List members might be interested in two reports by the Macroeconomic Policy Institute (IMK) and the Macro Group respectively.
[ IMK's English site: http://www.boeckler.de/91434.html ] 1) Report on Greeces current economic situation and the Greek public debt crisis (June 20th, 2011) Abstract: Many are in favor of a restructuring of Greek public debt. It seems that the measures taken so far were not successful. Furthermore, it is considered unjust that private creditors do not share the costs. In order to assess what measures are actually adequate, the report gives an overview of Greeces current economic situation and discusses policies to overcome the debt crisis, which is a current account crisis too. The report shows that the succession of rescue packages and the harsh austerity policies have not succeeded in stabilizing or reducing Greeces debt-to-GDP ratio. A debt restructuring, however, would be even more dangerous. A straight haircut would burden the Greek economy, and especially its banking system, and would question the existence of the euro area. A softer debt restructuring, e.g. in the form of an extension of debt maturities, would not take the load off Greece either. Every kind of debt restructuring would increase risk perception for all government bonds in the euro area. But above all danger arises that investors would sell massively government bonds of other European countries that are in dire straits right now, and thus increase the likelihood of further debt restructuring. Therefore, the report proposes an alternative program. This program aims at stabilizing interest rates at a level that allows the Greek government to consolidate its budget effectively, it avoids a haircut and gives Greece enough leeway to grow out of its problems. Facts, figures, and charts (text in German): http://www.boeckler.de/show_product_imk.html?productfile=HBS-005016.xml resp. http://www.boeckler.de/pdf/p_imk_report_61e_2011.pdf 2) The euro area at the crossroads First joint analysis of the Macro Group. Institut für Makroökonomie und Konjunkturforschung (IMK) & Centre de recherche en économie de sciences po (OFCE) & Oesterreichisches Institut für Wirtschaftsforschung (WIFO): IMK Report, Nr. 61e, April 2011. Abstract: The German economy entered the year 2011 buoyantly. The upswing is expected to continue throughout 2011 with GDP increasing at an average rate of 2.7%. Both internal and external demand will drive the economy. In the course of the forecast horizon, however, economic activity will become less vigorous. There are two key reasons for this slowdown: Firstly, the fiscal stimulus packages are coming to an end and fiscal policy is embarking on a restrictive course. Secondly, but more importantly, the sovereign debt crisis in the euro area is unresolved and taking its toll. The crisis countries are experiencing deep economic recessions, not least because of the fiscal austerity measures they had to adopt. The other member states are also turning to fiscal consolidation. This will dampen economic activity in the euro area, the main market for German export goods. The institutes therefore expect lower export growth and weaker investment demand in Germany for next year. All in all, German GDP growth will amount to 1.7% in 2012. The unemployment rate will decline to 6.6 % in 2012 from 7.1% in 2011. Consumer prices will increase by 2 % and 1.5% in 2011 ands 2012, respectively. Against this background the ECB should leave its key rates unchanged. This would be in line with its medium-term strategy as second-round effects of recent shocks in oil and food prices are not to be expected. The current course of the European Council is unlikely to resolve the crisis in the euro area. A comprehensive approach is needed that involves a guarantee of existing government debt and high domestic demand in countries with current account surpluses, in the short run, and, in the medium term, the setting up of a European Monetary Fund, the introduction of euro bonds and a refocusing of the stability and growth pact on current account balances. The German government should use the technical leeway provided by the good economy to make provisions for cyclical downswings: Given the already structurally underfinanced public budgets, higher than expected tax revenues should definitely not be used for tax cuts. Otherwise, the next cyclical downswing would invariably result in destabilizing fiscal consolidation measures. Full paper in English: http://www.boeckler.de/show_product_imk.html?productfile=HBS-004999.xml resp. http://www.boeckler.de/pdf/p_imk_report_61e_2011.pdf _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
