Greek Sovereign Debt: Addressing Economic Distress and Growth in the Euro Area
P. Alexakis, G. Hardouvelis, D. Paxson, G. Sick, L. Trigeorgis
December 2017
Abstract
This article addresses key issues of the Greek sovereign debt crisis, its broader economic distress and growth implications for the Euro Area and offers suggested remedies including growth indexed bonds, fiscal balances over a growth cycle, structural reforms, and using real option analysis in relevant public policy areas involving inefficient or growth sectors of the economy.
Introduction
The high debt of the Greek public sector continues to feed the public policy debate.
Despite fiscal measures, austerity and structural reforms and a debt haircut in 2012, the policy debate continues to focus on how to deal with the Greek sovereign debt as it keeps raising fears and anxiety about distress and no or slow economic growth. A recent International Monetary Fund (IMF) country report (see Table 1) shows that over the last decade the fiscal imbalance in Greece has continued unabated, reflected in economic decline (or stagnation) and a rising gross debt face value as a proportion of GDP, despite a moderate decline in the unemployment rate since 2013. IMF (2017) shows that many of the IMF forecasts in the past have been too optimistic.
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