The Best of GRReporter
flag_bg flag_gr flag_gb

Olivier Blanchard: Economic reforms will be extremely painful for Greece

24 February 2010 / 15:02:30  GRReporter
3641 reads

"Extremely painful" will be the strict financial discipline that Greece should follow for the next 10 to 20 years. Measures to reduce the deficit and the external debt will bring acute social change, in order to ensure financial stability. This is what Olivier Blanchard chief economist of the International Monetary Fund (IMF) said and he also added that he believes that the high indebtedness of the Eurozone countries (mainly Greece) will extend the recession period. According to Blanchard, Economic the restoration of the normal rhythm in these cases is much easier in countries with devalued currency. 

 "Countries where there is no possibility of devaluation, tightening measures would be extremely painful,” for a long period of time, said the economist. In the short term, countries with high deficits will have low or negative economic growth. This will inevitably lead to cuts in expenditure policy of the country. The first "victim" will be inevitably be the amount of wages as a step to restore competitiveness.

In the context of the changes are the measures of the Socialist government to reduce the bonuses of public employees by 10% to 20% depending on the size of their salaries. After the initial calculations it became clear that the Greek government should save an extra €3.5 billion in order to achieve the objectives of the stability and development program. At the same time cost of money/investment for developing the country's competitiveness, is high. Interest rates in Greece cannot fall to help increase liquidity in the country, because they are set by the European Central Bank (ECB). Thus, Greece remains with the only choice to introduce a series of additional cuts despite being in a deep recession. 

According to Olivier Blanchard, if the government did not artificially keep low inflation and low interest rates during the "good times," today no additional restrictions on economy recovery would have been needed.

Tags: Olivier Blanchard IMF EC European Central Bank Economy Greece
SUPPORT US!
GRReporter’s content is brought to you for free 7 days a week by a team of highly professional journalists, translators, photographers, operators, software developers, designers. If you like and follow our work, consider whether you could support us financially with an amount at your choice.
Subscription
You can support us only once as well.
blog comments powered by Disqus