The Greek economic crisis: causes and alternative policies

The Greek economic crisis is primarily structural and the result of an international economic impasse that developed in 2007, with devastating implications for the struggling peripheral economies of Europe. This article suggests that falling profitability led to the stagnation of profits, which in turn discouraged new investment, decreased production and increased unemployment. The resulting recessionary economic environment, in conjunction with the mounting public debt and the austerity policies imposed on the Greek economy by the so-called ‘troika’ of creditors in 2010, has decimated the Greek economy even further, causing one of the worst economic crises since the Second World War. The article also provides some broad guidelines for an alternative economic policy.     

全球公共债务危机:发生、发展与未来

全球公共债务危机从短期看是迅速扩大的公共开支,从长期看是政府的赤字财政政策,从根源看则是资本主义经济的运行方式。公共债务危机不仅进一步加重经济复苏的难度,而且对世界政治也将产生深远影响。对我国来说,不仅要应对全球公共债务危机的冲击和影响,更要分析债务危机形成的原因,防范公共债务危机的发生,以保证中国公共债务的可持续运用和中国经济的可持续发展。     

A Political Economy Application of the “Tragedy of the Anticommons”: The Greek Government Debt Crisis

The tragedy of the anticommons unfolds when separate social agents—be they private owners of a property who intend to use the property for their own economic benefit or political actors who pursue their political objectives—do not hold effective rights to use their economic or political power for their own purposes without consent of the other players of the economic or political game. I shall discuss the Greek government debt crisis and the Eurozone countries’ policies toward Greece within the analytical framework of the tragedy of the anticommons in this paper. I do not intend to dig deep into the structure and long-term trends of public and private finances in Greece. I shall only show that the successive bail-out programs of the Eurozone countries were doomed to fail because of these countries’ competitive and non-cooperative approach to the Greek financial problems. I shall also show that a coordinating agency, say the IMF, can foster the coordinated outcome only under strict informational conditions.     

Financial frictions and stabilization policies

After the financial crisis of 2007, in many economies, public and private debt have moved in opposite directions, as opposed to pre-2007 evidence. Private deleverage and public debt build-up may affect the recovery path of countries after a recession. In a new Keynesian model with financial frictions, we show that when the economy is hit by a credit risk shock, the negative correlation arising between public and private debt amplifies the response of GDP. In our setup, the traditional monetary-fiscal policy mix is not enough to offset this private-public debt mechanism and therefore bring back economic stability. When macroprudential policy is part of the policy mix, the private-public debt channel can be broken. Interestingly, depending on the macroprudential instrument, a trade-off may arise between private debt and output stabilization.     

地方政府债务绩效考核指标体系构建及评价模型研究

公共产品理论认为,地方政府债务是一把"双刃剑"。一方面,对债务资金借、用、还各环节的合理把握,可以充分发挥债务资金作为扩张性财政政策的杠杆作用;另一方面,各环节或某个环节的失误极有可能导致地方经济进入恶性循环,严重者甚至危害地方经济和社会安全。本文基于投入产出理论和"4E"理论,对地方政府债务支出绩效及支出过程的内涵进行充分剖析,系统全面地选取绩效考核指标,结合因子分析法进行验证并最终建立指标体系;在此基础之上,运用主成分分析法,构建评价模型;在指标体系和评价模型的构建过程中引入实证分析,针对性地提出相应改进对策和建议。     

Cross-country fiscal policy spillovers and capital-skill complementarity in integrated capital markets

The 2010 European sovereign debt crisis has renewed discussions on fiscal policy coordination. One rationale for coordination is fiscal policy cross-country spillovers. A common finding in the literature is that spillovers tend to be small in normal circumstances but can be large if monetary policy is at the zero lower bound. Orthogonal to the existing literature, we document a novel channel that generates cross-country spillovers over the medium run. We assume perfect capital markets integration and find that capital-skill complementarity can lead to large spillovers without the zero lower bound nor a large import share in government expenditures. As capital markets have become increasingly integrated in the Eurozone, the current degree of fiscal policy coordination between its members, low, may be insufficient. We also find that the smoothing benefits from a temporary rise in public debt spill over to other countries.     

Why Crisis Continue?——The Endogenous Reason of Financial Crisis and Evolution to the Debt Crisis and the Enlightenment

当前欧债危机越演越烈,需要重新思考金融危机爆发并且演化为主权债务危机的内生性根源.此次金融危机中,资本主义社会的基本矛盾是危机发生的制度性根源.这一矛盾外化为“相对过剩”.经济机制层面,新自由主义影响下的自由市场经济体制放大了市场经济固有的缺陷,为危机的爆发积累了机制性原因.微观市场层面,缺乏金融监管、不当的房地产和货币政策则是诱发危机的直接原因.高赤字和高负债的背景下,一些国内经济和社会矛盾突出的国家发生主权债务危机是金融危机深化的必然结果.处理好自由市场经济和规制市场经济、金融创新和金融监管、实体经济和虚拟经济的关系以及地方债务问题是此次金融和债务危机给我国的最大启示.     

