Greece: when is it time to forgive debt?

An article on Greece and the Eurozone by Jagjit Chadha, Professor of Economics at the School, has been published today in The Conversation

“Greek citizens preparing to vote in a referendum have been implored by their coalition government to reject a deal with the country’s creditors which, in actual fact, might have worked to keep the country afloat and on the road to some form of recovery. The offer that was on the table did miss out on something crucial, however. And it’s something which has become an established part of the narrative around the management of indebted nations: debt relief.

Indeed, the Greek prime minister, Alexis Tsipras, proposed a bailout deal on Tuesday that explicitly asked for it. With his country’s previous bailout now expired, a new one remains to be negotiated.

So, when should forgiveness start to play its part – and should it even have an automatic part to play? The state of Greece’s economy is such that many think it is time to tear up its membership of the eurozone. The Greek people have had a terrible time since the start of the financial crisis. Following two protracted bailouts in 2010 and 2012, the country has suffered a series of recessions and performed terribly in key economic indicators – from GDP to employment and real wages. And even though the quantity of public debt has been broadly stable since 2012 it has become more difficult to fund from the base of a shrinking economy.”

Click here to read the full article.