In this short paper, we deal with a comparison of the economic policies that Ireland and Greece have followed since the early 1990s on four fronts. We do that in four sections correspondingly. We begin with the general macroeconomic environment and policies’ comparison. We continue with the public-sector finances policies. After that, we deal with the structural policy reforms pursued in both countries in the last 20 years, following which we continue with taxation policies. Finally, we conclude, focusing on the prospects of both countries to exit the crisis.

This paper focuses on the distortions that the Greek public debt has imposed on the Greek banking system, and suggests how these can be unwound. The low level of competitiveness of the Greek economy, which is well below the competitiveness of the developed countries, poses a great challenge for the Greek banks. At the same time it puts at risk Greece’s economy ability to service both the private and public debt, which, as an aggregate, are comparable to the indebtedness of the developed nations. An adjustment of economic activity to match the current low level of competitiveness will increase the risks faced by the financial system and make an orderly servicing of the debt of the economy very challenging. It follows that only one reasonable policy option remains: to increase the competitiveness of the economy through an aggressive reform agenda, so that it will match its level of indebtedness, and through the resulting growth shift the excessive debt of the public sector to the private sector.