If it is ever to
emerge from crisis, Greece will need more debt relief to allow it to restart
its economic engines. That's what Marcel Fratzscher, President of the German
Institute for Economic Research, is calling for.
We therefore need to
consider how we can bring about this sustainability, to allow the Greek
government to be able to function again. At the same time, it is important to
Greece's European partners that the requirements Greece has agreed to will also
be adhered to in the future. The challenge here is to find a balance between
the two.
So there would be a haircut only if Greece keeps reforming?
Yes. The European
partners want a promise from the next Greek government that it will stay on the
path of reform. Greece still has some reforms ahead. The country has already
done a very, very great deal, but state institutions still need to be improved.
The country must be made more competitive, and companies will need help to
start investing more again. It will be important for its European partners that
Greece keeps its promises.
Could the eurozone and Germany cope with vast debt relief?
The experts have yet
to work out the extent of the restructuring and how much state debt should be
written off. For me it is clear that the restructuring effort has to be big
enough. Once again, we don't want a small solution where we have the same
problem two or three years later. Europe can surely manage this.
It's a matter of
helping, but of course we also get something in return. That something must be
continuing the reforms and not undoing them. I think this is the key point.
Only when the Greek economy recovers and generates growth, when people return
to work and can earn a good income - only then will Greece recover from its
crisis, and only then will Greek sovereign debt be sustainable in the future.
These two items are
essential for Greece to reduce its national debt while continuing reform, so
that people can finally get back into work and have an income.
The German government has been very critical about further debt relief.
What room for negotiation is there here? What do you expect will happen?
My expectation is that
European politicians will enter into negotiations with the next Greek
government, no matter who makes up that government, even if it's Alexis
Tsipras. We must then think carefully about how best to accomplish the common
goal of leading Greece out of the crisis. I expect a very constructive approach
from all European partners, including the German government.
How would you describe the Grexit discussion, the talk of a Greek exit
from the eurozone?
The discussion about
Grexit is harmful, especially for Greece. Without the euro, Greece would fall
into an even deeper depression than is already the case.
We can easily imagine
what would happen if Greece gave up the euro as its currency and changed to a
new drachma: There would not only be an immediate national bankruptcy, but
there would also be a massive wave of insolvencies among Greek banks and almost
all Greek companies.
Unemployment would
rise significantly, while income would drop significantly. In addition,
galloping inflation would weaken the purchasing power of consumers in Greece. I
am convinced that a Greek euro exit would cause massive damage over the
subsequent five years.
Europe could more
easily cope with a Greek exit, but there would also be a price to pay. From an
economic perspective, no one is hoping for a Greek exit. And we must also
realize the main victims of a Grexit would undoubtedly be Greek citizens.
What will happen if Alexis Tsipras, the current opposition leader and
head of the radical left-wing SYRIZA, wins the election, and stops the reform
course?
I cannot imagine the
reforms would not continue. Greece must be aware that the Greek government and
the banks are still on European life support. They are dependent on aid.
Greece's banks could not survive without the loans from the European Central
Bank. They can only do because the ECB still continues to accept Greek
government bonds and guarantees.
If the reforms do not
continue, it will be extremely difficult for Greek banks to avoid collapse. The
Greek government - including a government under Mr. Tsipras - will not be in a
strong bargaining position at all.
If it wants to protect
the economy and the people of Greece, it will continue the path of reform. I do
not see any alternative.
Marcel Fratzscher is President of the German Institute for Economic
Research (DIW Berlin), Professor of Macroeconomics and Finance at the Humboldt
University of Berlin and a member of the Advisory Board to the German Economy
Ministry.
(Πηγή: dw.de)
