The Greek Public Debt Problem

Michalis Nikiforos,Gennaro Zezza

doi:10.2139/ssrn.2781682

Michalis Nikiforos, Gennaro Zezza

Open Access

https://doi.org/10.2139/ssrn.2781682

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Abstract

This paper examines the issue of the Greek public debt from different perspectives. We provide a historical discussion of the accumulation of Greece’s public debt since the 1960s and the role of public debt in the recent crisis. We show that the austerity imposed since 2010 has been unsuccessful in stabilizing the debt while at the same time taking a heavy toll on the Greek economy and society. The experience of the last six years shows that the country’s public debt is clearly unsustainable, and therefore a bold restructuring is needed. An insistence on the current policies is not justifiable either on pragmatic or on moral or any other grounds. The experience of Germany in the early post–World War II period provides some useful hints for the way forward. A solution to the Greek public debt problem is a necessary but not sufficient condition for the solution of the Greek and wider European crisis. A broader agenda that deals with the malaises of the Greek economy and the structural imbalances of the eurozone is of vital importance.

Highlights

The Greek economic crisis started as a public debt crisis five years ago
We argue that Greece’s public debt is clearly unsustainable and a very significant restructuring of this debt is needed for the Greek economy to start growing again
In a similar vein, Keynes warns that the stubborn insistence on demanding reparations that could never be repaid would lead to a serious economic crisis that, in turn, could have serious political repercussions for Germany and the rest of Europe: The Restructuring of German Public Debt Post–World War II Another irony of history is that Germany, which staunchly opposes any effort to restructure the Greek public debt, was the beneficiary of the largest debt restructuring deal in history, in the aftermath of World War II

Summary

Introduction

The Greek economic crisis started as a public debt crisis five years ago. despite austerity and a bold “haircut,” public debt is around 175 percent of Greek GDP. We argue that Greece’s public debt is clearly unsustainable and a very significant restructuring of this debt is needed for the Greek economy to start growing again.

Results

Conclusion