An election too far ? Four scenarios for Greece after the elections. European Policy Brief No. 9, June 2012

The results of the Greek elections on 17 June are of crucial importance for both the country itself and the eurozone. This Policy Brief outlines the possible post-election scenarios. It argues that an intelligent modification of the current adjustment programme is the best course of action. Other policy choices would likely have a worse outcome, as they would either underestimate the resentment of the current programme among Greeks or risk leading to the

Greece & the European Agenda: EU Enlargement and European Monetary Union. CES Germany & Europe Working Papers, No. 08.2, 1998

In the decade to come, the European Union will embark on two new projects, each destined to transform it in fundamental ways: (i) Eastern enlargement, and (ii) economic and monetary union. Neither of these projects will affect all members equally or in the same way. But Greece will, for two reasons, be affected in a manner qualitatively different to all other member states. First, Greece is the only country physically affected by the Luxembourg Summit's decision to begin accession negotiations with some, but not all, Central and Eastern European applicant countries: as a result of this decision, she will continue, for at least another eight to ten years, to be the only member country not to share a common border with another member state, with all the consequent implications in economic and geostrategic terms. Second, when the European Council meets in early May to select those member states that are deemed to have met the convergence criteria, it will find that Greece is the only member state falling short of those criteria. This development may create additional difficulties for her economy during the transitional period of derogation. It will also pose new risks to Greece, insofar as she will be absent during the initial-and crucial-years of establishing a common monetary policy.

Why Greece is different. CEPS Commentary, 22 May 2015

With Greece���s economy tanking again, the country’s government is convinced that it is the victim of the wrong treatment in the form of excessive austerity and is calling for a renegotiation of the bailout deal it made with its international creditors. In Daniel Gros’ view, however, this narrative overlooks the fact that the approach worked in other peripheral countries: Portugal, Ireland, Spain and even Cyprus, are all visibly recovering. As he points out in this CEPS Commentary, it was their strong export performance which allowed these countries to escape the austerity trap and he accordingly urges Greece���s policy-makers to focus their attention on stimulating exports rather than only discussing the budget.

A parallel currency for Greece. CEPS High-level Brief, 20 May 2015

Greece and its creditors seem to be engaged in a game of chicken: both sides expect the other to yield at the last moment. The game will almost certainly end with each side deviating somewhat from its preferred course. This High-Level Brief discusses how a parallel currency could contribute to a resolution of the conflict. In the author's view, it would be the least-bad option for both sides among three possible options on the table.

Greece is insolvent but illiquid. CEPS Commentary, 18 June 2015

In a new CEPS Commentary, Paul De Grauwe argues that the Greek government is solvent but is trapped in a liquidity dilemma in which cannot find liquidity because markets believe it cannot find liquidity. He then explores the role of the European Central Bank in this self-fulfilling problem and ask specifically whether its outright monetary transactions (OMT) programme, introduced in September 2012, should be used to ease the constraints on Greece.

The Fate of Greece in a ‘Genuine Economic and Monetary Union’: Lessons from a small island state. CEPS Hi-Level Brief, 19 June 2015 Friday, 19 June 2015

As the Greek debt drama reaches another supposedly decision point, Daniel Gros urges creditors (and indeed all policy-makers) to think about the long term and poses one key question in this CEPS High-Level Brief: What can be gained by keeping Greece inside the euro area at “whatever it takes”? As he points out, the US, with its unified politics and its federal fiscal transfer system, is often taken as a model for the Eurozone, and it is thus instructive to consider the longer-term performance of an area of the US which has for years been kept afloat by massive transfers, and which is now experiencing a public debt crisis. The entity in question is Puerto Rico, which is an integral part of the US in all relevant economic dimensions (currency, economic policy, etc.). The dismal fiscal and economic performance of Puerto Rico carries two lessons: 1) Keeping Greece in the eurozone by increasing implicit subsidies in the form of debt forgiveness might create a low-growth equilibrium with increasing aid dependency. 2) It is wrong to assume that, further integration, including a fiscal and political union, would be sufficient to foster convergence, and prevent further problems of the type the EU is experiencing with Greece.

The Euro as a Foreign Currency for Greece Friday, 19 June 2015

In contrast to his contribution just a month ago, which examined how a Greek parallel currency to the euro could allow the Greek government to gain some room for manoeuver in fiscal policy while at the same time continuing the adjustment programme demanded by the country’s creditors, Thomas Mayer explores in the present note the question of how the Greek population could still keep the euro after a default of its government. Contrary to general belief, he finds that Grexit and the reintroduction of the euro as a foreign currency would probably be positive for the Greek economy, although its creditors would be hard hit. It is therefore primarily in their interest that default and Grexit are avoided.

Flashlight Europe N°7–09 July 2015. Greece After the Referendum: Three Possible Scenarios for the Euro Area

About ten days ago Alexis Tsipras, the Greek prime minister, announced that there was going to be a referendum, and thus terminated the negotiations on a new rescue package unilaterally. Since then the euro area has been plunged into a wholly unprecedented political crisis. Whether or not Greece can re-main in the monetary union is more uncertain than ever, and decisions that can give a new twist to the political and financial situation are being made almost every day. The Greek banks have been closed for over a week. The economic data are deteriorating rapidly. And yet a solution is nowhere to be seen. The No vote in the Greek referendum has not exactly improved the chances of reaching an agree-ment. For the time being the positions seem to have become uncompromising. At the summit of the heads of state and government on 7 July the Greek government was given five days and a “final deadline” in order to come up with viable proposals for reform. Thus the next few days are of crucial im-portance. At the weekend the heads of state and government of all 28 EU member states are going to meet in order to decide the future of Greece. This flashlight europe provides an overview of the events of the last few days, outlines possible scenarios for what may happen in the near future, and identifies factors which may exert an influence in the short term. We are not trying to give an exact forecast or to formulate action recommendations. But we are trying to shed some light on a confusing situation by identifying important patterns and some of the salient factors.

Puerto Rico and Greece: A Tale of two defaults in a monetary union. CEPS High-Level Brief. 18 June 2015, Update 30 June 2015

It is widely argued that the problems of Greece in the eurozone derive not only from mistakes made by successive Greek governments, but from deep-seated problems with the design of the euro area. The euro area is judged to be incomplete because it does not have any fiscal shock absorbers, nor a federal transfer system, and, according to many, it has imposed senseless austerity on the country. The US, by contrast, is often held up as an example of a complete monetary union in this type of problem could not arise. However, the working of the US is much less perfect than it appears from afar. The ‘genuine’ economic and monetary union, which undoubtedly exists in the US, also has problems in dealing with low-performing states in terms of productivity and governance. Puerto Rico exemplifies these difficulties and shows that in such an integrated area similar problems, including a fiscal crisis can arise. Both Puerto Rico and Greece are very special and extreme cases within their respective unions, but the strength of a system can be measured by how it deals with these cases.