“欧洲学期”:欧盟改善经济治理的重要一步

主权债务危机充分暴露出欧盟内部经济治理方面的体制性缺陷,也让成员国看到深化欧盟内部融合、增进财政预算和宏观经济政策协调的必要性。"欧洲学期"就是欧盟在债务危机恶化之际推出的一项重大改革举措,是完善欧盟经济治理的重要内容。因此,对这一机制的研究显得尤为必要。本文从"欧洲学期"机制的框架内容、创新之处、存在的问题、实施现状和预期政策效应等方面着手,试图对其做出较为客观全面的剖析,并给出初步的评价。     

Institutional arrangements and public debt threshold limits

Inter-governmental Organisations, such as the IMF and OECD, advocate a medium-term reduction in deficit spending and public debt accumulation among advanced economies to satisfy conditions of fiscal sustainability. Buttressing the need for fiscal austerity, Reinhart and Rogoff claim to have identified a so-called tipping point, beyond which public debt accumulation negatively affects economic growth. While recent data seem to indicate that some Eurozone (non-sovereign) economies have reached a tipping point, for other advanced (sovereign) economies, such as the US, UK and Japan, this is not clear. The mainstream tipping point literature however does not recognise the importance of institutional arrangements for the conduct of fiscal and monetary policy. Furthermore, the literature sheds little light on the transmission mechanism between high public debt and low economic growth. This article draws on the principles of Modern Monetary Theory to discuss institutional arrangements and to justify the theoretical and empirical focus on Eurozone economies. The empirical analysis unpacks the transmission mechanism(s) to reveal that Eurozone economies have reached a public debt threshold limit with respect to long-term interest rates.     

‘An Incomplete Contract Approach to Eurozone Fiscal Governance’ – Commitment vs. Flexibility

In this paper, we take an incomplete contract approach to Eurozone Fiscal Governance between the European Commission (EC) and any heavily debt member state, Greece in particular. Incomplete contract approach makes possible to put a long process of Eurozone Fiscal Governance into an extensive form game in which a renegotiation procedure is incorporated. We theoretically reveal the conflict of interests between the EC (Germany) and Greece over the Greek debt repayment plan proposed in 2015. We show that the Greek’s position is consistent with incomplete contract theory, but that the EC (Germany) does not allow the renegotiation for restructuring for growth-oriented debt repayment program proposed by the Greek government because the EC (Germany) judges that the commitment effect (on fiscal austerity) is greater than the flexibility one (pro-growth effect). This will undoubtedly provide a novel and interesting approach to Eurozone Fiscal Governance.     

Increase in home bias in the Eurozone debt crisis: The role of domestic shocks

One of the most striking consequences of the recent episode of sovereign debt market stress in the Eurozone has been the increase in the share of public debt held by the domestic sector in fragile economies. However, the causes and potential consequences of this increase were only given scarce attention in the literature on the Euro area sovereign debt crisis. In order to fill this gap, we first determine the shocks that impact the variation in the share of sovereign debt held at home in an SVAR model on a sample of Eurozone countries between 2002 and 2014, distinguishing between external and domestic shocks. Thanks to several alternative tests, we show that home bias in sovereign debt responds positively to country-specific fundamentals and expectation shocks but we find no evidence that the increase in home bias is destabilizing per se in the short-run. Second, a stylized theoretical model backed by the empirical results predicts that the consequences for sovereign debt crisis depend on the relative impact of domestic initial destabilizing shocks and increased home bias. The analysis suggests that an increase in home bias in times of sovereign debt stress, despite reflecting deteriorating fiscal conditions, may make default less likely.     

An Alternative Approach to the Institutional Economics of the Eurozone Crisis

I argue that the Eurozone crisis is neither a crisis of European sovereigns in the sense of governmental over-borrowing, nor a crisis of sovereign debt market over-lending. Rather, it is a function of the “sovereign debt market” institution itself. Crisis, I argue, is not an occurrence, but an element fulfilling a precise technical function within this institution. It ensures the possibility of designating — in the market’s day-to-day mechanisms rather than analytical hindsight — normal (tranquil, undisturbed) market functioning. To show this, I propose an alternative view on the institutional economics of sovereign debt markets. First, I engage literature on the emergent qualities of the institutions “market” and “firm” in product markets, concluding that the point of coalescence for markets is the approximation of an optimal observation of consumer tastes. I then examine the specific institution “financial markets,” where the optimal observation of economic fundamentals is decisive. For the specific sub-institution “sovereign debt market,” I conclude that the fundamentals in question — country fundamentals — oscillate between a status of observable fundamentals outside of markets and operationalized fundamentals influenced by market movements. This, in turn, allows me to argue that the specific case of the Eurozone crisis is due to neither of the two causes mentioned above. Rather, the notion of “crisis” takes on a technical sense within the market structure, guaranteeing the separation of herd behavior and isomorphic behavior on European sovereign debt markets. By the same token, the so-called Eurozone crisis ceases to be a crisis in the conventional sense.     

