My first reaction is that there seem to be two possible outcomes in four months:
1) The technocrats at the ECB / EU / IMF agree to change the target for the primary budget surplus. The current plan is for Greece to run a primary surplus of 3.0% in 2015 and 4.5% in 2016, however that assumed that the unemployment rate would peak at 14.8% (instead the unemployment rate increased to close to 28%), and that GDP would start increasing in 2012 - instead GDP kept falling - and Greece is now in a Great Depression size contraction.
Contractionary policy has been very contractionary!
It is amazing that Greece is even running a primary budget surplus with a collapsing economy. If the primary target isn't change, the depression will continue. A little growth would help everyone, so easing the primary budget target is critical.
2) The Greeks will take the four months and ready the drachma printing presses.
Point 1 is possible, but the technocrats are the only hope for Greece, not the politicians. See the following quote from German Finance minister Wolfgang Schauble in 2013:
"Nobody in Europe sees this contradiction between fiscal policy consolidation and growth,” Schauble said. “We have a growth-friendly process of consolidation, and we have sustainable growth, however you want to word it.”Not everyone is blind to the obvious - some people in Europe see the obvious contradiction (just look at the data for Europe as a whole and Greece in particular). Too many politicians can't (or won't) look at the data and change their minds.
No comments:
Post a Comment