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The Greek Economic Crisis and the Experience of Austerity: A Strategic Analysis

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  • Dimitri B. Papadimitriou
  • Michalis Nikiforos
  • Gennaro Zezza

Abstract

Employment in Greece is in free fall, with more than one million jobs lost since October 2008--a drop of more than 28 percent. In March, the "official" unemployment rate was 27.4 percent, the highest level seen in any industrialized country in the free world during the last 30 years. In this report, Levy Institute President Dimitri B. Papadimitriou and Research Scholars Michalis Nikiforos and Gennaro Zezza analyze the economic crisis in Greece and offer policy recommendations to restore growth and increase employment. This analysis relies on the Levy Institute's macroeconomic model of the Greek economy (LIMG), a stock-flow consistent model similar to the Institute’s model of the US economy. Based on the LIMG simulations, the authors find that a continuation of austerity policies would decrease GDP and increase unemployment. They find recent International Monetary Fund and European Commission projections for the Greek economy overly optimistic, and recommend a recovery strategy, similar to the Marshall Plan, to increase public consumption and investment—a strategy centered on an expanded direct public-service job creation program.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Strategic Analysis Archive with number sa_jul_13.

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Date of creation: Jul 2013
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Handle: RePEc:lev:levysa:sa_jul_13

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Web page: http://www.levyinstitute.org

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  1. Ardagna, Silvia, 2004. "Fiscal Stabilizations: When Do They Work and Why," Scholarly Articles 2580047, Harvard University Department of Economics.
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Cited by:
  1. Dimitri B. Papadimitriou & Greg Hannsgen & Michalis Nikiforos & Gennaro Zezza, 2013. "Rescuing the Recovery: Prospects and Policies for the United States," Economics Strategic Analysis Archive sa_oct_13, Levy Economics Institute.
  2. C.J. Polychroniou, 2013. "A Failure by Any Other Name: The International Bailouts of Greece," Economics Policy Note Archive 13-06, Levy Economics Institute.

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