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From Grexit to Growth: On Fiscal Multipliers and how to End Recession in Greece

Author

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  • Nicos Christodoulakis

Abstract

Three years after the implementation of the Adjustment Programme for Greece, public debt remains at unsustainable levels. Despite recent improvements in meeting deficit targets and the fact that the risk of exit from the Euro Area has subsided, growth is still missing and unemployment has surpassed 25 per cent, causing major social tensions. The paper argues that a critical parameter of such failure was that the Programme grossly underestimated the adverse effects that fiscal correction might have on growth. Fiscal multipliers are found to be significant in the Euro Area so that fiscal cuts had strong and permanent Keynesian effects, rather than a transitive and minor downturn as initially assumed. In light of this, the paper argues that policies should now concentrate on enhancing growth and by relaxing fiscal targets allow the multipliers to raise activity as the only route to safeguard the exit from recession and ensure sustainability of debt.

Suggested Citation

  • Nicos Christodoulakis, 2013. "From Grexit to Growth: On Fiscal Multipliers and how to End Recession in Greece," National Institute Economic Review, National Institute of Economic and Social Research, vol. 224(1), pages 66-76, May.
    • Handle: RePEc:sae:niesru:v:224:y:2013:i:1:p:r66-r76
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    Citations

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    Cited by:

    1. Symeon Mavridis, 2018. "Greece’s Economic and Social Transformation 2008–2017," Social Sciences, MDPI, vol. 7(1), pages 1-14, January.
    2. Christophe Blot & Marion Cochard & Jérôme Creel & Bruno Ducoudré & Danielle Schweisguth & Xavier Timbeau, 2014. "Fiscal consolidation in times of crisis: is the sooner really the better?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 159-192.
    3. Eduardo Garzón Espinosa & Bibiana Medialdea García & Esteban Cruz Hidalgo, 2021. "Fiscal Policy Approaches: An Inquiring Look From The Modern Monetary Theory," Journal of Economic Issues, Taylor & Francis Journals, vol. 55(4), pages 999-1022, October.
    4. Myrto Tourtouri & Dimitris Pavlopoulos & Christos Papatheodorou, 2020. "Assessing the impact of liberalisation policies on the Greek labour market: an insider–experts' view from the perspective of the varieties of liberalisation," Industrial Relations Journal, Wiley Blackwell, vol. 51(6), pages 517-535, November.
    5. repec:hal:wpspec:info:hdl:2441/2g7mhju69b94obeaqlen09s1au is not listed on IDEAS
    6. Serafeim POLYZOS & Dimitrios TSIOTAS, 2020. "Measuring Structural Changes Of The Greek Economy During The Period Of Economic Crisis," Management Research and Practice, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 12(2), pages 5-24, June.
    7. repec:spo:wpecon:info:hdl:2441/2g7mhju69b94obeaqlen09s1au is not listed on IDEAS
    8. George PETRAKOS, 2014. "Economic Crisis In Greece. European And Domestic Market And Policy Failures," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 39, pages 9-33.
    9. repec:hal:spmain:info:hdl:2441/2g7mhju69b94obeaqlen09s1au is not listed on IDEAS

    More about this item

    Keywords

    Debt; fiscal policy; Greece;
    All these keywords.

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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