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January22,201511:45pm

EuropewillbenefitfromGreecebeinggivenafreshstart
Sir,FTcolumnistshaverecentlyacknowledgedthatdebtreliefisanecessary(thoughnotsufficient)conditionforGreecetorecover
(GillianTett,January17,WolfgangMnchau,January5,PeterSpiegel,January7).Onlywithsuchreliefwillitbeabletodevelopa
growingeconomythatmakesfulluseoftheskillsofitspeopletocontributetoaunitedanddemocraticEurope.

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Onthevexedissueofdebtresolution,thewritersconcernedaretobecongratulatedfortakinganethical
andpragmaticstance.Ethicalinrejectingadogmaticinsistenceondebtrepaymentinfullregardlessofthe
socialandpoliticalconsequencesadogmathatisalreadydividingEurope.Pragmaticinrecognisingthe
breathingspacethatdebtreliefwillgivetoagovernmentintentonpursuingreformsinchallenging
corruptionandtaxevasionandaimingathigherproductivity
ratherthanpursuingausterityperse.We
wouldtakesuchpragmatismfurthertosuggestthreeformsoffinancialrestructuringthathavepractical
precedents.

First,afurtherconditionalincreaseinthegraceperiod,sothatGreecedoesnothavetoserviceanydebt,for
exampleforthenextfiveyearsandthenonlyifGreeceisgrowingat3percentormore,anduntilGreecehas
recoveredatleast50percentofthegrossdomesticproductithaslostsince2008.Precedentsforthis
includethebisqueclauseintheUKloanfromtheUSnegotiatedbyJMKeynesafterthesecondworld
war,wheretheUKdidnotservicethedebtuntiltheeconomymetagreedconditions.
FirstFTisournewessential
dailyemailbriefingofthebest
storiesfromacrosstheweb

Second,somedebtreduction,especiallyofbilateralofficialdebt,tofurtherincreasethefiscalspaceavailable.Third,significantmoneyfor
efficientinvestmentprojects,especiallyforexports.TheJunckerPlancouldprovideagoodframeworkforsuchinvestment,tobefunded,
say,bytheEuropeanInvestmentBank,EUStructuralFundsandtheGermanKfW.Aswellasincreasingaggregatedemand,sucha
supplysidemeasurewillalsoenhancefuturegrowth.
Debtreliefisnotasufficientconditionforthisvirtuousdynamic,however:Greecemustitselfcarryoutreforms.Webelieveitisimportant
todistinguishausterityfromreformstocondemnausteritydoesnotentailbeinganti
reform.Macro
economicstabilisationcanbe
achievedthroughgrowthandincreasedefficiencyintaxcollectionratherthanthroughpublicexpenditurecuts,whichhavereducedthe
revenuebaseandledtoanincreaseinthedebtratio.
WethinkthatthewholeofEuropewillbenefitfromGreecebeinggiventhechanceofafreshstart.Afterall,asMsTetthasremindedus,it
wasaftersubstantialdebtreliefthattheGermaneconomywasabletogrowandreformitself
inthe1950s.
ProfJosephStiglitz
ColumbiaUniversity,NobelPrizewinner
ofEconomics
ProfChrisPissarides
LondonSchoolofEconomics,NobelPrizewinnerofEconomics
ProfCharlesGoodhart
LondonSchoolofEconomics
ProfMarcusMiller
WarwickUniversity
MichaelBurke
EconomistsAgainstAusterity
ProfPanicosDemetriadis
UniversityofLeicester

ProfStephanyGriffithJones
IPDColumbiaUniversity
ProfGustavAHorn
MacroeconomicPolicyInstitute(IMK)
ProfMaryKaldor
LondonSchoolofEconomics
NeilMacKinnon
VTBCapital
ProfJoseAntonioOcampo
ColumbiaUniversity
AvinashPersaud
PetersonInstituteforInternationalEconomics
HelmutReisen
ShiftingWealthConsult
RobertSkidelsky
EmeritusProfessor,UniversityofWarwick
ProfFrancesStewart
UniversityofOxford
ProfRobertWade
LondonSchoolofEconomics
HilaryWainwright
TransnationalInstitute,Amsterdam
ProfSimonWrenLewis
MertonCollegeOxford

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