Sunday, July 26, 2015

Joe Stiglitz Criticizes The Troika Recovery Plan For Greece

Joe Stiglitz, unlike most of  us, has read the Troika plan, to which Greece must conform, in order to receive essential funding.  He argues that the plan is not good for creditors and it is not good for Greece.  The faulty plan does not surprise him.  His experience with the World Bank is full of examples in which external funding agencies have imposed structural changes on indebted nations that made their economies worse, and also made it less likely that the debts would be repaid.  The plan proposed by the Troika is subject to all of the problems that one might expect from a plan that must satisfy the needs of a wide variety of interest groups.  That includes the oligarchs within Greece which control the media and the financial system. 

Stlglitz understands that the Greek economy would be better off if it could make some structural changes.  He has two problems with the structural changes proposed in the Troika plan.  In the first place, it takes a long time for structural changes to have an impact on the economy.  They won't solve the short term problems that are ravaging the Greek economy today, and which will made worse by the fiscal contraction imposed on Greece by the Troika plan.  Secondly, the Troika has not put its finger on the structural changes that would be best for Greece.  Many of the structural changes in the plan will make things worse in Greece if they were implemented.  Several of the faulty changes are described in detail in his critique. 

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