Costas Milas's picture
Affiliation: 
University of Liverpool
Credentials: 
Professor of Economics

Voting history

ECB's quantitative easing

======================================================================

Question 2:

Do you agree that the structure of the ECB's QE programme makes the Eurozone more fragile and increases the risk of one country leaving the euro?

======================================================================

Answer:
Disagree
Confidence level:
Confident
Comment:
I would not say so. Although not officially stated, limited risk sharing is probably related to the fact that some Eurozone countries are much further behind than others in terms of structural reforms. This lack of structural reforms undermines economic growth, adds to sustainability issues and indeed makes Eurozone more fragile. I would imagine that progress in terms of structural reforms would (at some stage) take out of the picture limited risk sharing but Eurozone’s leaders need to become explicit about this. Take for example Greece. Greece’s need for structural reform is captured by World Bank’s government effectiveness index. The index, which captures perceptions of the quality of the civil service and the degree of its independence from political pressures, reveals the extent of the problem. Among 215 countries, the index currently ranks Greece at the disappointing 67th percentile. Both Portugal and Spain, Eurozone’s other peripheral countries who have gone through similar financial experiences to Greece, are ranked above the 83rd percentile whereas Germany is ranked at the 90th percentile.

======================================================================

Question 1:

Do you agree that the design of the ECB's QE programme reduces its effectiveness? 

======================================================================

Answer:
Disagree
Confidence level:
Not confident

Deal or no deal: The Greece standoff

=======================================

Question 2: Do you agree that Greece would be better off defaulting right now rather than signing to the agreement under consideration?

=======================================

Answer:
Strongly Disagree
Confidence level:
Very confident
Comment:
In the musical “The Sound of Music”, Maria repeatedly breaks the rules set by Mother Abbess (who runs the Nonnberg Abbey), and for this reason is asked to exit the monastery. For many Eurozone leaders, Greece represents a modern version of Maria who ruthlessly breaks the fiscal rules set by Angela Merkel (the modern version of Mother Abbess), and for this reason is threatened to exit the Eurozone monastery. This (I think) is precisely what will happen (sooner of later) if Greece defaults on its debts. Proponents of the default scenario both among European and Greek policy-makers argue that Greece, outside the Eurozone, will, sooner or later, boom. A Greek default followed by a “successful” Grexit largely rests on the implicit assumption that Greek government effectiveness is powerful enough to handle such a risky transition. Fans of the idea forget, however, that the continuous stand-off between Greece and its partners is explained (at least partly) by the very unwillingness of Greece to improve its government effectiveness by resisting necessary structural reforms. Indeed, had all structural reforms been implemented in the first instance, Greece wouldn't have been in the current mess.

=======================================

Question 1:  

Do you agree that, on balance, the implementation of the agreement as outlined in media reports will have a non-trivial negative effect on Greek GDP?

=======================================

Answer:
Agree
Confidence level:
Very confident
Comment:
The deal (under discussion) is heavily skewed towards tax (e.g. VAT and corporate tax) hikes. The deal puts forward a primary surplus of 1% in 2015, 2% in 2016, 3% in 2017 and 3.5% in 2018. Nevertheless, having a poor record in tax collection, it looks (at best) questionable that Greece will hit the targets largely via tax increases. Indeed, all governance indicators (published by the World Bank) currently rank Greece below Eurozone’s core and periphery. With this in mind, the deal under discussion looks more like the typical “extend and pretend” stategy. The deal will trigger a deep recession. But, will it be implemented? This is highly questionable. It looks strange to me that the current government, which came to power on the (false) promise of abolishing austerity, will work efficiently in implementing the deal. For the deal to have a “minimal” recessionary impact, work effectively and give hope to the Greek people, it has to be implemented together with significant debt restructuring. This very restructuring could take the form of a “dual mandate” of debt repayment in terms of GDP growth and governance improvement as follows: if Greece records positive GDP growth but no improvement based on the government effectiveness index (published by The World Bank), then the cost of servicing the Greek debt should be higher compared with the case where Greece records both positive growth and an improvement in the index. This mandate plan, will provide a strong signal that Greece “means business” and therefore address some of the concerns of its lenders.

=======================================

Question 3: Do you agree that implementation of the agreement will lead to an expected decrease in Greek debt repayments?

=======================================

Answer:
Agree
Confidence level:
Confident

Pages