Summing up, internal devaluation has so far had negligible effects on Greek exports, while the fall in the purchasing power of wages has added to the fall in domestic demand generated by fiscal austerity, and thereby contributed to the unprecedented crisis in Greece.
Our July projections have so far been on track, and we predict that even if prices keep falling, as advocated by the troika plan, the response of the current account will be too slow to compensate for fiscal austerity. Strategies to increase employment and income are urgently needed.Multiplier Effect
Internal Devaluation in Greece
Gennaro Zezza | Associate Professor in Economics at the Department of Economics of the University of Cassino, Italy, and a Research Scholar at the Levy Institute of Economics
1 comment:
“Strategies to increase employment and income are urgently needed.”
Sounds great, but what will those “strategies” actually consist of?
Any increase in “employment and income” will just suck in imports, which makes Greece’s balance of payments worse, unless I’ve missed something. Plus if cutting costs under the existing “autsterity for the periphery” isn't working, then Greece reverting to its own currency and devaluing wouldn’t work either.
In that situation, there is only one option for such a country, mass emigration (as Wynne Godley once pointed out in respect of the UK when the UK’s balance of payments was in dire straits a few decades ago).
And in fact Greece has exported people on a large scale over the last century, though I’m not sure how big that “export” has been relative to other countries. Certainly Ireland, another periphery country, has been exporting people on a large scale for well over a century.
Post a Comment