 From Grexit to Growth: On Fiscal Multipliers and how to End Recession in GreeceNational Institute Economic Review, 2013, vol. 224, issue 1, R66-R76 Abstract: Three years after the implementation of the Adjustment Programme for Greece, public debt remains at unsustainable levels. Despite recent improvements in meeting deficit targets and the fact that the risk of exit from the Euro Area has subsided, growth is still missing and unemployment has surpassed 25 per cent, causing major social tensions. The paper argues that a critical parameter of such failure was that the Programme grossly underestimated the adverse effects that fiscal correction might have on growth. Fiscal multipliers are found to be significant in the Euro Area so that fiscal cuts had strong and permanent Keynesian effects, rather than a transitive and minor downturn as initially assumed. In light of this, the paper argues that policies should now concentrate on enhancing growth and by relaxing fiscal targets allow the multipliers to raise activity as the only route to safeguard the exit from recession and ensure sustainability of debt. Keywords: Debt; fiscal policy; Greece (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:niesru:v:224:y:2013:i:1:p:r66-r76 Access Statistics for this article More articles in National Institute Economic Review from National Institute of Economic and Social Research Contact information at EDIRC. |
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