The man who brought Greece in the euro area is now trying to repair the “mistake” as the new prime minister of Greece. Lucas Papademos was in charge of the Greek central bank when the country joined the euro area ten years ago. Now, the former Vice President of European Central Bank will have to ensure stability of the country within the euro zone, writes Bloomberg.
Over the eight-year mandate at the head of the Greek central bank, Papademos contributed to the economic welfare of the country, helping Greece to achieve economic growth rates thta have exceeded, at that time, those of Germany and France. Now, Greece is in a position to no longer be able to pay its debt.
“He is a leader who can lead Greece in troubled times, but we must take into account that he has no political experience”, said Spyros Economides of the London School of Economics. “A political coalition will accept to live with it for a certain period, for a limited time”, he added. Papademos comes to the head of government just a week after Germany and France have warned Greece that they will cut any form of aid until the country will approve the rescue plan agreed upon on 26 october in Brussels. If this plan is not approved, then Greece would be excluded from the euro area.
How did Greece succeed to adopt the euro
In March 1998, Greece devalued its currency at that time, the drachma by 14 percent against a basket of European currencies, to enter the preparation zone for the euro area. Papademos maintained the key interest rate to over 10% to mitigate inflationary pressures. By 2000, the inflation, which was 14.2% in 1993, fell to 3.2%.
Papademos’s legacy, however, was canceled by the financial crisis whose effects were manifested through financial markets. Papandreou’s government, elected two years ago, revealed deficits almost doubled in comparison with the previous administration. But the previous government hid debt through certain finacial arrangements made by Goldman Sachs Group.
“Getting Greece in the euro area was a mistake”, said Nicolas Sarkozy, French President, in an interview on France 2 television channel on October 27. “Greece has entered it on the basis of false data.”
Papademos’ academic career
Papademos was professor of economics at Columbia University in New York, from 1975 to 1984, and at the University of Athens, from 1988 to 1993.
“He is a sober and talented banker. And he is sufficiently detached from the politics of Greece to be considered a person who is outside the political corruption”, said Fredrik Erixon, head of the European Centre for International Economic Policy in Brussels.