Galery

1

The first bills of the new Greek cabinet relate to alleviating the consequences of the so-called "humanitarian crisis", reinstating the state television ERT that was closed down 2 years ago and to the loans "in the red". What would the macroeconomic results from the application of these measures be? Is there a risk of Greece returning to budget deficits?

Greece is confidently moving towards deficits, as tax revenues have significantly dropped and the government wants to spend much more. Anticipating a political change, many taxpayers have stopped paying their taxes, believing that the new government will forgive them. This proves to be a great delusion, as every government needs money but it will be difficult to restore the fiscal discipline, especially for a government that has promised to put an end to the fiscal burdens and restrictions. However, the problem with budget deficits is that Greece cannot finance them - it has no access to markets to obtain a loan nor can it obtain one from the lenders because it is not fulfilling the agreement. There is a lack of money, which will limit the opportunities for new spending programmes and SYRIZA will have to give up most (and the more expensive) of its campaign promises.

Do you see a risk of Greece exiting the euro zone? How would such a development affect the Greek economy regardless of how close or far off it would be?

The risk of Greece finding itself outside the euro zone is great, now this risk is historically the highest, approaching 40-50%. The consequences would be very severe, including loss of access to funding, bankruptcy of the state, bankruptcy of real business, closing of banks (as happened in Cyprus), hyperinflation, decline in real incomes, international isolation, capital flight, etc. Bulgaria experienced such a period in the 1990s and it took more than a decade to recover from it.

Do you think there is a possibility of SYRIZA fulfilling some of the promises it had made before the elections?

There are two paths before SYRIZA - one is to make a turn to the reforms and to fully benefit from the European integration and European aid (as PASOK did in the 1980s). The example of Ireland shows that this is possible - Ireland has already emerged from the debt crisis and paid off all its loans to the International Monetary Fund, it has reduced unemployment and attained higher growth. The other path before SYRIZA is to continue with its unfulfilled promises, cancel the reforms and leave the euro zone, which will mean a severe crisis. In short, the choice is either membership in the euro zone or breaking the agreement - both cannot happen at the same time as the Greek politicians and voters want. A serious decision will have to be made and soon at that.