acclaimed and an advisor to major organizations
and governments, such as Bulgaria’s. A holder of a
PhD from Princeton University, he teaches macro-
economics at INSEAD and is renowned for his
expertise on economic crisis issues. A proponent of
the view that governments must take decisive action
for rescuing their economies, he also declares his
support for radical reforms to the European and
Greek frameworks, focused on enhancing entrepre-
neurship. His interview highlights the main issues
that the Greek government should pay attention to in
order to survive and to hope.
Professor, is the global economic crisis struc-
tural, or simply operational? Do you believe
that it can be overcome? And which changes
will it finally bring about?
We are surely witnessing a global redistribution of
the total “economic pie”. This is a positive devel-
opment and, based on existing evidence, I
Trade with Greece
83
ILIAN MIHOV:
THE CRISIS IS AN
OPPORTUNITY FOR
GREECE
believe that the international economy is leaving
the recession behind. For the time being, the
main driver is Asia, but there are also encourag-
ing developments in the US. Europe, though,
faces a grave public debt problem, and the mar-
kets wonder whether countries like Greece,
Ireland or Spain and Portugal will be able to repay
their debts. On the other hand, Germany is doing
well, followed by Austria, the Netherlands and, to
a certain extent, France. The question is what
interrelations will emerge in this two-speed
Europe that lacks a clear economic policy. In this
sense, it is urgent to clarify whether a single
European fiscal, and therefore tax, policy will be
introduced. Nonetheless, problem countries must
make serious reforms in order to enter a fiscal
consolidation stage. This will be painful. But pre-
serving the status quo will be disastrous. It
inescapably leads to default.
But doesn’t fiscal consolidation lead to reces-
sion? Isn’t this a vicious spiral?
A person who suffers from obesity must lose
weight. In other words, this person must follow a
specific, tailored diet. I mean that, without fiscal
consolidation, it is absurd to talk about growth.
The main lesson from the crisis is that this type of
growth, which was based on the incessant
increase of debts, has lost its wind. It is coming to
an end. After the crisis, credit conditions will not
return to a state of very low-cost money and
excessive leverage — because, to say the least,
the new regulatory regime will be preventive, and
prudence will be imposed. Past experience —as
recently reminded to us by the IMF— teaches that
