Dirk Niepelt

πάντα ῥεῖ

Skip to content
  • Dirk Niepelt
  • CV · Picture · Information
  • Research
  • Contributions
  • Textbook
  • Teaching
  • Notes
Dirk Niepelt

“The Greek Tragedy”

Hans-Werner Sinn has published a special issue of CESifo Forum entitled “The Greek Tragedy.” Here is the abstract:

By the end of March 2015, Greece had already received a total of 325 billion euros in rescue credit from the measures instituted by the EU, the IMF and the ECB, and yet its unemployment has soared to more than double the rate of five years ago, when the fiscal rescue operations started. The reason is that Greece is suffering from a bout of Dutch Disease. The more money that flows in, the lower the incentives to roll back the excessive price increases of the early years of the euro, and the lower the disposition to set off on the stony path to restoring the country’s competitiveness.

Contrary to assertions, the Greek population has also benefited from the rescue credit. Calculated from the onset of the crisis, in net terms one-third of the public credit has contributed to financing the Greek current account deficit, one-third to paying off private foreign debt, and one-third to capital flight by Greek people. Furthermore, the country has profited greatly from the lowering of interest rates on its foreign debt, an advantage that translated into around 50 billion euros between 2008 and 2014. In 2014, overall Greek private and public consumption amounted to almost 114% of net national income.

Greek banks have received some 80 billion euros in ELA credit from the Greek central bank in the past few months. ELA credit, which can be blocked only by a two-thirds majority in the ECB Council, exceeds by far the recoverable assets of the Greek central bank in case commercial banks go bankrupt and the collateral pledged by the banks loses its value. Thanks to ELA, the private capital fleeing to other countries has been replenished with public credit from the international community. This credit has strengthened Greece’s negotiating position with the international community by increasing the other euro countries’ potential losses in the case of Grexit. This could explain why the Greek government has played for time in the current negotiations.

If it should come to a Grexit, it would be crucial to introduce as quickly as possible a new legal tender, in order for all price tags, as well as rent, credit and wage contracts to be redenominated and devalued simultaneously, restoring the competitiveness of the Greek economy. A creeping transition to a new currency by way of state-backed promissory notes (IOUs) that are not legal tender could buttress the solvency of the Greek government, but it would not solve the competitiveness problem. Econometric studies have shown that an economic upturn can make itself felt in as little as one or two years after a devaluation and a haircut on outstanding foreign debt have been carried out.

UntitledFigure 5 in the special issue, reproduced below, illustrates (private and public) consumption relative to net national income in Greece, France, Germany and the Netherlands.

UntitledUntitled

This entry was posted in Notes and tagged Capital flight, Competitiveness, Consumption, Current account, Devaluation, Dutch disease, ELA, EU, European Central Bank, Greece on June 22, 2015 by Dirk Niepelt.

Post navigation

← A Plan for Greece The Economics of Sovereign Debt →

Recent Posts

  • “Austerity,” EJ, 2021
  • “Fiscal and Monetary Policies,” Bern, Spring 2021
  • “Money Creation, Bank Profits, and CBDC,” VoxEU, 2021
  • SNB Profit Distributions
  • Peter Bieri’s “Das Handwerk der Freiheit”
  • Comments on Geneva Report 23
  • “Staatsschulden sind keineswegs kostenlos (Free Government Debt?),” NZZ, 2021
  • Neil MacGregor’s “Germany: Memories of a Nation”
  • Money vs. Savings: Gluts, Current Accounts, Triffin, Capital Flow Correlations
  • “The Pandemic Endgame,” VoxEU, 2021
  • Make Your Bed
  • Manley Hall’s “Fundamentals of the Esoteric Sciences”
  • Peter Matthiessen’s “The Snow Leopard”
  • Jim Al-Khalili’s “The World According to Physics”
  • Reading List on ‘Free’ or ‘Not-so-free’ Public Debt
  • John Cochrane about CBDC and Me
  • Notions of Liquidity Trap
  • Not Much Left of “Modern Monetary Theory”
  • Discussion of Benigno, Schilling and Uhlig’s (2020) “Cryptocurrencies, Currency Competition, and the Impossible Trinity,” 2020, Bank of Canada
  • “Dirk Niepelt im swissinfo.ch-Gespräch (Interview with Dirk Niepelt),” swissinfo, 2020

