Panicos Demetriades's picture
Affiliation: 
University of Leicester
Credentials: 
Professor of financial economics
Former Governor, Central Bank of Cyprus and ECB Governing Council member

Voting history

Deal or no deal: The Greece standoff

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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?

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Answer:
No opinion
Confidence level:
Extremely confident
Comment:
Media reports are not terribly reliable in such fast changing circumstances. In any case, media reports suggest that there is as yet no agreement on new fiscal measures. It's therefore hard to comment on what the additional effects will be at this stage, without knowing the overall package of fiscal measures and structural reforms.

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

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Answer:
No opinion
Confidence level:
Extremely confident
Comment:
Without knowing what the agreement is, it's hard to express an opinion on this.

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

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Answer:
Strongly Disagree
Confidence level:
Extremely confident
Comment:
A disorderly default will trigger a chain reaction of negative shocks that could prove truly catastrophic. If the ECB ceases to supply ELA to Greek banks, which would be almost inevitable in the event of default, the banking system will close down. Capital controls are not the answer, if there's no liquidity whatsoever. Shutting get down the banking system is like shutting down the entire economy. Cash will be king, those who have it will get by, those who don't would have no access to basic necessities, bread, milk, medicines, electricity. If this lasts for a few days, there will be blackouts and riots on the streets. What will happen next is highly uncertain, if there's still no agreement. This is clearly chartered territory. It may be necessary to issue IOUs to pay salaries and wages, that will start being traded allowing some domestic exchange. If there's still no agreement, Greece will be forced to introduce a new currency and may be forced out of the EU.

Monetary policy and the zero lower bound (ZLB)

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Question 2: Do you agree that the benefits of reforming the monetary system to allow materially negative policy interest rates outweigh the possible costs?

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Answer:
Strongly Disagree
Confidence level:
Extremely confident
Comment:
See my previous comment.

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Question 1: Do you agree that it is feasible for the UK authorities to change the monetary system so that materially negative policy interest rates could be safely implemented? (In answering, you may wish to explain your reasons and define your view of 'material')

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Answer:
Strongly Disagree
Confidence level:
Extremely confident
Comment:
Any proposal to tax holdings of cash is, at best, impractical. Even if it can be implemented, which is very doubtful, it would lead to confusion, inefficiency and currency substitution. It would undermine the foundations upon which modern exchange economies function, namely the existence of a stable and simple to use medium of exchange.

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