IfW in the News

Snower, Dennis J.: Forget Grexit


Oped by Dennis Snower, who argues to implement a fiscal plan, which allows Greece higher debts in times of economic crises, to help the country

Excerpt from the Article

(...) With the help of an expansive monetary policy, it is possible to stimulate an economy effectively in times of recession. There only needs to be a guarantee in return - that during boom times savings are achieved and debts are liquidated. Greek adherence to such a plan could be monitored by the troika or by the European Commission alone.

In order to set up a fiscal policy, Greece would first have to be relieved of part of its debts, to some extent by privatizing state property. Moreover, a debt-restructuring haircut would most likely be required. It could be linked to a new policy that stimulates Greek growth by promoting competition and investments in human capital and - where clearly required - physical capital.

In economic terms, it doesn't matter whether debts disappear by renouncing the demand for repayment or by extending the life of loans.

In addition, a fiscal plan would have to be implemented with automatic changes in taxes or state spending, to ensure that debt reduction over the mid-term would not be jeopardized with each change of government.