Research Topics

Measuring Income Loss and Poverty in Greece

More than a decade after the 2009 crisis, the standards of living of the Greek population are still contracting and the prospects are gloomy. In this policy note, Vlassis Missos, Research Associate Nikolaos Rodousakis, and George Soklis deal with how to approach the measurement of income loss and poverty in Greece and argue for the use of household disposable income (HDI) in estimating adjustments, which offers a more accurate appreciation of the burden falling on the Greek population. They underline the significance of replacing a “southern-European model” of social protection with a passive safety net model—and the centrality to the latter model of embracing ideas of internal devaluation and fiscal consolidation—and suggest a better measure of poverty, for the case of Greece specifically and in general for developed economies in which front-loaded neoliberal policies are imposed. Finally, they comment on the sacrifice that would be required if fiscal discipline were to return in the aftermath of the COVID-19 pandemic lockdowns.

This paper extends the empirical stock-flow consistent (SFC) literature through the introduction of distributional features and labor market institutions in a Godley-type empirical SFC model. In particular, labor market institutions, such as the minimum wage and the collective bargaining coverage rate, are considered as determinants of the wage share and, in turn, of the distribution of national income. Thereby, the model is able to examine both the medium-term stability conditions of the economy via the evolution of the sectoral financial balances and the implications of functional income distribution on the growth prospects of the economy at hand. The model is then applied to the Greek economy. The empirical results indicate that the Greek economy has a significant structural competitiveness deficit, while the institutional regime is likely debt-led. The policies implemented in the context of the economic adjustment programs were highly inappropriate, triggering private sector insolvency. A minimum wage increase is projected to have a positive impact on output growth and employment. However, policies that would enhance the productive sector’s structural competitiveness are required in order to ensure the growth prospects of the Greek economy.

Ireland was at one time the poster child for fiscal austerity, but that country’s disappointing economic performance of late has left austerity apologists searching for a new model—and the Baltic economies appear to be next in line. But Estonia, Latvia, and Lithuania are as unsuited to stand as successful models of expansionary fiscal contraction and “internal devaluation” as their Irish predecessor.

The Baltic States and the Crisis

The commonly cited example of the successful application of “internal” devaluation as a strategy for economic recovery is that of the Baltic economies. In this Policy Note, we discuss whether the Baltic austerity plan worked, how it was designed to work—and, most important, whether it can be replicated anywhere else. We argue that the Baltic recovery has unique features that do not relate to domestic austerity policies, nor are they replicable elsewhere.

Improving Competitiveness by Reducing Living Standards and Increasing Poverty

Greece’s new EU/IMF bailout package is all about private sector wage cuts and an overhaul of labor rights. In short, it will do absolutely nothing to address the nation’s economic crisis because it is not designed to rescue Greece’s embattled economy. In fact, it will have the unwanted effect of keeping the nation locked in a vicious cycle of debt—and leading, finally, to its exit from the eurozone.