THE HELLENIC LINK, Inc.

Member Update- BULLETIN

An  Economic Strategy for Greece:

Through Public Investment*

Prof. Nicholas Economides

Stern School of Business, NYU

As we reach the fall of the 5th year of the Greek economic crisis, Greece has good fiscal news as it continues to build a primary surplus. In the other three main economic problems (debt, reform, unemployment), Greece has made only limited progress. Here is what needs to be done now.

1. Need to create a wise strategy and persistence in its implementation

Greece needs to set targets, to create a strategy, and above all to insist in its implementation. The stakes are huge. Greece has a realistic possibility of leaving the economic crisis behind it in 15 months. Failure would be catastrophic, creating a political and economic crisis similar to one of May 2012. As I have written before in Kathimerini in the beginning of 2014, at the present juncture, Greece has choices. This requires wisdom in the creation of a strategy, persistence in its implementation, and regaining of credibility for Greece.

2. Economic program and strategy

The first and most important issue is growth. All agree on the need for growth. In the long run, it will be created through the improvement of the Greek economy through structural reforms. But how can it be achieved in the short term? Through public investment. Greece is now able to borrow from the international markets by issuing new bonds. All the money (€5 bil. annually) from the new bonds should be put in public investment. Not even one euro should be lost and buried in the general State budget. Through these investments, Greece will create new employment positions, income, tax receipts, and will rebound. And surely, through the boost of public investment, private investors who have been waiting to buy “Greece” cheaper, will now be pushed to invest in Greece by the fear that, if they do not buy now, they will have to pay more in the future. Public investment of €5 bil. yearly (3% of GDP) and 1-2% of GDP private investment will surely make the Greek economy take off. Greece has to convince the Troika to exempt public investment from fiscal restrictions since, through the products and services investment produces, it decreases rather than increases the percentage of debt to GDP. For those who foolishly ask why should Greece borrow from the market at 3-5% interest rather than borrow from the Europeans at 2%, I remind them that the Europeans and the IMF do not lend to Greece all the money Greece wants.

Second, Greece should set up a crucial target to reduce unemployment from 27% to 13-15% in two years through the creation of new employment by the investment program. Greece should convince the Troika that this is a crucial target. After the deep fiscal consolidation, Greece has to immediately act to reduce unemployment. However, this should be done through investments that create new work positions and not through an “employment program” that just subsidizes the unemployed and renames them “employed.”

Third, Greece needs to persevere in implementing the structural reforms. The recent quote of the Greek Economics Minister in the New York Times “Greece has done most of the reforms” is unfortunate. Everyone knows that only few reforms have been made, and most reforms are waiting to be done, including the reduction of tax rates, the reduction of bureaucracy, the increase in efficiency in the public sector, the evaluation of public servants, and the shrinking of the public sector. Greece should say “yes” to the structural reforms, and Greeks should be convinced that they want them done even if they did not have the Troika to remind them to do them. Of course this requires political support. It is crucial that citizens are convinced that reforms are crucial for the long term prosperity of Greece. Some may lose their privileges, but the public will win a lot and for a long time. Surely there is need for prioritization in their substance and time of implementation.

Fourth, Greece needs to tackle the very large public debt that was accumulated from decades of corruption, populism, foolishness, and inertia. Greece is in a good position since it pays small interest rates (average 1.82%, below 2%) on the largest part of its debt that is held by the European Stability Mechanism and the European partners of Greece, and additionally these lenders allow Greece to delay payment of interest for a number of years. Moreover, Greece is lucky that worldwide interest rates are at the lowest of the last 50 years. However, these are likely to increase because of a change in policy of the Fed, possibly before the end of the year.

Greek pubic debt is large as a percentage of GDP, and some worry that at some point in the future it may not be serviceable/viable. This problem is solved through growth, increasing the GDP as I propose above, and reducing the ratio of debt to GDP. And to be sure that in the future Greece will be able to pay interest on its debt, Greece should now ask its European partners to convert the now variable low interest rates to low fixed rates. And Greece should also ask for the reduction of the net present value of the debt by 50% through the elongation of the maturity of the debt to 75 years. The Greek debt will stay the same as a number of Euros, but its net present value will decrease by 50%. This change will give the opportunity to future generations of Greeks to pay off a much smaller debt. To those who say that the elongation of the maturity of the debt burdens future generations, I should underline that, unfortunately, the present Greek generation already (before 2009) has consumed the moneys of its children and grandchildren. The elongation of debt maturity does not add any new burden to future Greek generations. On the contrary, it reduces their burden. Those (including SYRIZA) who advocate that Greece should not pay its debts to friendly countries and should instead blackmail them, are not grounded in reality. Such a move would lead to the exit of Greece from the Euro, the collapse of Greek banks, hyperinflation, and shrinking of incomes to the level of 1950s.

