Sunday, June 23, 2013

The economics of the "success story"

There is something I need to admit... I am sick of the so called "success story" and the naive- false and deceitful, if you are as malicious as I am- declarations of the opposition. Here are the facts:

During 2008, Greece produced goods and services of 240 bn euros. During the period April 2012- March 2013 GDP in current prices was 190 bn euros (EL.STAT.). By the end of March 2013 the debt of the Central Government was 309 bn euros (Ministry of Finance), i.e. 161% of Greek GDP. 

Additional measures need to be taken in order to make sure that the Central Government debt will be less than 110% of GDP by 2022. The most auspicious scenario is that the current taxation will remain unchanged for at least until 2015 with the hope that recession will deescalate. Anyway, I do not really believe that there is any more space left for heavier taxation.

On the other hand, we are still missing the big picture: while oscillation between anemic growth and periods of recessions tends to become a long-run condition (2013 minus 2008 equals file years which you cannot call "short-run") we have failed to address the long-run challenges of technology, innovation and competitiveness in the struggling periphery and, to some extent, the main core of the Euro-zone to some extent.

Consequently, there is absolutely no success story to talk about nor any margins for policy reorientation unless the fundamentals of the Euro area are redrawn, i.e. the mandate of the ECB and the policy priorities.