Economists Call for Cancellation of Greek Debt to Avoid ‘Inescapable’ Austerity

Extrait de: Greece needs debts cancelled and growth, Financial Times, Jan 5, 2015

Sir, The future of the EU is at stake in the negotiations between Greece and its creditor institutions, now close to a climax. To avoid failure, concessions will be needed from both sides. From the EU, forbearance and finance to promote structural reform and economic recovery, and to preserve the integrity of the Eurozone. From Greece, credible commitment to show that, while it is against austerity, it is in favour of reform and wants to play a positive role in the EU.

In a letter to the FT in January, several of us said: “We believe it is important to distinguish austerity from reforms; to condemn austerity does not entail being anti-reform.” Six months on, we are dismayed that austerity is undermining Syriza’s key reforms, on which EU leaders should surely have been collaborating with the Greek government: most notably to overcome tax evasion and corruption. Austerity drastically reduces revenue from tax reform, and restricts the space for change to make public administration accountable and socially efficient. And the constant concessions required by the government mean that Syriza is in danger of losing political support and thus its ability to carry out a reform programme that will bring Greece out of the crisis.

It is wrong to ask Greece to commit itself to an old programme that has demonstrably failed, been rejected by Greek voters, and which large numbers of economists (including ourselves) believe was misguided from the start.

Clearly a revised, longer-term agreement with the creditor institutions is necessary: otherwise default is inevitable, imposing great risks on the economies of Europe and the world, and even for the European project that the eurozone was supposed to strengthen.

Syriza is the only hope for legitimacy in Greece. Failure to reach a compromise would undermine democracy in and result in much more radical and dysfunctional challenges, fundamentally hostile to the EU.

Consider, on the other hand, a rapid move to a positive programme for recovery in Greece (and in the EU as a whole), using the massive financial strength of the Eurozone to promote investment, rescuing young Europeans from mass unemployment with measures that would increase employment today and growth in the future. This could both transform the economic performance of the EU and make it once more a source of pride for European citizens.

How Greece is treated will send a message to all its eurozone partners. Like the Marshall plan, let it be one of hope not despair.

Extrait de : Greece, austerity, letter, The Guardian, 20 January 2015

Greece, austerity, letter

As economists, we note that the historical evidence demonstrates the futility and dangers of imposing unsustainable debt and repayment conditions on debtor countries; the negative impact of austerity policies on weakening economies; and the particularly severe effects that flow on to the poorest households.

We therefore urge the troika (EU, European Centra Bank and IMF) to negotiate in good faith with the Greek government so that there is a cancellation of a large part of the debt and new terms of payment which support the rebuilding of a sustainable economy. This settlement should mark the beginning of a new EU-wide policy framework favouring pro-growth rather than deflationary policies (Report, 14 January).

We urge the Greek government to abandon the austerity programme that is crushing economic activity and adopt a more expansive fiscal policy setting, targeting immediate relief from poverty and stimulating further domestic demand; to launch a fully independent investigation into the historic and systemic failure of the Greek public financial management processes (including any evidence of corruption) that led to the accumulation of debt, the disguising of the size and nature of the debt and the inefficient/ineffective use of public funds; and to consider the establishment of a judicial body or alternative mechanism that is independent of government and charged with a future responsibility of investigating corruption from the highest to lowest levels of government.

We urge other national governments to exercise their votes within official sector finance agencies and to pursue other diplomatic activities that will support a cancellation of a large part of the Greek sovereign debt and new terms of payment for the rebuilding of a sustainable Greek national economy.

·         Malcolm Sawyer Emeritus prof, University of Leeds

·         Danny Lang Associate prof, University of Paris

·         Prof Yu Bin Professor and deputy director, Chinese Academy of Social Sciences

·         Prof Ozlem Onaran University of Greenwich

·         Prof Mario Seccareccia University of Ottawa

·         Hugo Radice Life fellow, University of Leeds

·         John Weeks Professor emeritus, Soas, University of London

·         Prof Howard Stein University of Michigan, Ann Arbor

·         Anitra Nelson Associate professor, RMIT University, Melbourne

·         Prof George Irvin University of London, Soas

·         Dr John Simister Manchester Metropolitan University

·         Mogens Ove Madsen Associate professor, Aalborg University

·         Wang Zhongbao Associate professor, editorial director, World Review of Political Economy

·         Dr Susan Pashkoff Economist

·         Andrea Fumagalli University of Pavia

·         Pat Devine University of Manchester

·         Professor Ray Kinsella University College Dublin

·         Alan Freeman Co-director, Geopolitical Economy Research and Education Trust

·         Eugénia Pires Economist, member, Portuguese Citizens Debt Audit

·         Dr Jo Michell University of the West of England, Bristol

·         Michael Burke Economist, Socialist Economic Bulletin

·         Paul Hudson Formerly Universität Wissemburg-Halle

·         Dr Alan B Cibils Universidad Nacional de General Sarmiento, Buenos Aires, Argentina

·         Guglielmo Forges Davanzati Associate prof, University of Salento

·         Prof Sergio Rossi University of Fribourg

·         Faruk Ulgen Associate prof, University of Grenoble

·         Tim Delap Positive Money

·         Eleni Paliginis Middlesex University

·         Grazia Ietto-Gillies Emeritus professor, London South Bank University

·         Professor Radhika Desai University of Manitoba

·         Michael Roberts Economist, ‘The next recession’

·         Michael Taft Unite the Union, Ireland region

·         Dr Andy Denis City University London

·         Peter Kenyon Chartist

·         Professor Emeritus Geoffrey Colin Harcourt UNSW Business School