No Grexit, but future is bleak for Greece
IMD Professor Reacts: Arturo Bris on Greece’s election of the anti-austerity party, Syriza
January 28, 2015
The left-wing party Syriza was recently elected in Greece amidst widespread poverty and anti-Europe sentiment in the country.
Arturo Bris, Professor of Finance and Director of the IMD World Competitiveness Center, shared his thoughts in a recent interview on BFM, a business-focused radio station. Below is an extract of his comments.
On the possibility of Greece being forced out of the euro
It is impossible for Greece to be forced to leave the European common currency even though it has elected Syriza to head the government. Greece can only be forced out of the euro if it defaults on its government debts. Greece definitely doesn't want to leave the euro because it would be a tragedy for the country. That means it will not want to default on its debts. But, Greece will be unable to repay these massive debts. So the only situation I can foresee is some sort of debt relief program. It will be some kind of arrangement whereby Greece would be able to continue to use the common currency without repaying its total debt, which it will not and cannot pay.
On how the International Monetary Fund, the European Commission and the European Central Bank are handling the Greek economic situation
The Troika has probably realized that it was a big mistake to impose such harsh measures in certain economies in Europe. This realization will probably tone down the demands of the Troika in the future. A lot has been written about how misled some European countries felt by the Troika because the implementation of their harsh demands has brought suffering, rather than relief. Because of this, the Troika has lost a lot of credibility in certain parts of the world, particularly in Southern Europe. It's going to be much more difficult for them to keep on recommending the same recipe.
On the effectiveness of austerity
It certainly didn't work in Greece but it did work in Ireland and it is working in Spain. The difference between the countries was the starting point. Greece was in a terrible situation and there were not many potential solutions for the country. I think we should have helped Greece rather than imposing strict austerity measures.
On Greece's future
I think Greek social unrest will continue but with much more anger. This is a government that is bringing hope. My feeling is that this hope is not going to materialize. So this disappointment will be dramatic because the Greeks will realize that they only have more poverty in the future.
Listen to the full interview here.
Arturo Bris is Professor of Finance at IMD and directs the IMD World Competitiveness Center.