The Greek Economy and the Crisis

Transcription

1 The Greek Economy and the Crisis

2 .

3 Panagiotis Petrakis The Greek Economy and the Crisis Challenges and Responses

4 Prof. Panagiotis Petrakis National and Kapodistrian University of Athens Department of Economics Stadiou Athens Greece ppetrak@econ.uoa.gr ISBN e-isbn DOI / Springer Heidelberg Dordrecht London New York Library of Congress Control Number: # Springer-Verlag Berlin Heidelberg 2012 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer. Violations are liable to prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Printed on acid-free paper Springer-Verlag is a part of Springer ScienceþBusiness Media (

5 Contents 1 Introduction: The Responsibility of Knowledge, Challenges and Responses... 1 References The Changing World and the Greek Economy Before the Crisis Basic Sources of Growth The Unexplained Part of Growth, or the Factors Shaping Total Productivity Small Open Economies and Development Fundamental Global Economic Changes The Monetary Economy Population Flows Technology and Innovation Energy and Climatic Change The Formation of National Power Southeastern Europe and Greece References The Pre-Crisis Growth of the Greek Economy Growth in the Greek Economy Financing of Growth and Wealth Production and Income Consumer Expenditures Imports, Exports and Balance of Payments Competitiveness and Productivity Growth and Demand in the Greek Economy The Size of the Shadow Economy and its Effects Entrepreneurship References The Question of Growth The Issue of Human Development v

6 vi Contents 4.2 Examination of the Greek Economy s Convergence with the European Union The Question of Quality of Life and Development References Human Capital: Education, Innovation and Health The Quantitative Dimension of Education The Qualitative Results of the Education System Education and Labour Market The Relation Between Research and Innovation as a Serious Problem in the Greek Educational System The Financing of Education Summary of Problems in the Education System The Development of the Human Capital Innovative Activity of Enterprises Population Health References Cultural Values, Stereotypes and Historical Evolution The Evolution of the Greek Economy Risk, Commitment Time of Investment Funds and Productive Model in the Greek Economy Cultural Values and Stereotypes Empirical Facts on the Hierarchy of Cultural Values Social Capital The Role of Family Networks in Greece Economic and Social Reflections of the Cultural Model The Basic Description of the Model Temporal Orientation and Relationship with the Future Self-Employment and the Shadow Economy References Idiosyncratic Economic Institutions Characteristics of Transactions Visible Transaction Costs Invisible Transaction Costs and Business Development Invisible Transaction Costs and Corruption Property Rights The Oligopolistic Situation in Greece Greek and Foreign Companies The Structure of the Financial System: Banks or Financial Markets? Key Features of the Greek Financial System The Tax and Insurance System The Structure of the Tax System

7 Contents vii Organisation and Operation of Social Insurance Schemes The Insurance Scheme in the Greek Economy References Political Institutions and the Distribution of Income Political Institutions in Greece The Effectiveness of Political Institutions Size and Efficiency of the Public Sector Bureaucracy Public Enterprises The Influence of the State on the Functioning of the Economy and Society Pressure Groups in the Greek Society Professional Organisations Freelance Professionals Unions Trade Unions Farmers Pensioners The Unemployed Political Institutions and Income Distribution Distribution of Income Redistribution of Income Key Features of Poverty in Greece References Human Incentives Incentives and Economic Results Formation of Incentives Impact of Cultural Stereotypes on the Formation of Incentives Basic Incentive Mechanisms Incentives and Entrepreneurial Behaviour The Importance of Investment Funds Commitment Duration and of Risk Taking Psychological Needs and Incentives Returns of Investments in Human Capital Incentives and Economic Institutions The Financial System Financial System, Crisis and Financial Managers Incentives The Tax System

8 viii Contents The Social Security System Parallel Economy and Incentives Incentives and Capital Returns Incentives and Entrepreneurial Activity References The Crisis and the European Stability Mechanism Financial Crises in the Global Economy The 2008 Crisis and the Real Global Economy The 2008 Crisis and the Greek Economy The Phases of the Crisis over Time Internal Conditions of the Crisis Public Debt and its Maturity Spreads Credit Default Swaps The Three Credit Rating Agencies The Problem of the Financial System Public Lending External Conditions of the Crisis Germany s Role The Obama Administration s Policy and the US Financial System Creation of Rescue Packages in Europe The Creation of the ESM and the Entrance of the Greek Economy Measures of December 2009 (Stability and Growth Program, SGP) March 2010: The Result of Aggressive Market Pressure and the Additional Corrective-Supplementary Decisions of the Greek Government May 2010: Inclusion in the European Stability Mechanism The Evolution of Economies: The Unbalanced Recovery and the Global Imbalances References The Deeper Causes of the Greek Economic and Social Problems Special Features of the Institutional Background Cultural Background and Its Significance Property Rights Obscurity Political Institutions as a Defining Factor for Restructuring Economic Institutions Common Resources as the Main Source of Wealth

9 Contents ix 11.3 The Moral Hazard in the International Financial System and the Institutional Weakness Within the EU The Long-Term Social Choice of Expanding the Public Sector as a Means to Absorb the Excessive Workforce Systematic Existence of High Risk Levels in the Greek Society and Economy References The Greek Economy and the Crisis The Social Perception of the Crisis The Medium-Term Perspective in the International and European Economy The IMF, Growth and Adjustment The Classical and Peculiar Market Models, the Crisis and the Economic Adjustment Program (EAP) The Economic Adjustment Program, Policy and Income Distribution Economic Adjustment Program, Cultural Background, Motivation, Social Capital and Business Capital References The Effectiveness of Economic Adjustment Interventions Fiscal Adjustments and Economic Developments Structural Interventions The Financial System and the Real Economy Education and Innovation The EAP s Working Hypothesis and the Greek Economy References The Medium-Long Term Outlook of the Greek Economy The Medium-Long Term Perspective on the Greek Economy and the Sources of New Growth The Relationship Between the Key Factors of Growth and Other Factors (TFP) Overcoming the Trend The Political Conditions The Specifications of the Growth Model The Target, Instruments and Time Required to Overcome the Growth Trend The Objectives of the Growth Model The Instruments for Implementing the Growth Model. 426 References

10 x Contents Appendix: A Sectoral Proposal for Potential Growth in the Greek Economy. Climate Change, Population Ageing, Tourism and Culture Geophysical Components of the Long-Term Evolution of the Greek Economy Climate Change and Its Effects Population Ageing The Tourism Sector and the Greek Economy The Productive Sector of Culture Health References