Greek crisis more difficult than just fixing debt; Deeper reforms needed
Greece’s low productivity and competitiveness will hamper growth
Even if Greece’s debt were eliminated tomorrow, the Greek economy will still not grow substantially enough to catch up with the rest of Europe, according to Yannis M. Ioannides of Tufts University and Nobel-prize winner Christopher A. Pissarides of the London School of Economics and University of Cyprus in “Is the Greek Crisis One of Supply or Demand?” While the Greek debt is too high to allow the government flexibility in its budgetary policies, Greece also suffers from serious structural problems such as low productivity and lack of competitiveness. Since joining the Eurozone, the Greek government collected less in taxes than it spent, the country consumed more than it produced, and had to import well above its exports. For implementation to succeed, market reforms that free up competition in trades such as taxis and pharmacies need to be “owned” by the Greek government and eased in gradually to give affected workers alternative means of support in the transition. There is likely to be a time lag for which Greece will need help from international institutions – longer than 3 to 4 years as has been the timeframe for other European economic reform programs.