3. Greece’s relations with the Troika

The Troika came to Greece to supervise the fiscal consolidation of Greece when suddenly the European Stability Mechanism, the EU partners, and the IMF became Greece’s main creditors. Its second target was structural reforms.

The macroeconomic model of the Troika (that is, the IMF’s) was repeatedly way off in its predictions (as the IMF has also admitted). On the other side, Greece never proposed its own macroeconomic model in the negotiations and never proposed qualitatively different targets than the Troika’s. That is, the negotiations of Greece with the Troika were quantitative and not qualitative, with Greece attempting to get a “discount” of 20% on the proposals of the Troika. The frequent visits of the Troika, the many small installments, and the inertia of the State mechanism cast a shadow on the substance and the objectives of the program. Additionally, the constant repetition of the dilemma for and against the Mnemonia (the agreements of Greece with its creditors) without a real understanding of the content of the Mnemonia denied the Greek people the possibility to take a serious part in the discussion on the future of the Greek economy.

After four years of supervision, having created a primary surplus and the possibility of borrowing from bond markets, Greece is in a much better negotiating position than earlier. But it still lacks a comprehensive strategy, and it still addicted to the quantitative negotiation.

4. What Greece should ask of the Troika

First, Greece should ask for the immediate start of the discussion for the elongation of debt maturities and the conversion of the interest rates to fixed ones. The elongation helps Greece. There is no substantial reason for this issue not to be finished now.

Second, Greece should ask the Troika to exempt public investment from the fiscal consolidation restrictions up to €5 billion, with the money coming from new issues of bonds that will go exclusively to public investment.

Third, Greece should clearly tell the Troika that it does not need more money and a new program, having achieved and sustained a primary surplus. The fiscal consolidation has ended. Of course, Greece can make structural reforms that decrease tax evasion, shrink the public sector and make it more effective.

Fourth, Greece should tell the Troika that it wants to make the structural reforms and in fact it is implementing them. The government should prioritize them. The quantitative negotiations on the forms (e.g. Greece has done 80% rather than 70% of them) are ludicrous and should stop.

Fifth, the negotiation should stop focusing on details (e.g. where there will be 50 or 40 installments), even though it helps the government giving it the justification that specific measures were imposed by the Troika (and Greece “succeeded” in negotiating for 50 installments while the Troika wanted 40), and the middle level bureaucrats of the IMF and Brussels “live” for the details. However, the focus on the details hurts Greece because it is not focused on the crucial issues.

5. The end of the Troika, the possible departure of the IMF from Greece, and the issue of growth

Some in the IMF and some in Greece want the IMF to leave Greece. This would be politically expedient for the IMF because it now gives money to Greece rather than poorer countries with perhaps bigger needs. It would also be politically useful to the Greek government that hopes that IMF’s exit will automatically mean the dissolution and exit of the Troika and an end to its frequent supervisory visits. But, most likely the Europeans will continue to check on the Greek economy hoping that Greece will pay off its loans to them. This means that the supervisory visits will not end with the death of the Troika.

There are two significant problems related to the possible exit of the IMF from Greece. First, the IMF has already given 16 billion euros to Greece, and, according to its rules, this debt has to remain “viable,” or the IMF would need to immediately ask for its full repayment. This means that the IMF will implement a supervision similar to that of the Troika, even if it were not to make any additional loans to Greece. Therefore it is not improbable that after the end of the Troika, two of its constituent parts, the IMF and the EU, would conduct two separate supervisory checks!

Second, as part of the program, the IMF is expected to loan €12 billion to Greece in 2015-16. These moneys are already budgeted and their lack has to somehow be covered. At some point, there were thoughts to use the remaining €11 billion of the moneys originally borrowed for the bank recapitalization, but now it seems that they will be given to the banks for partial coverage of non-performing loans that reach €80 billion.

There are thoughts for Greece to issue €12 billion new bonds to cover the needs arising from IMF’s exit. In my opinion, such a move is in the wrong direction. Instead, Greece should use all moneys from new bonds issuance for public investment. Greece does not have the luxury to reject moneys that have been promised to it years ago from the IMF, if this results in killing the public investment program. To put it simply: as long as Greece can draw money from the financial markets, it should put all these moneys to public investment. But what should Greece do about the shortfall of €12 billion that would arise if the IMF exits? What does Greece really gain from IMF’s exit? Either way, the IMF will send a team to check on the viability of the Greek debt. This implies that Greece wins very little from IMF’s exit, but Greece loses the unique possibility to finance its rebound from the recession and growth by issuing new bonds.

