Macroeconomic Management and the post EMU Need for Structural Reforms in Greece

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Author: Gikas Hardouvelis
Publication: Economy & Markets, Eurobank Research, Issue 8, Volume 2, October 2007

Key points:

  • EMU membership has restricted the tools for domestic macroeconomic management and has elevated the need for structural reforms to top priority.
  • Prior to EMU, bond and FX markets used to punish the economy for disequilibria or inappropriate policies whereas post EMU, the previous market crises are transformed into cumulative imbalances, which are less apparent to Greek policy makers and the public.
  • The major imbalances of the Greek economy is the lack of competitiveness, a large public debt, which is expected to rise further due to the demands of financing the pension system, and a high rate of unemployment, a low level of employment and income inequality.
  • Structural reforms ought to continue more aggressively in the markets of goods and services as well as the public sector and, after they become acceptable to the public, move into aspects of the labor market.

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