Euro Area Scenarios and their Economic Consequences for Slovenia and Serbia

Klaus Weyerstrass and Daniela Grozea-Helmenstein
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Daniela Grozea-Helmenstein: Institute for Advanced Studies, Vienna, Austria

Managing Global Transitions, 2013, vol. 11, issue 4 (Winter), 323-351

Abstract: Since 1999, divergences in international competitiveness led to an accumulation of current account deficits in the south and surpluses in the north of the euro area. With the aid of macroeconometric models, this paper estimates the effects of an exit of Greece or of all GIIPS countries (Greece, Italy, Ireland, Portugal, Spain) on the economies of Slovenia and Serbia. An exit of one or more countries would affect other economies via the trade channel and credit constraints. Euro area members would additionally suffer from an increase of public debt due to non-performing loans of the European Stability Mechanism and devaluations of public bonds purchased by the European Central Bank. An exit of Greece alone would only marginally affect the economies of Slovenia and Serbia. An exit of all GIIPS countries or a euro area breakup would have dramatic negative consequences for output, unemployment and public finances.

Keywords: sovereign default; euro area break-up (search for similar items in EconPapers)
JEL-codes: C54 F41 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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