6. Conclusion

In conclusion, I emphasize the most important point of this article. The strategy that leads Greece quickly and with certainty to growth and reduction of unemployment is simple. Greece borrows €5 billion per year issuing new bonds and uses all the moneys in public investments. Greece does not put a single euro from these moneys in the general budget, and the money is not wasted to “pay” the IMF, which would send inspectors to Greece even if it extends no further loans. With some attention and care, Greece can reach a 3-5% growth in 2015 and higher in 2016. And by the end of 2016, this growth would result in 600,000 new work positions. In contrast, without insistence in reforms and without this specific program of fast growth, Greece can easily stay in the swamp of recession, which will be accompanied with huge dangers of political instability and national crisis.

*A Greek version of this story appeared in Kathimerini, on September 14, 2014.

The Hellenic College Needs to Fill the Position of its President

The Hellenic College/Holy Cross Greek Orthodox School of Theology (HCHC) has just announced an active search for filling the position of its President with effective date: July 1, 2015. The Board of Trustees, chaired by the Archbishop Demetrios, is inviting submission of applications or nominations for the position with closing date: Monday Dec. 19, 2014.

HCHC is the only Hellenic academic institution in the Western Hemisphere dedicated to the preservation and growth of the Orthodox Faith through the pastoral mission of the clergy and lay graduates of its School of Theology, and to the dynamic projection in the community of the Hellenic Heritage and Ideals by its Hellenic College graduates. At present, the institution offers studies in six undergraduate majors and three graduate degrees, by the School of Theology. Several institutes on its Brookline MA campus enhance its academic mission in various ways.

The suitable Presidential candidate is anticipated to be “a visionary and strategic leader

who will implement the strategic plan, enhance the academic stature, and strengthen its position as a leading institution.” The challenges awaiting the successful candidate will be indeed great and complex. In view of this reality, the Greek American community attending the process of finding and installing the new HCHC President with profound interest should become simultaneously aware of the dire need to help the institution and its administration in an unprecedented degree. Concerning the size of support the Omogeneia should be ready to bestow on it, a useful yardstick would be the amounts of support that scores of thriving denominational colleges and universities receive around the country from their faith communicants, e.g., Roman Catholic and Jewish. We believe that the communicants of the Christian Orthodox Faith should not prove second-rate

.Ever mindful of this imperative obligation, we reprint the HCHC Announcement of Presidential Search, wishing it an abundantly blessed result for the greater good of all of us:

Presidential Search

The Board of Trustees invites applications, nominations, and inquiries for the position of President of Hellenic/ College Holy Cross Greek Orthodox School of Theology located in Brookline, Massachusetts. The elected candidate is expected to assume the Presidency, commencing July 1, 2015. The Trustees seek a dynamic, visionary, and strategic leader who will implement the strategic plan, enhance its academic stature, and strengthen its position as a leading institution.

The President is the chief executive officer of Hellenic College, Inc., which is governed by the Board of Trustees, chaired by the Archbishop of the Greek Orthodox Archdiocese of America. The President is expected to build upon the institution’s achievements and to lead the College and School of Theology into a future of ever-changing needs in higher education and in the life of Orthodox Christianity.

Founded in 1937, and supported thereafter, by the Greek Orthodox Archdiocese of America, Hellenic College Holy Cross is an institution of higher learning fully accredited by the New England Association of Schools and Colleges and The Association of Theological Schools in the United States and Canada. Hellenic College is a faith and learning collegiate endeavor offering six baccalaureate majors. Holy Cross, a graduate school, is the oldest and largest Orthodox Christian School of Theology in the English-speaking world offering three graduate degrees. The College and School of Theology educate men and women in the liberal arts and selected professions in the context of the teachings and traditions of the Orthodox Christian Church and Hellenic heritage. The institution houses several high quality institutes and centers that provide complementary academic assets to faculty, students, and the scholarly community.

It is essential that the President understands and embraces the vision of Hellenic College/ Holy Cross as the center for intellectual, educational, and spiritual formation for the Greek Orthodox Church in America. The institution is committed to educating, forming, and developing seminarians, collegians, and graduate students for ordained and lay vocations in service to the Greek Orthodox Archdiocese, other Orthodox Christian jurisdictions, and Society. Emphasis is placed on preparation for leadership positions in chosen professions.

