{"id":12920,"date":"2016-02-05T11:09:40","date_gmt":"2016-02-05T16:09:40","guid":{"rendered":"http:\/\/multiplier-effect.org\/?p=12920"},"modified":"2016-02-05T11:12:49","modified_gmt":"2016-02-05T16:12:49","slug":"how-long-until-greece-recovers","status":"publish","type":"post","link":"https:\/\/blogs.bard.edu\/multiplier-effect\/how-long-until-greece-recovers\/","title":{"rendered":"How Long Until Greece Recovers?"},"content":{"rendered":"

The Levy Institute has completed its\u00a0most recent medium-term projections<\/a>\u00a0for the Greek economy. The\u00a0outlook, unsurprisingly,\u00a0isn’t reassuring.<\/p>\n

The baseline simulation, which\u00a0assumes the continuation of current policy, shows the GDP growth rate turning positive in 2017 and reaching 2 percent in 2018.\u00a0Yet, in a reflection of how much damage has been done by the crisis, even\u00a0if Greece managed a growth rate around that pace (2.1 percent per year), it would\u00a0take until 2030\u00a0<\/em>for\u00a0<\/em>real GDP\u00a0to\u00a0return to its\u00a02006 level.\u00a0It’s fair to wonder whether such a delayed recovery\u00a0— with little relief on the horizon for the elevated\u00a0numbers of\u00a0poor and unemployed in Greece —\u00a0is\u00a0politically and socially sustainable.<\/p>\n

And there’s worse news in the report. The\u00a0baseline generated by the authors’ model<\/a>\u00a0for Greece reflects a scenario in which future growth would be export-driven. But this increase in Greek exports would\u00a0not be\u00a0<\/em>generated\u00a0primarily by price competitiveness (“the price elasticity of Greek exports is low while the income elasticity is high”). That is, the decline of Greek wages — the centerpiece of\u00a0the official “internal devaluation” strategy — isn’t projected to produce much of a payoff in terms of net exports.<\/p>\n

Instead, the rise of exports in this scenario\u00a0is almost entirely due to assumptions about the economic health of Greece’s trading partners; assumptions taken from the IMF. And as the authors caution, the IMF is\u00a0likely overstating European growth prospects. So this lost decade-and-a-half for Greece (more, if you’re counting from the onset of the crisis) is actually the “optimistic” scenario.<\/p>\n

What can be done? Some of the plans being considered are simply too tame. The authors run a second simulation based on the implementation of a “Juncker Plan”: an increase in public investment for Greece, funded by European institutions, of \u20ac1 billion in 2016, \u20ac2 billion in 2017, and \u20ac3 billion in 2018. The results suggest such a program could help raise GDP growth rates (to -0.4 percent in 2016, 2.9 percent in 2017, and 2.8 percent in 2018), but according to the authors the lag between output and jobs\u00a0would still leave unemployment too high for too long. Something better targeted, and\u00a0less reliant\u00a0on the good will of European institutions, is required. More on that soon.<\/p>\n

Read the full Strategic Analysis here<\/a>\u00a0and the One-Pager version here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Levy Institute has completed its\u00a0most recent medium-term projections\u00a0for the Greek economy. The\u00a0outlook, unsurprisingly,\u00a0isn’t reassuring. The baseline simulation, which\u00a0assumes the continuation of current policy, shows the GDP growth rate turning positive in 2017 and reaching 2 percent in 2018.\u00a0Yet, in a reflection of how much damage has been done by the crisis, even\u00a0if Greece managed […]<\/p>\n","protected":false},"author":202,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[567,19,1087,1130,769,288,11],"class_list":["post-12920","post","type-post","status-publish","format-standard","hentry","category-eurozone-crisis","tag-exports","tag-greece","tag-juncker","tag-levy-institute","tag-recovery","tag-stock-flow","tag-unemployment"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/12920","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/users\/202"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/comments?post=12920"}],"version-history":[{"count":22,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/12920\/revisions"}],"predecessor-version":[{"id":12942,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/12920\/revisions\/12942"}],"wp:attachment":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/media?parent=12920"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/categories?post=12920"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/tags?post=12920"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}