More Pain, No Gain for Greece: Is the Euro Worth the Costs of Pro-Cyclical Fiscal Policy and Internal Devaluation?

Mark Weisbrot and Juan Montecino ()

CEPR Reports and Issue Briefs from Center for Economic and Policy Research (CEPR)

Abstract: This week the Greek government reached agreement with the European authorities and the IMF for 130 billion euros in lending, as part of a new adjustment package to replace the current IMF program that began in May of 2010. Although the agreement should allow the government to avoid default in March, there are grave doubts as to whether the agreed upon program will lead the country to a point where it returns to growth, has a sustainable debt burden, and can borrow from private markets. The most important problem with the commitments that Greece has made in the past two years is that its fiscal policy is pro-cyclical – that is, the government has been, and is committed to, tightening its budget while the economy is in recession.

Keywords: greece; euro; europe; devaluation; procyclical; countercyclical; imf (search for similar items in EconPapers)
JEL-codes: E E5 E52 E6 F F1 F14 F3 F34 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2012-02
New Economics Papers: this item is included in nep-eec and nep-mac
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:epo:papers:2012-07

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