THE GREEK DEBT CRISIS IN QUEST OF GROWTH IN TIMES OF AUSTERITY Edited by Christos Floros and Ioannis Chatziantoniou The Greek Debt Crisis Christos Floros · Ioannis Chatziantoniou Editors The Greek Debt Crisis In Quest of Growth in Times of Austerity Editors Christos Floros Department of Accounting and Finance Technological Educational Institute of Crete Crete, Heraklion, Greece Ioannis Chatziantoniou Portsmouth Business School University of Portsmouth Portsmouth, UK ISBN 978-3-319-59101-8 ISBN 978-3-319-59102-5  (eBook) DOI 10.1007/978-3-319-59102-5 Library of Congress Control Number: 2017947808 © The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations Cover credit: © mustafahacalaki\Gettyimages Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Contents When Did It Go Wrong? The Case of Greek Sovereign Debt Vasilis Sarafidis, Anastasios Panagiotelis and Theodore Panagiotidis Asymmetry, Austerity and Anxiety: The Approach to the Greek Debt Crisis Giannoula Karamichailidou, Dimitris Margaritis and David G Mayes Debt Supercycle in Greece and Secular Stagnation in the Eurozone: Implications for Policy Dimitris G Kirikos The Effects of the Financial Crisis on the Creditworthiness of Banks Anestis C Ladas, Christos I Negκakis and Angeliki D Samara On the Split of Social Security Contributions Between Funded and Pay-as-You-Go Pension Schemes; Contribution to Growth Thomas Poufinas and Effrosyni Kouskouna 37 85 109 129 v vi     Contents The Role of Sovereign CDS Spreads for Stock Prices: Evidence from the Athens Stock Exchange Over a ‘Default’ Period Nicholas Apergis History of Greece’s Debt Crisis and the Banking Policy Alexandros Garefalakis, Christos Lemonakis, George Alexopoulos and Efthalia Tabouratzi The Market Reaction on Ex-return of Capital Dates During Financially Constraint Periods Apostolos Dasilas The Impact of Greek Economic News on European Financial Markets Evidence from the European Sovereign Debt Crisis Dimitrios I Vortelinos, Konstantinos Gkillas (Gillas) and Christos Floros Innovation and SMEs Financial Distress During the Crisis Period: The Greek Paradigm Christos Lemonakis, Alexandros Garefalakis, Grigoris Giannarakis, Efthalia Tabouratzi and Constantin Zopounidis 153 177 189 219 285 Index 309 About the Editors Christos Floros is Professor of Finance at the Technological Educational Institute of Crete and at the Hellenic Open University, Greece His main research interests include behavioural finance, financial derivatives, financial econometrics, and empirical banking He is the Editor-in-Chief of the International Journal of Financial Markets and Derivatives (IJFMD) and has published in a number of academic journals, including Journal of Empirical Finance, Journal of International Financial Markets Institutions and Money, International Review of Financial Analysis, Economic Modelling, Manchester School, and Global Finance Journal Christos is a Fellow of the Higher Education Academy, UK, a member of the Economic Chamber of Greece (ECG), and co-author of Modelling and Forecasting High Frequency Financial Data (Palgrave 2015) Ioannis Chatziantoniou is a Senior Lecturer of Economics and Finance at the Portsmouth Business School, University of Portsmouth, UK His main research area is empirical macroeconomics with a particular interest in monetary policy, housing markets, financial markets and energy His studies have been published in international academic journals such as Economics Letters, Review of Quantitative Finance and Accounting, Energy Economics, and International Review of Financial Analysis His work has been presented at prominent academic conferences and he has served as a reviewer for academic vii viii     About the Editors journals such as the Journal of Banking and Finance, Energy Economics, and Applied Economics He has written articles about the Greek debt crisis in various media outlets and newspapers, notably in the EUROPP (LSE) blog and The Conversation List of Figures When Did It Go Wrong? The Case of Greek Sovereign Debt Fig. 1 General government gross debt, % of GDP Fig. 2 Growth rate of real GDP Fig. 3 Inflation rate Fig. 4 General government deficit, % of GDP Fig. 5 Primary deficits, % of GDP Fig. 6 Number of violations of the fiscal deficit criterion Fig. 7 Revenues and expenditure, % of GDP Fig. 8 Primary expenditure, % of GDP Fig. 9 Wages and social transfers, % of GDP Fig. 10 Total revenues, % of GDP Fig. 11 Composition of taxes, % of GDP Fig. 12 Change in fiscal aggregates 1995–2000, p.p of GDP Fig. 13 Interest payments, % of GDP Fig. 14 Implicit interest rate Fig. 15 Decomposition of debt accumulation, p.p change of debt/gdp Fig. 16 Exchange rate movements 10 11 12 13 15 16 19 19 20 22 25 26 27 ix x     List of Figures Asymmetry, Austerity and Anxiety: The Approach to the Greek Debt Crisis Fig. 1 Material deprivation (in percentage terms of total population) Fig. 2 Youth unemployment (15–24) in percentage terms (1) Fig. 3 Youth unemployment (15–24) in percentage terms (2) Fig. 4 EURO STOXX 50 Volatility Fig. 5 Inflation rate Fig. 6 Government budget surplus/deficit (in percentage terms of GDP) Fig. 7 Government debt (in percentage terms of GDP) Fig. 8 GDP growth (in percentage terms) Fig. 9 Total unemployment rate (in percentage terms) Fig. 10 Long-term government bond yield (10 years) 64 65 66 67 68 75 75 75 76 76 Debt Supercycle in Greece and Secular Stagnation in the Eurozone: Implications for Policy Fig. 1 Aggregate demand for a small country in a monetary union 89 Fig. 2 Investment plus net exports, and inflation for Greece 90 Fig. 3 A recessionary spiral 91 Fig. 4 Nominal interest rate on government bonds and fiscal balance for Greece 92 Fig. 5 Shifts in aggregate demand 94 Fig. 6 Long-term real interest rate on government bonds (percent) 95 Fig. 7 Eurozone working age (15–64) population 96 Fig. 8 Probability of a high potential growth rate for the Eurozone 97 Fig. 9 Long-run equilibrium and secular stagnation 97 Fig. 10 Hysteresis for a country in a monetary union 99 Fig. 11 Hysteresis for the core of a monetary union 100 Fig. 12 Fiscal balance as percent of GDP 101 Fig. 13 Effects of expansionary monetary policy 102 Fig. 14 Expansionary fiscal and monetary policies and increased inflationary expectations 103 .. .The Greek Debt Crisis Christos Floros · Ioannis Chatziantoniou Editors The Greek Debt Crisis In Quest of Growth in Times of Austerity Editors Christos Floros Department of Accounting and Finance... On the Pricing of Corporate Debt: The Risk Structure of Interest Rates The Journal of Finance 29: 449–470 Muscio, A., and G Nardone 2012 The Determinants of University-Industry Collaboration in. .. (IJFMD) and has published in a number of academic journals, including Journal of Empirical Finance, Journal of International Financial Markets Institutions and Money, International Review of Financial