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Last November we announced publication of the 2017 independent Annual Growth Survey: The Elusive Recovery, which is available on the Progressive Economy website.
The report has now been completed with two additional chapters which analyse the economic situation in Greece and Germany, compare various scenarios of economic policy and make recommendations on economic priorities.
Chapter 6 - The Greek crisis: outlook and an alternative economic policy.
For the last seven years the Greek economy has been entrapped in a dramatic crisis in depth, intensity and duration. The scale of the disruption the crisis has left behind is exceptional in the economic history of the country and is clearly visible in every aspect of the economic, social and political life. The very architecture of the macroeconomic adjustment programmes implemented in Greece since 2010 is incompatible with the country’s consumption-led growth model. Thus, any attempt to address Greece’s sovereign debt crisis and lacking competitiveness by means of a frontloaded mix of fiscal discipline and internal devaluation is destined to fail, aggravating the country’s financial instability, productive deficiencies and social distress. The aim of this survey is to present and critically evaluate the consequences of the creditors’ crisis resolution strategy and to propose the basic pillars of an alternative economic policy that could help Greece exit the crisis.
Chapter 7 - Germany in the position of leader.
Given the size of its economy, Germany has always played a leading role in the construction of Europe. The country’s recent economic performance has bolstered its position so much that Germany is now the undisputed leader of the euro zone, giving it additional influence on Europe’s political scene, in particular relative to France and Italy, the second and third largest economies. The analysis by the German government of the crisis in the euro area and with respect to both the current and future state of European governance is clearly decisive. Germany's economic success story is based on three elements. First, Germany is in a situation of almost full employment, even though the global economy has experienced the deepest recession since the 1930s. After the sharp blow to Germany’s economy in 2009, it quickly recovered to match and then surpass its pre-crisis state. Second, Germany has been spared the sovereign debt crisis. German bonds have benefited from their status as risk-free assets, with interest rates falling so much that they are now negative on maturities up to seven years. Finally, since 2001, Germany has accumulated current account surpluses, reflecting its industrial and export strength and relatively subdued import growth. The recent acceleration of wages has not had any impact on the current account up to now. The chapter addresses these issues in turn.
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