Corporate consultant, ex-Columbia prof: High Greek primary budget surpluses have actually increased public debt

30 March 2018
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The excessively high primary budget surpluses, as a percentage of GDP, that the current leftist-rightist coalition government has agreed to – with institutional creditors – and achieved over the last three years appear to have increased, rather than lowered, public debt.

The more-or-less radical supposition was put forth on Wednesday by Athens-based business consultant and former Columbia professor George Prokopakis, who presented his analysis at a high-profile workshop organized by the think tank ekyklos in the Greek capital, entitled “private and public debt as decisive factors for Greece’s economic course after 2019”.

Other participants included former minister and PASOK leader Evangelos Venizelos, ex-FinMin Gikas Hardouvelis, well-known Greek economist and analyst Miranda Xafa, and the up-until-recently head of Parliament’s independent Budget Office, Panagiotis Liargovas.

Prokopakis, who specializes in debt restructuring for private companies, also maintained that more expensive short-term borrowing, in place of cheaper long-term credit, merely shifts burdens after 2019. That year coincides with a scheduled general election in Greece, barring a snap poll in the meantime.

He also said the poll-trailing Tsipras government’s recurring theme of a “clean exit” from the bailout era, after August 2018, will essentially be financed by the state sector and various state entities.

Instead, Prokopakis pointed to a failure of the coalition government to negotiate for the remaining and unused funds allocated as part of the third memorandum bailout for Greece, saying this would be preferable to more expensive market lending once the country is outside the low-interest and guaranteed memorandum. This causes credit asphyxiation for the battered Greek economy, he warned.

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