2015年-CEPS欧洲政策研究中心_Can_Greece_‘grow_solvent_3页_344kb

Can Greece 'Grow Solvent'?

Core Content

The document discusses the feasibility of Greece growing out of its debt crisis, focusing on whether the country can achieve a sustainable debt-to-GDP ratio through economic growth. It evaluates the potential for Greece to become 'solvent' by increasing its GDP and reducing its debt burden over time, particularly in the context of the eurozone debt crisis.

Main Viewpoints

• Debt Solvency Through Growth: Prominent economists, including Jeffrey Sachs, argue that Greece can grow out of its debt crisis if it can access funding at the same cost as Germany. With a real interest rate of around 2% and an assumed real growth rate of 3% per year, Greece could reduce its debt-to-GDP ratio to 80% of GDP by 2030.

• Demographic Challenges: The Greek working age population (15–64 years) has already peaked and is projected to decline significantly over the next 30 years. Even with immigration, the population is expected to be 10% smaller in 2040 than in 2010. Without immigration, the decline would be even more severe, reaching 25% over the same period.

• Labour Market Participation: There is potential to increase the effective labour supply by encouraging more participation in the workforce, especially among women. However, this is a slow process and may not significantly boost growth in the short term.

• Sectoral Growth Dynamics: Greece's economic growth from 2000 to 2009 was largely driven by non-tradable sectors such as retail and wholesale trade. These sectors are expected to suffer due to austerity measures and weak domestic demand, limiting their contribution to future growth. Tradables (agriculture, manufacturing) are small and have not been a significant growth engine in recent years.

• Long-Term Growth Prospects: Even with improved productivity and immigration, Greece is unlikely to achieve the 3% annual growth rate required to significantly reduce its debt. The combination of demographic decline and a weak tradables sector makes long-term growth challenging.

Key Information

• Debt Reduction Scenario: Greece needs a 3% annual growth rate to reduce its debt burden to 80% of GDP by 2030, assuming access to low-cost financing.

• Working Age Population:

  • Peaked in 2009.
  • Projected to decrease by 10% by 2040 even with substantial immigration.
  • Without immigration, the decline would be 25% over 30 years.

• Labour Productivity and Growth:

  • From 1970 to 2004, Greece's average annual growth was close to 3%, with 0.75% from increased hours worked and 2.25% from productivity gains.
  • In the medium term, the growth rate is expected to be lower due to reduced productivity and population decline.

• Sectoral Contributions:

  • Non-tradable sectors (services, construction) contributed most to growth in the past.
  • Tradables (agriculture, manufacturing) are small and not a major growth driver.

• Comparative Demographics:

  • Greece is not unique in facing demographic challenges, but its decline has already begun.
  • Other eurozone countries (Spain, Portugal, Ireland) face similar issues but with a later onset, giving them some time to adjust.

• Structural Reforms:

  • Greece is implementing policies to increase labour supply.
  • These reforms are expected to have a long-term positive impact on growth, but their effects will be limited in the short term.

Conclusion

While Greece has the potential to grow its way out of debt through increased economic growth and improved productivity, the demographic decline and structural limitations in its economy make this a challenging and uncertain path. The country's reliance on non-tradable sectors and the slow pace of structural reforms further complicate its ability to achieve the necessary growth rates. Thus, the idea of Greece 'growing solvent' remains optimistic but faces significant obstacles.