Archives

Tags

* ** 100% money 2016 Election Academic Accounting Ageing Aggregate demand Agriculture Albert Einstein Anonymity Argentina Art Asset price Asylum seeker Austerity Australia Bailin Bailout Balance sheet Bank Bank for International Settlements Banking crisis Banking union Bank of England Bank regulation Bank resolution Bank run Bankruptcy Bank secrecy Bank supervision Bargaining Base money Behavioral finance Belgrade Benefits Bitcoin Blockchain Bond Book Brexit Bubble Budget Budget constraint Bundesbank Business cycle Canton Capital Capital account Capital account restriction Capital control Capital deepening Capital flow Capital income tax Capitalism Capital regulation Capital requirement Carbon tax Cash Central bank Central bank digital currency Central bank independence Central bank profit Centralization Chapter 14 Chicago plan China Clearing system Climate change Coco Collateral Collective action clause Commitment Competition Competitiveness Conflict of interest Constitution Consumption Coronavirus Corporate governance Corporate taxation Corruption Cost benefit analysis Cost of default Covered interest parity Covid-19 Credibility Credit Crime Crisis Crony capitalism Cross-border payment Cross-border resolution Crypto currency Currency Currency board Currency crisis Current account Customer data Cyprus Data Debt Debt burden Debt composition Debt crisis Debt maturity Debt overhang Debt relief Debt restructuring Debt structure Debt sustainability Decentralization Default Deficit Deflation Demographics Demonetization Denmark Deposit Deposit insurance Deposits Derivative Determinism Devaluation Digital currency Digital money Discount factor Discretion Distributed ledger Dodd-Frank act Dollar Dollarization Donald Trump Drug DSGE model Earth Economic history Economic policy Economics Education Efficiency Efficient markets EFSF Electronic money Employment Enforcement Epidemiology Equity Equivalence Ethereum EU Euro Euro area Eurogroup Europe European Central Bank European Commission European debt crisis European Stability Mechanism European Union Eurozone Exchange rate Exchange rate floor External debt Externality Fairness Fannie Mae FATCA FDIC Federal Reserve Finance Financial crisis Financial infrastructure Financial regulation Financial sanction Financial service Financial stability Fintech Fiscal council Fiscal equivalence Fiscal federalism Fiscal institution Fiscal monetary policy interaction Fiscal policy Fiscal policy council Fiscal theory of the price level Fiscal union Fisher equation Food Forecast Forward guidance France Freddie Mac Freedom Free will General equilibrium General relativity Germany Government Government asset Government debt Government spending Grant Great depression Great recession Greece Grexit Growth Guarantee Haircut Health Health care Health care cost Helicopter drop Helicopter money History Household asset Household debt Household wealth House price Humanity Iceland Immigration Implicit debt Impossibility theorem Income Income distribution Income inequality Income tax Independence India Inequality Infection Inflation Inflation expectation Inflation target Information Information exchange Innovation Inside money Insurance Interest on reserves Interest rate Intermediation International Monetary Fund Internet Investment IPSAS Iran Ireland Israel Italy Japan Jean Tirole John Cochrane John Maynard Keynes Justice Kenneth Arrow Krypto currency Labor market Labor mobility Labor supply Language Learning Legal tender Leverage Liability Liberalism Libra Liechtenstein Life Life satisfaction Liquidity Liquidity regulation Liquidity trap Loan Lockdown Logistic model Macroeconomics Map Massachusetts Institute of Technology Maturity extension Maturity structure Maturity transformation Meaning Means of payment Mexico Migration Milton Friedman MIT Model Modern monetary theory Monetary policy Monetary system Money Money creation Money demand Money laundering Money market Money multiplier Money supply Money transfer Moral hazard Mortgage Narrow banking Negative interest rate Nobel laureate Official debt Olivier Blanchard Open market operation Ownership structure Palestine Panama Pari passu Pass through Payment Payment system Peer-to-peer lending Pension Pension system Phillips curve Philosophy Physics Pigouvian tax Policy coordination Political bias Political correctness Politico-economic equilibrium Politico-economic equivalence Politics Portfolio Portugal Price level Privacy Private education Productivity Psychology Public asset Public debt Public education Public investment Public sector Public sector employee Puerto Rico Quality of life Quantitative easing Quantum theory Ramsey policy Real estate Real exchange rate Real interest rate Recapitalisation Redenomination Redistribution Reform Refugee Regulation Relationship Renegotiation Rent seeking Replication Research Research funding Reserve requirement Reserves Reserves for all Resolution Resolution mechanism Retirement Return Riksbank Risk Risk premium Risk sharing Russia Sanction Saving Savings glut Scandinavia Science Secular stagnation Seignorage Seniority Serbia Settlement Settlement system Shell company Signalling Single point of entry SIR model Social mobility Social science Social security Social security reform Software Solvency Sovereign-debt restructuring mechanism Sovereign debt Sovereign money Sovereign risk Spain Stability and growth pact Stablecoin Statistics Stimulus Stock market Structural reform Study Center Gerzensee Subsidiarity Subsidy Sweden SWIFT Swiss Franc Swiss National Bank Switzerland Syriza Tax Tax avoidance Tax evasion Tax haven Tax smoothing Taylor rule Technology Test Textbook Thomas Piketty Time Time inconsistency Too-big-to-fail Trade Transfer Transfers Transparency Treasury Troika Trust UK Ukraine Unconventional policy Unemployment United Kingdom United States Unit of account Universe University US USA Utility settlement coin Value added Vollgeld Voter War Wealth Wealth inequality Welfare state Withholding tax World War I World War II Zero lower bound γνῶσις

Meta

  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org
Proudly powered by WordPress