First paragraph: The European Central Bank’s decision to spend 60 billion euro a month to buy sovereign debt in order to fight deflation and revive the crumbling eurozone coincides with a snap Greek parliamentary election on January 25.https://theconversation.com/ecb-decision-should-be-good-news-for-greece-but-syriza-will-get-in-the-way-3657

Papanikos, Gregory T

English

First paragraph: The European Central Bank’s decision to spend 60 billion euro a month to buy sovereign debt in order to fight deflation and revive the crumbling eurozone coincides with a snap Greek parliamentary election on January 25

Stirling Online Research Repository (RIOXX)

29/05/2019 ECB decision should be good news for Greece, but Syriza will get in the wayhttps://theconversation.com/ecb-decision-should-be-good-news-for-greece-but-syriza-will-get-in-the-way-36578 1/4AuthorGregory T. PapanikosHonorary Professor, Department ofEconomics, University of StirlingAcademic rigour, journalistic flairECB decision should be good news for Greece, but Syriza willget in the wayJanuary 22, 2015 2.50pm GMTThe European Central Bank’s decision to spend 60 billion euro a month to buy sovereign debt in orderto fight deflation and revive the crumbling eurozone coincides with a snap Greek parliamentaryelection on January 25.If Syriza wins, as all polls indicate they will, this might be a serious setback for Greece, just at the timewhen the Greek economy was emerging out of a five-year deep recession.Economic turmoil is expected, primarily because Syriza insists on achieving a cut to Greek sovereigndebt. Germany and other eurozone countries consider this unacceptable.A parade of ex-prime ministersInvest in experts. Donate now and help share theirmessage with a global audience.Donate nowAlexis Tsipras doesn’t have what it takes to help ordinary Greeks. Yannis Kolesidis29/05/2019 ECB decision should be good news for Greece, but Syriza will get in the wayhttps://theconversation.com/ecb-decision-should-be-good-news-for-greece-but-syriza-will-get-in-the-way-36578 2/4The threat of a Greek breakaway is not considered serious by some analysts. After the Greek elections,they expect a compromise, even if Syriza wins. Since 2009, Greece has had five prime ministers: threeelected and two appointed. None lasted for long, primarily because they did not live up to theirunrealistic promises.Is this the fate of Syriza leader Alexis Tsipras? Probably. If he becomes the next prime minister ofGreece he will face the leviathan he created: a mass of people who want more jobs in the public sector(more than 300,000 are waiting) and a considerable raise in private and public wages. He simplycannot do it. Nobody will give him the money to start a new public spending spree.But if he does not deliver, then he will be forced to confront not only public anger, but his numerousclans inside his own party. He is doomed to fail. The sooner the better. The longer this lasts, thelonger political uncertainty reigns, not only in Greece, but in the eurozone countries as well. It seemsthat if nothing else, the recent crisis has been successful in producing ex-prime ministers.Taking on the tax evadersTsipras, along with the many political leaders before him, thinks he will find the money in thenotorious Greek “lake” of tax evasion. In Greece, tax evasion and tax avoidance is an art, which themajority of Greek taxpayers have learned to perform well over the years. Ingenuity and practice is thesecret.Tsipras thinks he would succeed where others had failed. He is daydreaming. Nobody can beat taxevasion in Greece. Greece has one of the highest concentrations of small businesses in the world –close to 2.5m. There are 1.5m self-employed people in Greece, representing a third of all Greek employment. They are also the source of most tax evasion in Greece. They do not pay any ValueAdded Tax and “naturally” they do not pay income tax. The cost of auditing them exceeds any taxrevenue benefit. If the political cost is added, then it is impossible to reduce tax evasion. Most of theseself-employed vote for Syriza.Good news, bad timingThis is too bad because under tranquil political conditions, the ECB announcement on quantitativeeasing would have been wonderful news for the Greek economy. Greece needs this more than anyother country in the eurozone for at least four reasons.First, an expansionary monetary policy will keep the euro exchange rate low and this would be morethan welcome in Greece, which depends on a low value of the euro to boost its international tourismreceipts. The chart below shows that the value of the euro relative to the US dollar is much higherthan its 2002 value, the inaugural year of the euro.A devaluation of the euro is what Greece needs. And it comes at the right time because manyEuropean tourists are now deciding where to spend their summer holiday.29/05/2019 ECB decision should be good news for Greece, but Syriza will get in the wayhttps://theconversation.com/ecb-decision-should-be-good-news-for-greece-but-syriza-will-get-in-the-way-36578 3/4Greece Europe Eurozone Greek elections Syriza Alexis TsiprasSecond, the ECB’s policy of buying sovereign debt comes at the moment where the whole debate onthe Greek debt has resurrected the speculation about Greece leaving the euro. If monetary policybecomes more accommodating, the risk of Greece defaulting on its debt and exiting the eurozonebecomes infinitesimal small.Third, and most important, is the impact of ECB’s initiative on the borrowing rates for the privatesector. Greece faces the highest nominal interest rates in the eurozone. Real borrowing rates are evenhigher because Greek deflation is also the highest in the eurozone. With such rates hardly anybodywould want to invest in Greece. But if interest rates are brought down and the cost of borrowingdiminishes, the private sector can invest again, creating jobs and growth.Finally, the ECB’s policy would bring down the interest rates in all eurozone countries. Privateinvestment will pick up, generating more jobs and more income. This will have an additional positiveimpact on the Greek tourism industry since many international tourists come from the eurozonecountries.For all these reasons, the Greek elections this coming Sunday are crucial for the future course of theGreek economy. Whoever becomes the next prime minister must balance citizens’ overwhelmingdesire to stay in the eurozone with their insatiable hunger for more debt financing public spending. Aherculean task indeed.Before you go...We need facts to build a better future – but not everyone values evidence. This isa problem, and experts are the solution. Help them spread their expertise andcreate positive change for the next generation.Euro-US dollar exchange rate. ECBDonate now29/05/2019 ECB decision should be good news for Greece, but Syriza will get in the wayhttps://theconversation.com/ecb-decision-should-be-good-news-for-greece-but-syriza-will-get-in-the-way-36578 4/4Emily BrownCities and Young People Editor

ECB decision should be good news for Greece, but Syriza will get in the way

Stirling Online Research Repository

https://dspace.stir.ac.uk/retrieve/200a0175-36a2-401f-90cd-7ab7a7198522/Papanikos-Conversation-2015.pdf

ECB decision should be good news for Greece, but Syriza will get in the way

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