Louka Katseli on her journey from EGC to the Greek cabinet and international development community

“Integrity over expediency”: Louka Katseli on her years at Yale and the path to international policymaking

Louka Katseli lives by two credos. The first is “make an imprint,” and the Greek economist-cum-policymaker has indeed made her mark – on the students she has taught, as well as on policy. Greece’s first insolvency law, passed to protect borrowers during the debt crisis, bears her name.

The second is “choose integrity over expediency.” Acting on this credo not only built her reputation as a staunch advocate of human rights and sustainable development, but also won her the distinction of being cast out of her own caucus in the Greek parliament not once, but twice. 

In an interview with EGC, Katseli detailed how her early career at Yale helped her formulate the principles that would guide her through positions at the OECD Development Center, the United Nations, and the Greek Cabinet – and her work in protecting property rights and advocacy today.

Greece’s authoritarian regime fell in 1974, by which time Katseli was starting her PhD in Economics at Princeton University, having just completed her MPA in public policy and development economics at Princeton School of  International and Public Affairs. A recipient of an award for her “Outstanding PhD Dissertation”, Katseli joined the Economics Department at Yale as an assistant professor in 1977, together with Paul Krugman who would go on to win the Nobel Prize in economics in 2008. 

Katseli was drawn to Yale’s strengths in international and development economics, having long admired EGC affiliates such as T.N. Srinivasan, Carlos Diaz-Alejandro, and Hugh Patrick. EGC was, in the early 1980s, a locus of research on topics ranging from agricultural transformation to debt, exchange rate policy to trade, foreign investment to migration. Some of these themes aligned with Katseli’s own research, which concerned the transmission of inflation to small open economies and trade-migration-investment interdependencies. Her work while at EGC informed discussions of one of the most pressing macroeconomic conundrums of the day: stagflation, a grim combination of surging inflation, high unemployment, and anemic growth.

Katseli (left) with her mother Aleka Katseli and sister Nora at the lighting of the Olympic torch in 1964. Katseli’s mother was named Chief Priestess of the Temple of Hera at Olympia, Greece, where the Olympic torch is traditionally lit before being caried around the world on its way to the games.

Financial crisis erupted in Greece in 2009. At this time, her name became associated with a number of regulatory reforms to promote investment and social entrepreneurship, as well as labor-market reforms intended to enhance flexibility with protection of collective agreements. In 2010, she was the architect of the “Katseli Law”: Greece’s first personal insolvency law, which furnished protection to primary residences and allowed, via court decisions, mortgage debt to be written down and rescheduled. The Katseli law restored the purchasing power of vulnerable debtors, provided creditors with the means to claw back part of their loans and protect their primary residence, and palliated the Greek economy. “To promote progressive reforms at a time of harsh austerity was a major challenge,” Katseli said. “I became wiser, more resilient and committed in the process.”

Katseli as a Minister of Economy in the Greek government, opening up trade relations and tourism with China in 2010.

Katseli’s academic background provided her with valuable knowledge and insights into policy making. She traces her savvy for debt restructuring policy back to spirited discussions at EGC with Diaz-Alejandro, who had taken up the topic in the 1970s. Additionally, her tenured professorship at the University of Athens allowed her to vote by her conscience in Parliament, untrammeled by the careerist motives that guided other politicians. She refused to back programs advanced by Greece’s creditors and accepted by her Government, involving the dismantling of collective agreements; in return for her principled voting, she was removed from PASOK’s parliamentary group. In 2012, Katseli encountered crisis again when she objected to confiscation of Greek assets in case of non-payment of a tranche under Greece’s second bailout package with the Troika: the decision group formed by the European Commission, European Central Bank, and International Monetary Fund. She was removed from PASOK’s parliament group a second time. In collaboration with seven former PASOK parliament members, she then proceeded to found and head a new party, the Social Pact, which ran for election in May 2012. 

“My time at EGC was formative because I was surrounded by people who not only had strong theoretical foundations, but also a wealth of practical experience and policy insight.” – Louka Katseli 

In 2015, Katseli became Chair of the National Bank of Greece and Chair of the Hellenic Bank Association: the first woman ever to hold these positions. In the months following, Katseli faced a new upheaval which she had to manage over the imposition of capital controls that led to a widespread restructuring of bank procedures and the recapitalization of all Greek banks. 

Costas Meghir, Douglas A Warner III Professor of Economics at Yale and an EGC affiliate, said, "Louka Katseli has been a trailblazer for women in policy and together with a small group of prominent women has helped open doors to a more inclusive political scene in Greece, which continues to be heavily male dominated."

Katseli in 2017 visiting Harare, Zimbabwe as member of the Executive Board of the African Capacity Building Foundation.

In keeping with her past work at the EGC, Katseli believes the global development community’s top priority should be to revamp global governance “The post-Bretton Woods institutions are not in a position to manage the global community effectively as they were set up to be strictly intergovernmental. Power has shifted to major corporations: just 140 corporations control more than 80% of world transactions. Global governance reform is needed to more effectively regulate the dominant players and mitigate recurrent global crises, such as the global financial crisis, the migration and asylum crisis, the Covid-19 pandemic, and the climate crisis.”
She noted that national governments are increasingly unable to safeguard human security and promote policies for the well-being of their citizens, and citizens are losing trust in them in turn. “Global governance reform is urgently needed to safeguard democracy,” she said.