Stiglitz, Piketty et al Letter to Financial Times

In the final hour, a plea for economic sanity and humanity

Sir, The future of the EU is at stake in the negotiations between Greece and its creditor institutions, now close to a climax. To avoid failure, concessions will be needed from both sides. From the EU, forbearance and finance to promote structural reform and economic recovery, and to preserve the integrity of the Eurozone. From Greece, credible commitment to show that, while it is against austerity, it is in favour of reform and wants to play a positive role in the EU.

In a letter to the FT in January, several of us said: “We believe it is important to distinguish austerity from reforms; to condemn austerity does not entail being anti-reform.” Six months on, we are dismayed that austerity is undermining Syriza’s key reforms, on which EU leaders should surely have been collaborating with the Greek government: most notably to overcome tax evasion and corruption. Austerity drastically reduces revenue from tax reform, and restricts the space for change to make public administration accountable and socially efficient. And the constant concessions required by the government mean that Syriza is in danger of losing political support and thus its ability to carry out a reform programme that will bring Greece out of the crisis. It is wrong to ask Greece to commit itself to an old programme that has demonstrably failed, been rejected by Greek voters, and which large numbers of economists (including ourselves) believe was misguided from the start.

Clearly a revised, longer-term agreement with the creditor institutions is necessary: otherwise default is inevitable, imposing great risks on the economies of Europe and the world, and even for the European project that the eurozone was supposed to strengthen.
Syriza is the only hope for legitimacy in Greece. Failure to reach a compromise would undermine democracy in and result in much more radical and dysfunctional challenges, fundamentally hostile to the EU.
Consider, on the other hand, a rapid move to a positive programme for recovery in Greece (and in the EU as a whole), using the massive financial strength of the Eurozone to promote investment, rescuing young Europeans from mass unemployment with measures that would increase employment today and growth in the future. This could both transform the economic performance of the EU and make it once more a source of pride for European citizens.
How Greece is treated will send a message to all its eurozone partners. Like the Marshall plan, let it be one of hope not despair.
Prof Joseph Stiglitz
Columbia University; Nobel Prize winner of Economics
Prof Thomas Piketty
Paris School of Economics
Massimo D’Alema
Former prime minister of Italy; president of FEPS (Foundation of European Progressive Studies)
Prof Stephany Griffith-Jones
IPD Columbia University
Prof Mary Kaldor
London School of Economics
Hilary Wainwright
Transnational Institute, Amsterdam
Prof Marcus Miller
Warwick University
Prof John Grahl
Middlesex University, London
Michael Burke
Economists Against Austerity
Prof Panicos Demetriadis
University of Leicester
Prof Trevor Evans
Berlin School of Economics and Law
Prof Jamie Galbraith
Dept of Government, University of Texas
Prof Gustav A Horn
Macroeconomic Policy Institute (IMK)
Prof Andras Inotai
Emeritus and former Director, Institute for World Economics, Budapest
Sir Richard Jolly
Honorary Professor, IDS, Sussex University
Prof Inge Kaul
Adjunct professor, Hertie School of Governance, Berlin
Neil MacKinnon
VTB Capital
Prof Jacques Mazier
University of Paris
Dr Robin Murray
London School of Economics
Prof Jose Antonio Ocampo
Columbia University
Prof Dominique Plihon
University of Paris
Avinash Persaud
Peterson Institute for International Economics
Prof Mario Pianta
University of Urbino
Helmut Reisen
Shifting Wealth Consultancy
Dr Ernst Stetter
Secretary General, FEPS (Foundation fro European Progressive Studies)
Prof Simon Wren-Lewis
Merton College Oxford