Nikos Christodoulakis, Professor of Economic Analysis at the Athens University of Economics and Business (AUEB), reviews, in this second edition of “Can One Save the Titanic”, the preeminent debates surrounding the Eurozone crisis and particularly the options available to Greece and its partners to overcome it[1].  The book begins with a pre-emptive strike against one of Greece’s ‘curses’- superficiality and, in particular, usually uninformed criticisms by an impatient audience, quick in embracing conspiracies and ‘dark secrets’ as opposed to informed and well-grounded analyses. Christodoulakis, with a self-critical and honest assessment of his role as in the 1996-2004 PASOK governments and his public stance in the 2008-2010 period, ensures that the readership focuses on the essence of his account[2].

While the book shows a deep understanding of the global and European dimensions of the crisis, the focus is almost exclusively on Greece. Christodoulakis first analyses the numerous errors and miscalculations of the two previous administrations (Karamanlis’ 2007-2009; Papandreou’s 2009-2011). This section of the book answers to a considerable extent the fundamental question of whether there was an alternative to the ‘Memorandum’. In sum, Christodoulakis explains that a multitude of factors and errors led to the ‘Memorandum’, involving more than one Administration, more than one Prime Minister and more than one Finance Minister. A series of self-delusions, unnecessary delays and procrastinations in the face of key and pressing decisions, a reckless pre-election spending spree in 2009, an opposition with a populist slogan promising ‘there is plenty of money’ (just waiting for better management), an uninformed and careless strategy of borrowing (obsessed with  long-duration bonds), a reluctant and indecisive euro-Area leadership and overall a series of bad, belated, and often both, decisions led Greece to the Memorandum, the IMF’s involvement and the deepening of the recession (especially pp. 19-71). For Christodoulakis, avoiding the ‘Memorandum’ was possible, but very difficult in light of the lack of seriousness and preparedness of the Greek political elite in the crucial period 2008-2010, but also due to miscalculations on the part our European partners (pp. 65-70; 39; 50).

However, when discussing alternative paths, one may feel that the author should have developed a bit more his point regarding what he means by ‘an organised and efficient strategy in the bond market’ (pp.47-48; 54; 60-65). A great analysis of how the market operates is conducted, but on a general level. The answer of how precisely Greece could have approached the question of borrowing is never fully answered. The point about the wrong timing under the PASOK administration is very effectively demonstrated often employing useful diagrams. The specific questions of what should the mix be, and how a balance between long and short term borrowing could have been achieved however, largely go unanswered. In page 65 the author attempts to answer this with a comparative paragraph of 150 words, comparing the Greek borrowing policy with the Irish one. Clearly this needed further development. This omission can perhaps be explained by the author’s acknowledgment that the publication of the book was under a tight time schedule, leading one to the possible assumption that there were limits as to the depth in which he could delve on this point. In any case, one would hope that the author addresses this issue in the next edition of the book – as it is unfortunately safe to assume that Greece’s troubles are far from over and so is the herculean task of getting the Eurozone right (Christodoulakis suggests that to best comprehend the latter challenge, it is optimal to read in parallel ‘The Pendulum of Convergence’ which he authored in 2006 and is also available with POLIS[3]).

Perhaps the book’s most fundamental contribution to the existing crisis literature is the very coherent set of proposals Christodoulakis develops in the second half of the book. Five crucial and very comprehensive proposals are made regarding: 1) Privatizations and State Property; 2) Budgetary Measures and Reforms; 3) Tax Reform; 4) the Pension System; and 5) Immigration Policy. The proposed reforms are far-reaching, thoroughly discussed, persuasively argued for, largely innovative, and, crucially, simple. The proposals aim to de-complicate the system, helping growth to spring/breathe again by lightening the bureaucratic weight, complexity and, consequently, the available space for corrupt practices. A smart use of the available means is suggested, ranging from the idea to strike a foreign policy agreement with Turkey limiting defence spending for a given time period to innovative ideas regarding how the use of new technologies can simplify and speed-up certain processes.

Crucially the proposals are specifically linked to growth; successful implementation of the suggested reforms promises to get the economy started again. Christodoulakis’ five proposals effectively address (arguably along with the National Health and Education Systems) the foundations of the role of the state in the Greek economy; getting these right shall drastically help improve the state of the Greek financial system. The author often draws on examples from other European states where such reforms are already in place. These analogies are very helpful and remind to an extent Kevin Featherstone’s repeated observations regarding the need to Europeanize and modernise the Greek economy[4]. Christodoulakis provides the most comprehensive to set of guidelines to date regarding how the key issue of privatization should be tackled. He explains why the state should retain a decisive share in the energy industry and analyses the overall strategy of how state firms (profitable or not) can be sold in a way working as catalysts for growth. A very demanding reader however may still argue that the discussion does not get specific enough, referring to the absence of specific examples and estimates of an optimal sale price coupled with an analysis of how this revenue is (reasonably) representative of the public’s investment in the firm in question.

Christodoulakis backs his arguments employing 22 diagrams and 3 tables. The reader (even if he has no prior knowledge of economics) will find most graphs of great help as these are designed to show the overall trends and give a visual representation of the issue discussed. More demanding readers may have liked to see some diagrams along with the 5 proposals giving an idea of the expected reversal of trends (for example how a lower indirect tax can help maximize tax revenue, a sound argument which can be diagrammatically depicted) (p.165). But the absence of a high number of projections may be justified on the basis that the book should avoid more complicated regressions to prevent the alienation of less diagram-friendly readers.

Overall, ‘Can one Save the Titanic’ is an informative read, a very distinct contribution to the debates surrounding ‘the crisis’ and particularly ‘the Greek question’, a very insightful account that would stimulate and engage even the most demanding readers. The contribution to the real and pressing problems is tangible and self-explanatory. It serves excellently the dual purpose of informing and equipping the general readership with the right tools to engage the public debate; and it also feeds into the debates in the policy-making circles. The book is a powerful account that can, and should, decisively influence the debate surrounding the crisis, its implications and the possible ways of returning back to growing again.

* ‘Can One Save the Titanic? From the Memorandum, back to Growth Again’, By Nikos Christodoulakis (POLIS, €12, 233 pages)

[1] Please note that the author’s information cut-off point was September 2011.

[2] Prof. Christodoulakis served as Deputy Finance Minister (1996-2000), as Minister for Development (2000-2001) and as Finance Minister (2001-2004).

[3] The ‘Pendulum’ examines the complicated internal dynamics of the euro-Area and in particular the macroeconomic imbalances (balance of payments / trade) between the core and the periphery, the North and the South and the eurozone’s structural problems and deficiencies.

[4] See for example his 2008 book ‘The Limits of Europeanization: Reform Capacity and Policy Conflict in Greece’ (co-authored with Dimitris Papadimitriou).