The Political Economist

Over the past year many commentators on the Greek political situation have claimed that Syriza, the radical left party that surprisingly won the Greek elections in 2015 (twice!), drew much of its support from tax-evasion areas. In other words the tax-evading upper-middle class voted for Syriza as they wanted to continue with their tax evasion (an endemic problem in Greece) and didn't want to accept the EU-imposed bailout deal which necessitates that Greek authorities clamp down on tax evasion.  In a long overdue post I will briefly look into whether or not there is any evidence to back this claim. Below I show two sets of maps. The upper map shows results of the 2015 general elections held in January (right), and the bailout referendum (left) held in July, while the lower map shows the share of tax evasion per municipality ( I've used this map before from a paper by Artavanis et al .).  Before we make the visual comparison, a quick reminder on the tax evasion ...

This is becoming a sort of a post-Christmas tradition on the blog - each year in the weak after Christmas I offer a wrap up of the year by evaluating my last year's predictions . Once again, I have to say, it was a good year in terms of what I got right (I managed to even beat my own predictions from 2014 : 85% compared to last year's 75%), but there were a few events that went under my radar (the Greece situation triggered by Syriza's victory, and the refugee crisis).  The title of last year's predictions was: "2015: Back to Realpolitik and back to growth" . My main prediction was that most economies in the West would return to having steady rates of economic growth (which came true), and that debates over the economy will be overshadowed by the return of realpolitik and muscle-flexing between Russia and the West. I've also stated that "low oil prices will be the key in prompting a stronger recovery", which they were, and I managed to exclu...

As you may have noticed, blogging has been particularly slow over the past few months. From the beginning of the year as well, compared to previous years. This is due to a number of commitments I have bestowed upon myself (including a lot of new research I've been doing), and it will likely continue until the end of the year, so expect regular blogging to continue as it has in the past as of 2016. In the mean time I will write an occasional comment on a burning issue, but due to many outstanding obligations I will again be rather slow. It will be quality, not quantity in the next few months.  So, let's recap what has happened over the summer, and what awaits in the forthcoming months. Keeping up with the Greeks A whole number of things happened in Greece. The most important one was the referendum on the new austerity package  ("the bailout referendum") in July which the Greeks overwhelmingly rejected. In the immediate aftermath their Finance Ministe...

It's been a rough few weeks, but Europe and Greece have finally reached an agreement . Or to be more precise, the Greeks have caved in to the demands of the financial markets, just as I predicted they would in my last blog post . Again, I hate to blow my own horn (but let's be honest, I need to); I was right once again in predicting the outcome in Greece. This aligns well with my track record of being correct on Greece in 2011 , 2012 , 2013 and, well, 2015 . Just saying.  So what was in the new deal? In a nutshell here is what the Greek government has pledged to do in return for the extension of the Eurogroup bailout program (much needed to maintain solvency of the Greek government): Combat tax evasion (new tax policies) : broadening the definition of tax evasion and fraud, while disbanding tax immunity. This includes reforming the collection of VAT (introducing technology), modernizing the income tax code, and altogether creating a new culture of tax compliance. Keep in...

Back in November 2011  an increase of Italian bond yields for the third time in three months and for the first time above the critical boundary of 7%, resulted in an abrupt and surprising resignation of Italy's controversial PM Silvio Berlusconi. All of his corruption affairs, political blunders, and even the infamous bunga bunga parties could not hurt him. It was the financial markets that punished his reckless behavior of buying time for reforms by playing with the patience of investors. The financial markets will be crucial once more in the case of the newly elected Syriza government in Greece, led by the radical leftist Alexis Tsipras. After having read his  op-ed for the Financial Times  published but a few days before the elections, it seems Tsipras realizes the gravity of the situation he and his country are in. Apart from the general anti-austerity rhetoric which won him the elections, Tsipras clearly stated that Syriza will respect the constraints given to th...

On a few previous occasions I've found myself praising 'good hunches' of certain economists on being right about a number of predictions for the future (see here and here for example). There's also been a few not so good hunches (like when Paul Krugman asked Alan Greenspan to create a housing bubble in 2002 to offset the IT bubble) and a few downright terrible ones (like when Paul Samuelson predicted that the Soviet Union GDP will surpass that of the US by 1984(!), but more realistically by 1997).  Now it's time to blow my own horn. I've been covering the eurozone sovereign debt crisis and in particular the Greek situation since I started writing this blog. After all, the crisis was a sort of an inspiration. I was rather content to see how precise I was back in October 2011 to describe the possible outlook for Greece in the next few years, after the policymakers have devised their first draft of the Greek bailout plan. Here is what I wrote back t...

After two brief intermissions which I simply had to comment on, the Tracking the recovery series continues in its third edition featuring Eurozone and the UK. This analysis, unlike the US one , will constrain itself only on observing the leading indicators from the OECD database and the Conference Board , and compare these to their levels from 6 months ago . ( Note: World Economics also has a decent overview of the recovery at their pages; they refer to it as Growth Monitors. Here is their  Eurozone Growth Monitor ).  As I've pointed out in the previous post , last year was apparently much better for America than it was for Europe. The graph below sums it up pretty well:   While the US was mildly recovering, Eurozone started to diverge into a double-dip recession (adding the stagnating UK into the above graph will only worsen the picture). The events from the begining of last year following the uncertainty in Greece and Spain, were extended to Italy...