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Reforms in Greece will take decades

18 December 2015 / 19:12:47  GRReporter
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Anastasia Balezdrova

Greece is facing a huge challenge to attain economic growth, not just macroeconomic consolidation to cope with the implications of the financial crisis, said in Athens Financial Times Chief Economics Commentator author of a series of books about the world economy Martin Wolf. He stressed that for this purpose, the country would have to implement deep structural reforms.

"If Greece wants to remain a Eurozone member it will have to become a normal European country in terms of policies and institutions," said Wolf, adding that this process would continue for decades. "If Greece is unable to cope with it, then it should consider the possibility of leaving it. But there are insignificant grounds to expect a better perspective in view of such a possibility."

Martin Wolf was invited by the Hellenic Foundation for European and Foreign Policy ELIAMEP to deliver the annual lecture of the organization on "Is the Eurozone crisis over - and what about Greece?"

According to his analysis, while for now the Eurozone has managed to avoid the worst consequences of the economic crisis that is raging inside it, Greece is the only member state that is showing no signs of improvement and will continue to be in a state of recession next year too.

The Eurozone itself is far from pre-crisis economic performance but has achieved economic growth of 1.5%. "We are talking about a lost decade," stressed Wolf. According to him, in the summer of 2012, it faced a "mortal danger" but thanks to the decisive intervention of the European Central Bank, it avoided a total catastrophe. However, unemployment remains very high both in the Eurozone as a whole and in the individual member states. Significantly, even Germany has not yet returned to the pre-crisis level of unemployment.

The member states are not equally recovering from the "terrible damage" of the crisis of the euro and the data show that the process is entirely dependent on the measures that each country has taken. Wolf emphasized Ireland’s "extraordinary success" in reducing unemployment and gave the example of Spain, "which has proved that deep and undoubtedly painful reforms produce results." As proof of this, he said that in early 2014 the forecasted increase in Spain’s GDP in 2015 was 1% percent. Actually, however, it will reach 3% thanks to the boom in productivity that followed the implementation of reforms.

On the other hand, the analyst expressed concern over the fact that France is in a state of stagnation, saying, "The reforms announced by Mr. Hollande are not giving results at least for the time being." "The situation in Italy is worse because the country failed to regain competitiveness. GDP per capita declined by 12% and if it continued at the present pace it would reach pre-crisis levels only in 2025," said the analyst to warn that if the two countries failed to attain economic recovery, the Eurozone would be threatened by other crises.

According to the British analyst, part of the problem is due to the model of the German economy imposed by Berlin on the Eurozone. "Often I call the German economy ‘the most powerful small economy in the world’," he said, explaining that by insisting on all member states achieving budget surpluses, "the Eurozone is transferring its deflation to the rest of the world." Wolf determined the position of Germany as "extremely irresponsible" and said that emerging economies such as those of Japan and China were following its example. His analysis shows that if this happened, there would be a high risk of convulsions in emerging markets, which would transfer to developed economies.

Tags: EconomicsGreeceReformsEconomic crisisEurozoneEconomics commentatorMartin Wolf
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