An Interview with the IMF's Alternate Executive Director, Michalis Psalidopoulos
Michalis Psalidopoulos was a professor at the Department of Economics of the University
of Athens and since June 2015, he has been an Alternate Executive Director at the International Monetary Fund (IMF)
1. You’ve been an Alternate Executive Director at the IMF since 2015. Could you please tell us the main duties and responsibilities of your position?
I work for the Executive Board of the IMF. It consists of 24 constituencies (countries or
group of countries). We convene three times per week (sometimes more than that). We
discuss country and other issues (like digital economy, fiscal implications of aging etc).
Staff prepares reports on every topic and we write memos (called greys in IMF language)
and then we convene at the Board to exchange views and reach decisions. Next to
providing input for these discussions, country representatives act as a bridge between
their authorities and the Fund. Authorities are briefed by us on what is going on here. If
the country is in a program, the Executive Board member is part of IMF missions, and acts
as an “economic diplomat”, whenever needed.
2. There are analysts who argue that Greece may have to sign up to further memorandums. Do you see this happening? What can our country do to avoid such a possibility?
I don’t see this happening and I don’t regard this kind of 'analysis' as serious. Of course, if
a country runs for an extended period budget deficits, a current account deficit and its
finances, accordingly, go out of control, it will have to seek international assistance and
sign further memoranda. It is one thing to define difficulties and problems and try to find
solutions and another to play “prophet of doom” .
3. What was, in your opinion, to blame for the fact that Greece was unable to attract foreign investment? Do you see any difference now?
This is an old story. Greece attracted foreign investment in the 1950s and 1960s
through incentives and profit export clauses given to (mostly Greek) investors, who
participated in Greece’s “economic miracle” of that time. Later, red tape, frequent
changes in taxation, business unfriendly court decisions (on environmental grounds) and
a rather "doing business with the government” mentality made private investors reluctant
to invest in Greece. Currently I see authorities aware about this complex issue and
working toward simplifying licencing and action. On the other hand, the law (Greek and
European) must be respected. This should be clear to every investor.
4. Many analysts say that two of the biggest problems that Greece is facing are the very high level of unemployment and the unsustainability of Greek debt. Do you agree? And if yes, what should we do, in your opinion, to solve them?
I agree that the rate of unemployment is very high. Under the present circumstances only
a huge public investment program could absorb the unemployed, something like what
happened in the US during the New Deal era. However Greek authorities don’t have
resources at hand, therefore unemployment will go down slowly through combined
private, local and government action. And use of EU funding, no doubt about that.
Greek debt is very high, but lately and due to Eurogroup decisions gross financing needs
to service the debt will remain in the medium term in the range of 15 to 20% of GDP and
Greek debt, which is by more than 80% in public/EU hands, will be reconsidered by EU
institutions in 2032. Since June 2018, even the IMF, the strongest supporter of debt relief
for Greece, doesn’t call Greek debt “unsustainable” anymore. I therefore don’t
understand those who are worried about what will happen after 2032 and don’t focus on
what can be done today and in the following years for the Greek economy. If the Greek
economy returns to sustainable and robust growth the debt issue will be easier to tackle
Photo source: https://uk.reuters.com/article/us-imf-greece-budget/imf-says-greece-needs-to-lower-pensions-cut-tax-rates-idUKKBN15M2KY