BPEA Fall 2015: Papers on Portugal and Greece

Ricardo Reis assesses adjustment in Portugal;  there is also an array of papers on the Greek crisis.

Papers here.

Update:   The discussion slides by Kevin O’Rourke for the Reis paper are available here.

3 replies on “BPEA Fall 2015: Papers on Portugal and Greece”

The root problem in Portugal and Greece is their inability to grow. They share this problem with Italy. Spain is the only Mediterranean country to show an ability to grow in recent decades. A number of northern European countries, frequently cited as models of good governance are not much better. I’d argue that disastrous demographics are one of the principal factors (although not the only one). These are the figures for growth in EU15 countries so far this century.

growth between Q4 1999 and Q2 2015 (GDP and GNP for Ireland, GDP for others):

Ireland (GDP) +68.6%
Ireland (GNP) +60.3%
Sweden +38.2%
U. Kingdom + 32.4%
Spain +29.0%
Austria +24.2%
Belgium +23.0%
Finland +22.8%
France +20.0%
Netherlands +19.9%
Germany +19.7%
Denmark +12.3%
Portugal +4.8%
Italy +1.7%
Greece +1.5%

I’d expect Ireland’s lead in this league table to increase sharply in coming years.

Denmark is only marginally better than the Mediterranean snails. Its growth so far this century is one-fifth that of Ireland. I’d say high taxes are the main factor here. These high taxes are constraining growth but bringing no social benefit. Its life expectancy is lower than Ireland’s and it came way behind Ireland in the 2013 PISA tests. Yet, the Irish commentariat is almost unanimous in arguing that Ireland should follow the Danish model.

Germany is particularly interesting. Frequently cited as an economic powerhouse, the figures show its growth to be very mediocre over the long-term. Germany isn’t overtaxed compared with the Nordics, and its an enterprising and financially well-run country. So, why the mediocre growth (one-third that of Ireland so far this century). Unquestionably disastrous demographics is the main factor here. In recent years births in Germany have been little more than half its number of deaths. In Ireland there have been 2.5 births for each death in recent years. Germany is geriatric. Frau Merkel has now decided to compensate for its inability to reproduce by inviting the populations of Syria, Iraq and Afghanistan (10% to 20% of whom are ISIL supporters) to reside within its borders. Whatever the economic consequences, its national suicide.


I would suggest Germany’s moderate performance is a reflection of sluggish domestic consumption fueled by labour policy that has resulted in a significant internal devaluation over the past decade. It is also what has resulted in Germany being so out of sync with much of the rest of europe and has facilitated a mountain of a trade surplus that was initially consumed by its EZ “partners” but since the crisis and sluggishness of the Euro, the EZ partners share of the surplus has tailed off only be replaced (and more) by exports to the ROW.

Germany made virtually no contribution to the 2% inflation target set by the ECB since the inception of the Euro – their profligate cousins more than compensating for them until that simply became unsustainable….and thus we are back to Germany enforcing restructuring among those cousins that will mean 2% will not be on the horizon for some time to come, ultimatley manifesting itself in low or near zero growth in the EZ for some time to come.

A friend commented:

‘One potential factor not mentioned is the “black economy” where lots of transactions aren’t recorded. While that is not likely the case now in Italy (in particular) it was certainly the case in the past. Portugal probably also has a large undeclared economy. Germany’s demographics are mentioned several times but what isn’t mentioned is the cheap pool of labour Germany has had access to since the wall came down. Genuine deflation.

It also depends on how ‘growth’ is achieved & measured.

Is low growth such a bad thing? The south of England has growth due to surging immigration but it doesn’t have wage growth (due to immigration) and the quality of life for a very great many (most?) is absolutely terrible.”

Comments are closed.