public debt is allowed from 2020. Ideally this policy should be modified. If this is not possible, then consolidation should be achieved by increasing taxes to maintain – or increase - investment in sectors like green infrastructure. Recent modelling shows such investment would encourage growth and employment in Germany and the rest of Europe.
The case for slower fiscal consolidation in the UK is also extremely clear. Bagaria, Holland and Van Reenen at the National Institute have shown that if fiscal consolidation in the UK was postponed till growth was restored, aggregate GDP would be at a significantly higher level by 2021 than with the current excessive austerity policies. The reason is that too early fiscal austerity is particularly inappropriate, as the IMF has emphasised, when fiscal multipliers are very high during or after crises and private bank lending is insufficient due to risk aversion. Again, higher UK growth would boost, via trade, growth in the rest of Europe, replacing vicious circles with virtuous ones.
The pace of fiscal consolidation needs to also be reduced in the European periphery countries. The troika should allow slower fiscal consolidation, and support measures to encourage growth and employment, via financing economically viable projects. Most urgent is the case of Greece, where GDP has fallen by a quarter.
Though national measures are clearly important, more needs to be done at European level. The doubling of the paid-in capital of the European Investment Bank, Europe's public development bank, was a visionary act by EU leaders. But till now it has not been sufficiently used. Indeed it was counter-productive that EIB lending actually fell in 2012, when private bank lending was falling in much of the EU. It is important that EIB lending increases rapidly. EIB lending to small and medium enterprises is growing quite substantially; this has to be further expanded as SMEs are an important source of employment. It needs to be complemented by the EIB increasing financing of investment in decentralised projects, such as those that foster innovation and increase energy efficiency.
It is particularly effective if EIB loans are co-financed by national development banks, as this will increase the multiplier effect of EIB loans, and leverage national public resources. Germany has a large, effective and profitable development bank – KfW. France just created a public development bank; the Labour party is proposing a British investment bank to fund both infrastructure and SMEs. Crisis-hit countries like Greece and Ireland also urgently need to create national development banks. The EU budget needs to be restructured to increase the proportion going to investment and growth. Particular emphasis should be placed on measures to increase youth employment immediately.
There are clear policies to create growth, jobs and hope in Europe. All we need is for politicians and policymakers to have the vision and courage to pursue them.
• Professor Stephany Griffith Jones is financial markets programme director at the Initiative for Policy Dialogue at Columbia University
• Matthias Kollatz is former vice president of the European Investment Bank
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| READ THE ORIGINAL POST AT www.theguardian.com |
Kathimerini | Greek PM to focus on reforms, coalition unity Kathimerini After a brief break for the August 15 public holiday, Prime Minister Antonis Samaras and his key cabinet ministers are reportedly preparing for their return to work in earnest next week when economic reform efforts are to resume and the two parties in ... Annual Economy Report |
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| READ THE ORIGINAL POST AT www.ekathimerini.com |
The eurozone recovery can be traced back to the ECB becoming a lender of last resort and to a relaxation of austerity policies
Finally, the recession in the eurozone is over: for the first time for almost two years, the region's GDP has grown again in the second quarter of this year. What is more, leading indicators point to a continuing recovery through the summer and autumn, albeit at a rather muted speed.
While German politicians in particular are now claiming that the recovery is a result of "consistent stability-oriented policy", closer scrutiny shows that this claim is not very plausible. Instead, the turnaround can be directly traced back to a reversal in two important areas of macroeconomic policymaking. First, Mario Draghi's decision from the summer of 2012 to make the European Central Bank to a de facto lender-of-last resort for embattled government. Second, the gradual relaxation of austerity policies in the euro area.
Since the onset of the euro crisis in 2010, policymakers have tried in vain to end it. Neither the establishment of the temporary European Financial Stability Facility nor the permanent European Stability Mechanism, both endowed with several hundred billion euros in lending capacities, managed to calm the markets.
The passage of both harsh austerity packages and the fiscal compact – which forces eurozone countries to limit structural budget deficits to 0.5% of GDP – have left financial markets completely unimpressed. Instead, after each new policy measure brought forward by the finance ministers, interest rates on bonds of southern European countries such as Spain and Italy continued to climb and the region's economies slid deeper into recession.
Mario Draghi has been much maligned in the European press, and in Germany in particular, where he has been branded "Draghiavelli". But only when he publicly stated last summer that the ECB would do "whatever it takes" to save the euro, announcing that the central bank would be willing to buy government bonds under the newly created Outright Monetary Transactions programme, did spreads between yields on periphery bonds and German bonds start to fall.
This fall in government spreads did not only benefit the treasuries of the embattled crisis countries. Since interest rates corporations have to pay follow closely that of their government, the reduction in spreads has also led to a relaxation of credit conditions for the private sector in the periphery countries. With the standard lag of interest rates influencing the real economy, the improvement in credit conditions can now be seen in economic activity.
Second, the breakneck austerity course Europe had embarked on in 2010 is slowly coming to an end. While this policy change did not attract as much public attention as Draghi's words and actions, it is no less real. As even the IMF has now acknowledged that austerity did not work quite as well as it originally believed, crisis and non-crisis countries across the continent have been given more time to get their fiscal balances in order.
According to the most recent forecast of the European commission, the structural budget deficit in the euro area has been reduced by 3.7% of GDP between 2010 and 2013. Yet, from 2013, no further tightening of fiscal policy is predicted. Instead, the structural budget deficits are expected to remain at roughly 1.5% of GDP over the coming year. Italy, Spain, France; in each of these countries, austerity measures are now pushed into the future not to derail the business cycle further.
