Greece and the Euro: A Mundellian Tragedy

George Alogoskoufis

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

Abstract: This paper analyzes the process of destabilization, crisis and adjustment in the Greekeconomy since the accession of the country to the European Union and, subsequently, the euro area. It reviews four policy cycles of the past 40 years, the four acts of the Greektragedy, and discusses alternative ways forward, following the sudden stop and the great depression of the 2010s. It concludes that despite the significant constraints implied by continued participation in the euro area, namely a stark Mundellian conflict between internal and external balance, exiting the euro area risks further destabilizingthe economy and bringing about a return of the problems of the 1980s. The currentchallenge for Greece is to seek to remain and prosper in the euro area. This would require a policy mix based on supply side reforms which would allow for a sustained recovery without the reemergence of external imbalances.

Keywords: Greece; Euro Area; fiscal policy; monetary policy; competitiveness; current account (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
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Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Greece and the euro: a Mundellian tragedy (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hel:greese:136

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