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The Economic Effects of the Implementation of the Greek Adjustment Plan in the Great Recession

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Abstract

In a situation of deep economic crisis such as the present one confronting some European countries, it is necessary to take measures to reduce the dangerous disequilibria that they face. The orthodoxy dictates that it is imperative to undertake strong fiscal consolidation to ensure a recovery in economic activity. The existing debate has tended to focus on the global analysis of such policies. As a contribution to this literature, in this chapter we provide a multisector and multiregional study of the effects of the fiscal adjustment implemented in Greece in 2012 using an Input-Output methodology. It allows us to trace the consequences of this fiscal policy for the different Greek economic sectors, as well as for the EU and the rest of the world. This is undertaken using the WIOD (World Input Output Database). This study concludes that, far from leading to a revival in the Greek economy, the fiscal adjustment has led to a contraction in the health and public administration sectors, as well as the industrial sectors with the last leading to a greater downturn in the economy.

Keywords

  • European Union
  • Credit Default Swap
  • European Union Country
  • Multiplier Effect
  • Fiscal Consolidation

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes

  1. 1.

    The 40 countries are: 27 EU countries (all excepting Croatia), and Australia, Brazil, Canada, China, Indonesia, India, Japan, Korea, México, Russia, Turkey, Taiwan and USA.

  2. 2.

    This matrix includes information on intermediate inputs for 40 countries with 35 sectors in each one, and another country, referred to as rest of world, whose part has not been included in the countries considered.

  3. 3.

    Generally, the elaboration of input–output tables by direct surveys is done each 5 years. Between these years the tables are updated. We have used WIOD-2010 because this is the last published matrix.

  4. 4.

    This matrix has been calculated using Matlab computing software.

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Correspondence to Inmaculada Carrasco .

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Carrasco, I., Córcoles, C., McCombie, J. (2017). The Economic Effects of the Implementation of the Greek Adjustment Plan in the Great Recession. In: Schofield, N., Caballero, G. (eds) State, Institutions and Democracy. Studies in Political Economy. Springer, Cham. https://doi.org/10.1007/978-3-319-44582-3_15

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