Nothing Special   »   [go: up one dir, main page]

  EconPapers    
Economics at your fingertips  
 

Greece 2010-18: What could we have done differently?

Cyrille Lenoel, Corrado Macchiarelli and Garry Young

GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe from Hellenic Observatory, LSE

Abstract: At the beginning of 2010, the fiscal situation of Greece was unsustainable, and an ambitious but costly adjustment plan had to be put in place under a consortium of the International Monetary Fund, the European Commission and the European Central Bank. It took three consecutive adjustment programmes, including debt-relief through private sector involvement, to restore confidence in the economy and achieve a budget surplus. In this paper, we provide a theoretical analysis of the Greek Crisis starting from 2010. We build a series of counterfactuals using the National Institute General Econometric Model (NIGEM) to analyse why the cost of the adjustment in terms of GDP loss and increase in debt-to-GDP ratio turned out to be much worse than expected. In doing so, we analyse three scenarios: (i) one in which we simulate a much more conservative cut in public investment by the Greek central government; (ii) a second scenario of a lower risk-premium, signalling, e.g., lower political and redenomination risks, had the European Central Bank guaranteed its lending of last resort role earlier than 2012; (iii) finally, a similar financial envelope as the one adopted during the first Greek adjustment programme but over a longer period, moving beyond the standard IMF three-year duration programmes. We find that the mix of expenditure cuts and loss of confidence among households and firms explain a large part of the unanticipated costs of the adjustment in the Greek crisis.

Keywords: Fiscal multipliers; Fiscal policy; Government; Public Expenditure; Public Investment (search for similar items in EconPapers)
Date: 2022-06
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published

Downloads: (external link)
https://www.lse.ac.uk/Hellenic-Observatory/Assets/ ... apers/GreeSE-172.pdf (application/pdf)

Related works:
Working Paper: Greece 2010-18: what could we have done differently? (2022) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hel:greese:172

Access Statistics for this paper

More papers in GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe from Hellenic Observatory, LSE Contact information at EDIRC.
Bibliographic data for series maintained by Vassilis Monastiriotis ().

 
Page updated 2024-12-16
Handle: RePEc:hel:greese:172