And, what is more important, contrary to its attitude over the past years, the austerity preaching German finance ministry has quietly accepted these adjustments. The combination of lower interest rates and a slower path of fiscal tightening has done exactly what standard textbook models would predict: it has given the economy more breathing space and the private sector activity is now recovering.
Is, then, all well now? Unfortunately not. So far, this is not a self-sustaining recovery with strongly growing private investment, disposable income, falling unemployment and growing consumption. The crisis can still re-emerge like a monster from a B-movie. A new failure of governments in countries such as Italy and Spain might again spook the markets.
An adverse ruling by the German constitutional court on OMT (a case is to be decided this autumn) could also create new uncertainty and send spreads up again. Draghi might then still come to a rescue by actually implementing OMT and start buying bonds but, in the process, the recovery can easily be derailed.
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| READ THE ORIGINAL POST AT www.theguardian.com |
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| READ THE ORIGINAL POST AT www.greekherald.com |
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| READ THE ORIGINAL POST AT www.greekherald.com |
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| READ THE ORIGINAL POST AT www.greekherald.com |
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| READ THE ORIGINAL POST AT www.greekherald.com |
Kathimerini | Greek PM to focus on reforms, coalition unity Kathimerini After a brief break for the August 15 public holiday, Prime Minister Antonis Samaras and his key cabinet ministers are reportedly preparing for their return to work in earnest next week when economic reform efforts are to resume and the two parties in ... Annual Economy Report |
|
| READ THE ORIGINAL POST AT www.ekathimerini.com |
|
| READ THE ORIGINAL POST AT www.greekherald.com |
The eurozone recovery can be traced back to the ECB becoming a lender of last resort and to a relaxation of austerity policies
Finally, the recession in the eurozone is over: for the first time for almost two years, the region's GDP has grown again in the second quarter of this year. What is more, leading indicators point to a continuing recovery through the summer and autumn, albeit at a rather muted speed.
While German politicians in particular are now claiming that the recovery is a result of "consistent stability-oriented policy", closer scrutiny shows that this claim is not very plausible. Instead, the turnaround can be directly traced back to a reversal in two important areas of macroeconomic policymaking. First, Mario Draghi's decision from the summer of 2012 to make the European Central Bank to a de facto lender-of-last resort for embattled government. Second, the gradual relaxation of austerity policies in the euro area.
Since the onset of the euro crisis in 2010, policymakers have tried in vain to end it. Neither the establishment of the temporary European Financial Stability Facility nor the permanent European Stability Mechanism, both endowed with several hundred billion euros in lending capacities, managed to calm the markets.
The passage of both harsh austerity packages and the fiscal compact – which forces eurozone countries to limit structural budget deficits to 0.5% of GDP – have left financial markets completely unimpressed. Instead, after each new policy measure brought forward by the finance ministers, interest rates on bonds of southern European countries such as Spain and Italy continued to climb and the region's economies slid deeper into recession.
Mario Draghi has been much maligned in the European press, and in Germany in particular, where he has been branded "Draghiavelli". But only when he publicly stated last summer that the ECB would do "whatever it takes" to save the euro, announcing that the central bank would be willing to buy government bonds under the newly created Outright Monetary Transactions programme, did spreads between yields on periphery bonds and German bonds start to fall.
This fall in government spreads did not only benefit the treasuries of the embattled crisis countries. Since interest rates corporations have to pay follow closely that of their government, the reduction in spreads has also led to a relaxation of credit conditions for the private sector in the periphery countries. With the standard lag of interest rates influencing the real economy, the improvement in credit conditions can now be seen in economic activity.
Second, the breakneck austerity course Europe had embarked on in 2010 is slowly coming to an end. While this policy change did not attract as much public attention as Draghi's words and actions, it is no less real. As even the IMF has now acknowledged that austerity did not work quite as well as it originally believed, crisis and non-crisis countries across the continent have been given more time to get their fiscal balances in order.
According to the most recent forecast of the European commission, the structural budget deficit in the euro area has been reduced by 3.7% of GDP between 2010 and 2013. Yet, from 2013, no further tightening of fiscal policy is predicted. Instead, the structural budget deficits are expected to remain at roughly 1.5% of GDP over the coming year. Italy, Spain, France; in each of these countries, austerity measures are now pushed into the future not to derail the business cycle further.
And, what is more important, contrary to its attitude over the past years, the austerity preaching German finance ministry has quietly accepted these adjustments. The combination of lower interest rates and a slower path of fiscal tightening has done exactly what standard textbook models would predict: it has given the economy more breathing space and the private sector activity is now recovering.
Is, then, all well now? Unfortunately not. So far, this is not a self-sustaining recovery with strongly growing private investment, disposable income, falling unemployment and growing consumption. The crisis can still re-emerge like a monster from a B-movie. A new failure of governments in countries such as Italy and Spain might again spook the markets.
An adverse ruling by the German constitutional court on OMT (a case is to be decided this autumn) could also create new uncertainty and send spreads up again. Draghi might then still come to a rescue by actually implementing OMT and start buying bonds but, in the process, the recovery can easily be derailed.
|
| READ THE ORIGINAL POST AT www.theguardian.com |
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| READ THE ORIGINAL POST AT business.time.com |