The hard shadow of the Greek economy: new estimates of the size of the underground economy and its fiscal impact

This article presents new estimates of the Greek underground economy and explores the link between the underground economy and aggregate debt. We show that the Greek underground economy has been underestimated heavily and has been on a rising trend again since Greece adopted the Euro. We also present evidence that the size of the underground economy is positively related to the debt-to-GDP ratio, implying that fighting the underground economy is also conducive to financial and macroeconomic stability. Our results suggest that for our sample of 11 EMU member countries, the loss of the inflation tax as an economic policy instrument had drastic consequences. While the underground economy did not have a statistically significant impact on aggregate debt before the introduction of the Euro, it has pushed up the debt-to-GDP ratio in our sample since.     

欧美债务危机与中国经济发展

在世界经济逐步摆脱金融危机的阴影,我国集中精力实施"十二五"规划的进程中,欧美经济又先后受到债务危机的困扰。美国债务危机的深层根源在于由基本矛盾而产生的有效需求不足,直接原因是为弥补这种不足而采取的财政赤字政策,举债过度。欧美债务危机对我国经济必将造成一系列的负面影响,但就我国经济发展的基础和趋势看,如果因应得当,国民经济继续保持较快持续发展的态势不会因此而改变。欧美债务危机对我国有深刻的启示,应从中吸取教训,采取必要的措施,把我国的经济搞得更好。     

公共资本投资、内生经济增长与合理政府债务规模*

本文基于一个具有内生增长机制的三部门世代交叠模型,讨论了政府举债为公共投资进行融资时经济的长期均衡;同时,通过数值模拟方法考察了我国的均衡政府债务规模及其影响因素。结果表明：在特定条件下,经济系统存在一个正的均衡政府债务-产出比重,该债务比重水平明显受到公共投资—产出比重、公共投资的债务融资比重、民间资本产出弹性等参数的影响。但是,均衡政府债务比重并不是无限上升的,当上述参数超过特定临界值时,经济系统无法达到均衡,政府债务-产出之比将持续上升,财政将不可持续。另外,当民间资本产出弹性较低时,较高的均衡政府债务比重可能导致经济运行动态无效率。数值模拟结果还显示,基于不同的假设情形,我国的均衡政府债务-产出比重均在不同程度上高于当前实际的政府债务规模,这为我国在未来期间实施扩张性财政政策提供了有利的依据。     

Law in Modern Society

In this article, we study the relationship between monetary policy and the socio-institutional framework. Specifically, we examine the economic policy response to the debt crisis of the Eurozone, applying institutional economics from two perspectives: the theory of social power and the endogenous money supply. The research question is whether monetary policy can be characterized as a countervailing power exercised by European institutions with respect to the member countries. Fiscal and monetary policies have been interpreted through these sources and types of power, as proposed by Galbraith, by distinguishing between those types of power that have had a permanent versus a conjunctural character. We conclude that European Quantitative Easing can be characterized as having been a countervailing power. All of this has strengthened European institutional power despite having been manifested in the context of an economic and financial crisis.     

The financial fragility and the crisis of the Greek government sector

The purpose of this paper is to develop Minskyan financial fragility indices for the government sector and to examine the financial structure of the Greek government before and after the onset of the sovereign debt crisis in 2009. We provide empirical evidence that clearly shows the growing financial fragility of the Greek public sector in the 2000s. We also assess the effectiveness of the implemented bailout adjustment programmes in Greece and claim that the conducted austerity measures and fiscal consolidation have not significantly improved the financial posture of the Greek government sector. We argue that the implementation of fiscal and wage austerity in an economy that lacks structural competitiveness produces prolonged recession and unemployment with adverse feedback effects on the financial fragility of the government.     

欧元区主权债务期限结构的实证分析

本文通过对欧元区成员国长期债务占总债务比重与各国整体宏观经济指标相关关系的实证分析表明,欧元区各国以GDP与税收比、债务与GDP之比所描述的当期融资能力与长期债务比例呈显著负相关,由于非对称冲击的作用,各国体现出不同的特征。本文同时构建了一个政府债务效用函数的二期模型,说明主权债务期限结构安排可以通过宏观调控进行跨期平滑,以防止主权债务危机的发生。     

Debt uncertainty and economic growth: evidence from five highly indebted Eurozone countries

The goal of this study is to examine the relationships between economic growth and debt uncertainty by applying the threshold generalized autoregressive conditional heteroscedasticity modelling methodology in five Eurozone countries spanning the period 2001–2013. The results document that during the European fiscal crisis period, debt uncertainty exerts a significant negative effect on economic growth across all five Eurozone countries that experienced the deterioration of their fiscal positions.     

Public capital,sustainable debt and endogenous growth

We analyze an endogenous growth model with public capital and public debt where we posit that the primary surplus of the government is a positive function of cumulated past debt with an exponentially declining weight put on debt further back in time. We consider two scenarios: first, we study the model assuming that the government runs a balanced budget and, then, we compare the outcome to that of the model with permanent deficits. We analyze growth effects of the two scenarios and we study how fiscal policy of the government affects the dynamics of the model economy. It is demonstrated that the balanced growth rate is higher when cumulated past public debt is smaller. Further, we show that the debt policy of the government crucially determines the dynamics of the model economy and that endogenous growth cycles can arise.