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How Long Before Growth and Employment Are Restored in Greece?

Listed author(s):
  • Dimitri B. Papadimitriou
  • Michalis Nikiforos
  • Gennaro Zezza

The Greek economy has not succeeded in restoring growth, nor has it managed to restore a climate of reduced uncertainty, which is crucial for stabilizing the business climate and promoting investment. On the contrary, the new round of austerity measures that has been agreed upon implies another year of recession in 2016. After reviewing some recent indicators for the Greek economy, we project the trajectory of key macroeconomic indicators over the next three years. Our model shows that a slow recovery can be expected beginning in 2017, at a pace that is well below what is needed to alleviate poverty and reduce unemployment. We then analyze the impact of a public investment program financed by European institutions, of a size that is feasible given the current political and economic conditions, and find that, while such a plan would help stimulate the economy, it would not be sufficient to speed up the recovery. Finally, we revise our earlier proposal for a fiscal stimulus financed through the emission of a complementary currency targeted to job creation. Our model shows that such a plan, calibrated in a way that avoids inflationary pressures, would be more effective--without disrupting the targets the government has agreed upon in terms of its primary surplus, and without reversing the improvement in the current account.

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File URL: http://www.levyinstitute.org/pubs/sa_gr_1_16.pdf
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Paper provided by Levy Economics Institute in its series Economics Strategic Analysis Archive with number sa_gr_1_16.

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Date of creation: Jan 2016
Handle: RePEc:lev:levysa:sa_gr_1_16
Contact details of provider: Web page: http://www.levyinstitute.org

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