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‘Grexit’: Who would pay for it?

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  • Alcidi, Cinzia
  • Giovannini, Alessandro
  • Gros, Daniel

Abstract

The eurozone countries are currently sitting on an aggregate exposure to Greece exceeding €300 billion. If the country were to exit the eurozone, it would certainly not be able to service its debt in the short run when the exchange rate overshoots. Over the longer run, however, the exchange rate is likely to return to a longer-run equilibrium and growth is likely to slowly resume closing the output gap. Moreover, exports are likely to grow by more than GDP, thus increasing over time the capacity of the country to service foreign debt. Therefore, the authors conclude, whether or not an exit from the eurozone is followed by default on the official debt depends decisively on the willingness (and ability) of Greece’s European partners to wait and finance the bridge between the short and the long run.

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File URL: http://www.ceps.eu/system/files/book/2012/05/PB272%20CA%20AG%20%20DG%20Cost%20of%20Grexit.pdf
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Bibliographic Info

Paper provided by Centre for European Policy Studies in its series CEPS Papers with number 6977.

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Length: 8 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:eps:cepswp:6977

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Cited by:
  1. Győrffy, Dóra, 2014. "Válság és válságkezelés Görögországban. A puha költségvetési korlát szerepe a gazdasági összeomlásban
    [Crisis and crisis management in Greece. The role of soft budget constraints in
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 27-52.
  2. Ansgar Belke & Florian Verheyen, 2012. "Doomsday for the Euro Area: Causes, Variants and Consequences of Breakup," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 1(1), pages 1-15, July.
  3. Klaus Weyerstrass & Daniela Grozea-Helmenstein, 2013. "Euro Area Scenarios and their Economic Consequences for Slovenia and Serbia," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 11(4 (Winter), pages 323-351.
  4. C. J. Polychroniou, 2012. "The Greek Crisis: Possible Costs and Likely Outcomes of a Grexit," Economics Policy Note Archive 12-07, Levy Economics Institute.
  5. Dóra Gyõrffy, 2013. "Crisis Management in the EU, Prospects for the De-politicisation of Economic Policy," Public Finance Quarterly, State Audit Office of Hungary, vol. 58(2), pages 119-132.

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