The Greek Crisis: Causes and Consequences

15 Pages Posted: 6 Dec 2011

See all articles by Antonio I. Garcia Pascual

Antonio I. Garcia Pascual

International Monetary Fund (IMF) - Western Hemisphere Department; CESifo (Center for Economic Studies and Ifo Institute)

Piero Ghezzi

Barclays Capital

Date Written: November 30, 2011

Abstract

Greece has reached a point where, under any plausible macroeconomic scenario, public debt will continue growing faster than GDP. Fiscal consolidation alone cannot close the solvency gap. A substantial reduction in the stock of debt is needed. Even post-debt restructuring, there is no guarantee that the government will succeed in its dual goal of restoring fiscal solvency and closing the competitiveness gap. Yet we think Greece stands a better chance of accomplishing these goals from inside the EMU rather than outside it. This chapter takes stock of the factors that led to the explosion of public debt, the loss of competitiveness, and the failure of the first EU-IMF programme. We also present our views on the likely debt restructuring (and post-restructuring) scenarios.

JEL Classification: E600, F400

Suggested Citation

Garcia Pascual, Antonio I. and Ghezzi, Piero, The Greek Crisis: Causes and Consequences (November 30, 2011). CESifo Working Paper Series No. 3663. Available at SSRN: https://ssrn.com/abstract=1968873

Antonio I. Garcia Pascual (Contact Author)

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Piero Ghezzi

Barclays Capital ( email )

5 The North Colonnade
London, Canary Wharf E14 4BB
United Kingdom

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