Must-Read: Richard Baldwin: VoxEU Told You So: Greek Crisis Columns since 2009

Must-Read: Richard Baldwin: VoxEU Told You So: Greek Crisis Columns since 2009: “Vox columnists have been analysing the situation with uncanny foresight right from the beginning…

…This column reviews a few of the contributions from 2009 and 2010 that predicted many of today’s challenges using nothing more than simple economic logic and a firm grasp of the facts…. The folly of the Eurozone’s choices on Greece was pointed out clearly in early analysis by Vox columnists right from the beginning. This is what Vox was set up to do…. A quote from Marco Pagano’s 15 May 2010 column on the Greek Crisis sums it up:

in emergencies such as the one we are currently experiencing, the way to escape the worst-case scenarios and find an exit strategy is to stick to clear-headed thinking.

The Greek Crisis is a classic case where research-based commentary by leading economists was greatly needed but little heeded…. Early warnings…. In 2008, Carmen Reinhart posted three warnings on Vox that history tells us clearly that severe banking crises are often followed by sovereign debt crises…. Barry Eichengreen added specificity to this in January 2009 with his insightful column ‘Was the euro a mistake?’… Six months before the first Greek bailout Charles Wyplosz and Paul De Grauwe also gave early warnings, both in December 2009….

After long claiming they would never bail out Greece, Eurozone leaders did exactly that in May 2010. The bailout package was a huge failure by any measure…. The first sentence in Wyplosz’s 3 May 2010 column, And now? A dark scenario, was: ‘The plan will not work.’… Barry Eichengreen (2010) provided another penetrating insight on 7 May 2010 – just before the Eurozone Finance Ministers agreed to set up the European Stabilisation Fund. ‘European leaders and the IMF have badly bungled their efforts to stabilise Europe’s financial markets. They have one last chance, but success will require a radical change in mindset.’… The rushed, emergency measures taken by Eurozone leaders in May 2010 were half measures, as many Vox writers pointed out. One of the first to lay out the economic logic of further steps was, once again, Charles Wyplosz…. In June 2010, Daniel Gros, Luc Laeven and I gathered a dozen world-renowned economists to contribute to a eBook that was to answer the simple question: what more needs to be done?…

The drumbeat of a failed rescue continued in 2011. Uri Dadush and Bennett Stancil in their column, Is the euro rescue succeeding?, argued that: ‘Until leaders deal with the core issues – the periphery’s lost competitiveness and misaligned economic structures – Europe’s rescue will ultimately fail.’ Zsolt Darvas, Jean Pisani-Ferry and André Sapir clearly set out what needed to be done in their February 2011 column…. In January 2011, EZ leaders setup the European Financial Stabilisation Mechanism (EFSM) to do deal future crises…. As Daniel Gros wrote in the March 2011 column, Pact for the euro: Tough talk, soft conditions?: ‘…the package is merely the next step down the slippery slope of EU taxpayers sharing the burden with Greek taxpayers.’… Ramon Marimon put forth a similar judgement in his column….

By Spring of 2011 it was clear that half measures were making things worse. What had been obvious to many Vox columnists in 2010 was becoming obvious to policymakers in 2011. Greece’s debt was not sustainable – it would never be paid back in full. Paolo Manasse used clear economic logic and basic facts to show that restructuring was the only way forward and was, in any case, inevitable…. Jeffrey Frankel provided a post-mortem of the botched bailout…. Kai Konrad and Holger Zschäpitz pointed out more system failures…. Charles Wyposz, in 2013… [was] prescient… cast the Greek Crisis as a problem for both those who borrowed foolishly and those who lent foolishly…

June 21, 2015

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