Sir Christopher Pissarides,
Nobel Laureate,
Professor of
Economics at the London School of Economics, Professor-at-Large
at the HKUST Institute for Advanced Studies, and HKUST IEMS
Faculty Associate, presented his views on Greece’s recent economic
crisis, explaining in detail the causes of the crisis and explaining
the country’s strained geopolitical history. The talk was supported
by the HKUST Leadership and Public Policy Program (LAPP) and EY
Hong Kong.
Sir Christopher stated that one must go back over 50 years to
understand the recent Greek economic conundrum. The 1940s
were the most destructive period, immediately after German
occupation and during the Greek civil war. Once communism was
defeated and their supporters exiled, Cyprus was given to Turkey.
Western European politicians had little interest in Greece except to
see that it became a democracy. Consequently, as a purely political
move without regard to Greece’s precarious economic situation at
the time, Greece was added to the European Union.
By the time the Euro came along, high inflation and debt made
it impossible for Greece to join the Eurozone. Only through
the falsification of its debt obligations was Greece able to join,
THE GREEK CRISIS AND THE FUTURE OF THE
EUROZONE
HKUST IEMS and LAPP – EY Hong Kong Emerging
Market Insights Series (2015.09.22)
as high inflation and its untenable fiscal situation made such
a prospect otherwise impossible. Greece then had access to
capital at Germany’s low interest rates and was tempted to
borrow increasingly more. Little of this lending went toward the
development of local industry or infrastructure, which would have
boosted the country’s long-term economic prospects. Instead, most
of the added liquidity poured into Greece’s heavily monopolized
domestic economy such as its expansive shipping industry.
In 2010, when doubts about Greece’s fiscal strength caught the
public’s attention, the country received temporary relief from the
European Union, and in 2012 some of its debts were forgiven
provided Greece undertake austerity measures.
Although both Greek politicians and international lenders made
mistakes, Sir Christopher felt strongly that only solidarity between
Greece and the Eurozone can lead to recovery. Unfortunately, the
current narrative paints a picture of a Greece whose interests are
in direct conflict with the rest of the Eurozone. Proposed austerity
measures, such as further cuts to the country’s domestic labor
costs, are unlikely to benefit the Greek economy in the long-run.
Sir Christopher was unequivocal that Greece’s best and perhaps
only option was to remain in the Eurozone. If Greece were to
leave the Eurozone and readopt the Drachma, its original currency,
it would have no choice but to default on its Euro-denominated
debts, and consequently fail to revitalize its flagging economy.
Video recording available at
Angelina Yee (HKUST LAPP), Albert Park (HKUST), Christopher Pissarides, Tony Chan (HKUST), Agnes Chan (EY Hong Kong)
DIRECTOR’S MESSAGE
Albert Park
NEWSLETTER
SPRING 2016
In the second half of 2015, HKUST
IEMS continued its active agenda of
events to engage key issues facing
emerging markets. We were honored
to co-sponsor lectures by three eminent
economists: Nobel Laureate and HKUST
IEMS Faculty Associate Chris Pissarides
talked about the Greek crisis, Nobel
Laureate James Heckman (University of
Chicago) discussed how best to develop
skills that will promote opportunity and
reduce poverty, and Partha Dasgupta
(University of Cambridge) explained
how nations can better measure national wealth to more
accurately reflect the well-being of their citizens. IEMS also hosted
three highly successful academic conferences that each created
new synergies by bringing together different groups of scholars for
the first time. The Conference on Comparative Studies of Regional
Governance in China and Russia brought together leading experts
on Russia and China studying the role of local government
leaders. The Conference on Urbanization, Structural Change, and
Employment brought together leading macroeconomists and
microeconomists working on employment issues in emerging
and developing countries. Finally, the Workshop on Challenges in
Emerging Markets in the 21st Century, brought together leaders
and key researchers from Institutes of Emerging Market Studies at
HKUST, the Indian School of Business, and SKOLKOVO Moscow
School of Management (all supported by EY), to discuss the
research agenda on emerging markets for the 21st century and
opportunities for collaboration among the three Institutes. The
Institute also continued its regular series of academic seminars
and business talks, continued to publish its popular Thought
Leadership Briefs, and proudly released its first Bi-annual Report.
