GREECE_THE_GLOOMY_PICTURE_OF_AUSTERITY_P

GREECE_THE_GLOOMY_PICTURE_OF_AUSTERITY_P - GREECE THE...

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GREECE: THE GLOOMY PICTURE OF AUSTERITY POLICIES Amedeo Panci § Summary . After more than five years the austerity policy has no longer solved the problems of public finance in Greece. It has made the recession more severe, instead, and there are no changes in view. There is no agreement on a new cut of the greek public debt. But it is more and more evident that without such a resolutive action, the country's destiny is to live in some sort of vegetative state full of risks. How long a country can be forced to live as a "financial zombie"? The failure of public finance targets. The 2010 forecasts had underestimated the long and severe recessive impact on the economy. As well as they had overestimated the country's ability to manage too ambitious targets for public finances. After the 2010 rescue the Troika had forecasted a fast fiscal consolidation to achieve public finance sustainability and the return of growth close to the pre-crisis potential. The world economic outlook of IMF in october 2010 had expected record improvements for the public finance. The primary balance would had to change from -8,9 percent of GDP in 2009 to 1 percent in 2012 and finall reach almost 6 per cent of GDP as early as 2014. Public debt would reach its peak of 143,9 percent of GDP in 2013, and then to fall at 133.9 points in 2015 (graphs 1 and 2). In the ex-post data, Greece has not achieved these ambitious targets. To the contrary, those targets proved to be completely out of reach. The primary balance has been slightly positive only in 2013 (1 percent of GDP) and then has returned to be negative in 2014. The latest IMF forecasts, in the world economic outlook of october 2015, have updated the target of primary balance in 2020. Now it is at 3.5 percent of GDP. A
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