Author(s): Yannis Stournaras
Date published: Feb 2019
SUERF Policy Note, Issue 56
By Yannis Stournaras, Governor, Bank of Greece
JEL-codes: F4, E6, H6, G01.
Keywords: Greece, bailout, EMU, crisis, reforms.
Over the past eight years, Greece has implemented a bold economic reform and adjustment programme that has eliminated flow macroeconomic imbalances, namely the large twin deficits, and has improved sharply wage and price competitiveness. In addition, it consolidated and recapitalized the banking system. Still, stock imbalances remain, such as high public debt and a high non-performing loans ratio. Also, despite the successful conclusion of the third adjustment programme in August, Greek government bonds are still below investment grade and bond spreads remain close to 400 basis points. Moreover, the cost of the adjustment programme in terms of output and unemployment losses has been much higher than in the other euro area Member States that also implemented adjustment programmes.
I will start today* by providing a brief overview of the progress achieved so far. I will then discuss the current economic conditions and prospects, as well as the challenges ahead. Next, I will highlight what, in my opinion, went wrong during the programme implementation in spite of overall success, and I will also refer to certain weaknesses of the EMU architecture. Before concluding, I will present a number of proposals for enhancing the functioning of the EMU.
* Speech held at „The Economist Southeast Europe–Germany Business and Investment Summit: Reassessing Europe’s priorities“ in Berlin, on 3 December 2018.
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