The ideal candidate for the Presidency, cleric or layperson, possesses intellectual breadth, discernment, an authentic spiritual demeanor, and strong interpersonal skills. The candidate is a successful teacher and scholar, and/or an outstanding clergyman, and/or an excellent senior manager. The candidate is a team-builder and efficacious administrator with a genuine desire and capacity for fund-raising and institutional advancement. The Trustees are seeking a President who can inspire and lead efforts to implement the institution’s strategic plan, enhance its academic stature, strengthen and expand its resources, pursue operational excellence, and promote its distinctive ethos, mission, and history.

Further, the Presidency requires passion, energy and courage to meet the institution’s challenges and opportunities. The President needs to be an effective communicator and skilled advocate in order to interact successfully with the institution’s trustees, faculty, students, administrators, staff, and external constituencies. The President is a proven business and academic leader who possesses strong financial acumen and who can manage a high degree of complexity.

• A doctoral/graduate degree or equivalent experience is required with proficiency in Modern Greek preferred.
• Non-traditional candidates with organizational leadership and development experience are encouraged to apply.
• Compensation is competitive with institutional peers.

Applicants are to submit a letter of application and a resume or curriculum vitae. Nominators are to submit a letter of recommendation and the nominee’s resume or curriculum vitae. Additional materials will be requested as needed. The search process strictly adheres to a policy of candidate confidentiality.

Applications or nominations are to be submitted to presidentialsearch@hchc.edu by Friday, December 19, 2014.

Please use “nomination” or “application” in the subject line.

Hellenic College is an Equal Opportunity Employer (EOE). A diverse workforce and an inclusive culture is valued.

Hellenic College/ Holy Cross Greek Orthodox School of Theology
50 Goddard Avenue, Brookline, Massachusetts 02445    (617) 731-3500

Hellenic College/ Holy Cross is an institution of higher learning founded by, associated with, and supported by the Greek Orthodox Archdiocese of America.

Copyright 2014. Hellenic College Holy Cross | 50 Goddard Avenue, Brookline, MA

– See more at: http://www.hchc.edu/about/news/news_releases/presidential_search#sthash.MFS

News of Interest in Brief

• The Hellenic American Leadership Council (HALC) is organizing a ‘New York Power Lunch ‘ in Astoria, NY, on November 24, 2014 at 12:00 noon. Lunch speaker will be Apostolos Zoupaniotis, publisher of the Greek News and U.N. correspondent of Cyprus News Agency, Cyprus Broadcast Corporation and Kathimerini-Cyprus, Mr. Zoupaniotis will review the ongoing U.N. initiative on two major Hellenic issues: Cyprus, and the Macedonian name. To attend this event, due to very limited space, an early RSVP is essential. Response link: https://salsa3.salsalabs.com/o/50154/p/salsa/event/common/public/?event_KEY=79914
• The Eastern Orthodox Studies Group of Fordham University is presenting a series of themes at the American Academy of Religion in San Diego, CA, Nov. 22-25, 2014: “Georges Florofsky and Changing Paradigms of Modern Eastern Theology”;  The Crafting of Socio-Religious Female Identity in Eastern Christianity” and “Ecological Theology.”
• Ο συνεργάτης μας στην Αθήνα Αλέξανδρος Οικονομίδης μας πληροφορεί ότι το εξαντλημένο και πεισματικά μη ανατυπούμενο για πολλά χρόνια Νεώτερον Εγκυκλοπαιδικόν Λεξικόν του «Ηλίου» έχει επανεκδοθεί εις μνήμην Ιωάννου Δ.Πασσιά σε υψηλής ποιότητας ψηφιοποιημένη φωτογραφική αναπαραγωγή. Σχετικές πληροφορίες παρέχονται από το Google.
• From the Sustainability Office of the University of Maryland/College Park, we are informed that on Earth Day 2014, university President Wallace Loh announced Energy Conservation Initiatives, an ambitious set of three goals of carbon-emission-cutting energy goals:

1) Energy Conservation Initiative: Reduce electricity use on campus by 20 per cent by 2020.                                                                                                                                                     2) Carbon Neutral New Development Initiative: Negate added greenhouse gas emissions from new construction and major renovations through energy-efficient design and renewable power.                                                                                                                                         3) Initiative on Purchased Power: Eliminate carbon emissions from purchased electricity by 2020 through the purchase of electricity from renewable energy sources.

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