After facing prosecution for a decade Andreas Georgiou, former President of Greece’s statistical agency (ELSTAT), is now liable to pay damages for defamation to those who produced the infamous ‘Greek statistics’!

Mundell pioneered the theory that serves as the basis for the design and implementation of economic policies in open economies. The launch of the euro was based on his work on “optimum currency areas”, and the late-twentieth century US economic boom was based on his theories about the optimum policy mix and the supply-side economics adopted by the Reagan administration. He always advocated fixed exchange rates and, by extension, the common European currency, believing that monetary independence is both unnecessary and undesirable. In a debate with Milton Friedman, he argued that exchange rate flexibility is no substitute for price flexibility: Even in the best circumstances, the adjustment process works by raising prices and undermining monetary stability. Mundell argued that monetary and fiscal policies should not target the same objective (full employment): one should target price stability (tight monetary policy) and the other growth (expansionary fiscal policy). Mundell’s theories are included in all economics textbooks. His colleagues have described him as “the brightest mind in our profession.” His contribution to economic theory and policymaking was recognized with the award of the Nobel Prize in economics in 1999.

For the past eight years Andreas Georgiou has been facing prosecution for the way he discharged his duties while he was president of Greece’s statistical agency (ELSTAT) in 2010-15. His detractors claim that Greece was forced to face harsher conditionality because the deficit was revised upwards, thus helping to justify externally imposed austerity. Despite overwhelming evidence that Mr. Georgiou correctly applied EU rules in revising Greece’s fiscal deficit and debt figures, and despite strong international support for his case, some Greek courts continued the pursuit. The Georgiou case tested the independence of the Greek judiciary, as some senior prosecutors and judges would appear to have repeatedly failed to act in accordance with the rule of law and due process. With a solid majority in parliament, the newly-elected center-right New Democracy government has the opportunity to deliver deep institutional and economic reforms. Ensuring the independence of the judiciary should be a top priority.

The Greek debt exchange (PSI) that took place in March 2012 was unprecedented in two ways: it was the biggest sovereign default ever and the first within the euro area. This paper examines the debt exchange and the subsequent debt buyback with a view to drawing lessons for policymakers and market participants. It discusses the interaction between the political dimension and the market perception, including areas of actual or potential conflicts between the two. The paper does not address Greece’s longer-term prospects for debt sustainability or euro area membership, but instead focuses narrowly on an assessment of the debt exchange and its aftermath, taking into account its impact on the broader euro area crisis.