Delivering his inaugural lecture as Chairman of the Athens Academy, former Governor of the Bank of Greece, then Vice-President of the ECB, Lucas Papademos, later caretaker Prime Minister when Greece attempted a more formal version of kicking the can down the road by negotiating and implementing (in 2012) a PSI exercise over its public debt, had interesting points to make about the two-tiered challenge Greece faces in the year 2017: How does one get growth while at the same time achieving fiscal consolidation.
Papademos started by looking at the reasons the Greek debt crisis - and the widespread economic and even social crisis that ensued - proved far deeper than those faced by other Programme countries. For him, imbalances (both fiscal and balance of payments) in Greece were far more pronounced that in other countries; when the successive Programmes were implemented, the short-term goals set were too ambitious and the adjustment caused too abrupt; structural reforms, such as were adopted to help recovery, were left dragging; the banking sector crisis, with capital outflows and NPLs blossoming, fed in; all along the electoral cycle and deep mistrust delayed any implementation. Last but not least, successive governments were unable to communicate the need for adjustment.
To dwell to the past is certainly useful - but Papademos used it to seek a way out of the current impasse. To that effect, he asked for better design of the Programme and of adequate measures to be taken; but he also stressed the importance of getting back confidence and never letting the need for social cohesion out of sight.
True enough, he supported the Greek Government's call for debt relief that could take the form of longer maturities for Greek debt (still, longer by 30 years and not by 3 or 5 as presently discussed) and of interest-rate caps for a portion of the debt outstanding. But deeper reforms that would turn around mentalities - such as those in the educational system or in support to R&D - would be needed to restart the economy on a sure footing.
Not an easy task altogether.
Excerpts of Papademos' lecture
"There are indications that the [Greek] economy has entered a period of stabilisation and growth. International organisations forecast that GDP will grow by 1.3 to 2.3 p.c. in 2017, by 2 to 3 p.c. in 2018 and by some 2 p.c. in the years after. Still, such predictions are based on the assumption that adequate policies will be applied on time and bring results, while there exist an important degree of uncertainty due to internal and external factors".
"The Greek people during these last seven years has been feeling increasingly disappointed and even angry. Favourable forecasts and expectations that the way out of the crisis is near have been proved wrong, while attractive promises for a different sort of policy that would lead to a latter future were inevitably given the lie".
"In the implementation of the reforms planned, priority should be given to the efficiency and the quality of public administration, which includes the amelioration of the way the justice system works; also enhancing tax collection and revamping education. This, in turn, demands a framework to be put in place which would allow for the evaluation of efforts undertaken and for rewarding such efforts as well as for goals achieved".