Greece needs a new set of reforms to boost growth

11 June 2016
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Greece needs to adopt a “second generation” of reforms as the policy mix followed during the crisis didn’t favour economic growth, Finance Minister Euclid Tsakalotos said on Thursday during a debate in a panel on structural reforms, at the Brussels Economic Forum.

“Greece is turning a page. It is breaking the vicious circle of fiscal measures that cause recession, which in turn brings more fiscal measures,” the minister said in his speech, adding that the sequence of reforms implemented in the country was wrong. “Greece was asked to complete an ambitious fiscal adjustment program very quickly,” he said, which was at the expense of employment and the economy.

He also spoke of the significance of investments, not just for Greece but for Europe as a whole, noting that the low or zero interest rates from which some countries are benefiting must be used to stimulate investments.

Commenting on the benefits or problems of globalization, Tsakalotos said he disagreed with the head of the European Stability Mechanism (ESM) Klaus Regling that all economists agree globalization is good, noting that the main problem is the unequal distribution of profits from increased productivity.

He also said that to fight euro-scepticism you need more than better communication: “There are winners and losers and it must be ensured that losers will have a chance.” Deputy Prime Minister Alexander De Croo, who was in the same panel, said it is cynical to say globalization didn’t benefit nations and that it is wrong to give more importance to social inequality versus social mobility.

“More Europe makes sense only if it’s more democratic and social,” Tsakalotos responded and expressed hope that in the second generation of reforms, Europe will take into consideration the needs of societies.

Asked about the European Central Bank’s quantitative easing program, the minister said sounded the alarm on countries with large debts such as Italy and Portugal. “The QE program has problems and will not last forever. We must remember that when it is completed, many economies that have a high debt will have a problem,” he said.

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