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How long before growth and employment are restored in Greece?

Papadimitriou, Dimitri B., Nikiforos, Michalis, Zezza, Gennaro, (2016), “How long before growth and employment are restored in Greece?”, Levy Economics Institute of Bard College, Strategic Analysis, Ιανουάριος.

The Greek economy has not succeeded in restoring growth, nor it has managed to restore a climate of reduced uncertainty, which is crucial for stabilizing the business climate that promotes investment. On the contrary, a new round of austerity measures that has agreed upon will imply another year of recession for 2016. After reviewing some recent indicators for the Greek economy, we project the trajectory of key macroeconomic indicators over the next three years. Our model shows that a slow recovery can be expected from 2017, at a pace which is well below what is needed to alleviate poverty and reduce unemployment. We analyze next the impact of a public investment program financed by European institutions, of a size which is feasible given the current political and economic conditions, and we find that, while such a plan will help stimulate the economy, it will not be sufficient to speed up the recovery. We finally revise our proposal for a fiscal stimulus financed through the emission of a complementary currency targeted to job creation. Our model shows that such a plan, calibrated in a way that avoids inflationary pressures, will be more effective, without disrupting the targets the government has agreed upon in terms of its primary surplus, and without reverting the improvement in the current account.

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