Opinion
Here's What Greece Needs to Fix Now
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Dealing effectively with the micro issues of the Greek economy will almost guarantee that this is the last loan program for Greece.
By Nicholas Economides
After months of meandering negotiations, a deal between Greece, the European Union and the International Monetary Fund now seems likely but far from certain. Greece is running out of cash quickly, and should accept practically any deal to avoid bankruptcy and possible Grexit. However, with all the attention to the drama of the erratic negotiation and the controversial positions of several government officials, not enough attention has been paid to the essential elements that will make an agreement lead to growth and competitiveness in Greece.
The three previous agreements with the lenders, while leading toward a balanced budget and solving fiscal deficits, implemented very few of the microeconomic reforms that would guarantee Greece becoming competitive and eventually not needing any more loan help. At the signing of its fourth loan agreement, it is high time to learn from the mistakes of the previous three and stress the micro rather than the macro part of the program.
Greece has a huge and highly inefficient public sector that weighs down on the private sector. It needs to be reduced significantly through evaluations and reductions of its labor force to become more efficient. The pension system is in disarray with some pensioners reaping huge benefits while others get very little compared to their contributions. The pension system needs to be rationalized so that pensions correspond to contributions. This may involve severe cuts for some, but also significant increases for others.
Read full article as published by CNBC
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Nicholas Economides is a Professor of Economics.
The three previous agreements with the lenders, while leading toward a balanced budget and solving fiscal deficits, implemented very few of the microeconomic reforms that would guarantee Greece becoming competitive and eventually not needing any more loan help. At the signing of its fourth loan agreement, it is high time to learn from the mistakes of the previous three and stress the micro rather than the macro part of the program.
Greece has a huge and highly inefficient public sector that weighs down on the private sector. It needs to be reduced significantly through evaluations and reductions of its labor force to become more efficient. The pension system is in disarray with some pensioners reaping huge benefits while others get very little compared to their contributions. The pension system needs to be rationalized so that pensions correspond to contributions. This may involve severe cuts for some, but also significant increases for others.
Read full article as published by CNBC
___
Nicholas Economides is a Professor of Economics.