The Greek economy is projected to grow 1.8 per cent this year, against an earlier forecast of 2.7 per cent according to the proposal…
Of course that’s not great, especially with all the catch-up they could be doing (but please don’t assume that all or even most of the output gap represents potential catch-up). Still, the Greek economy is not shrinking, even though Keynesian fiscal theories predict it should be:
“We accept that there will need to be a 3.5 per cent primary surplus until the end of the [bailout] programme [in 2018] but after that it should come down to something like 1.5 per cent to allow for more capital expenditure to lift the Greek economy.”
Here is the FT article by Kerin Hope and Claire Jones. I said it before, I’ll say it again: the 2008-2012 period was a very special one, with a very high risk premium (sorry, Scott!) and with massive contractions in bank intermediation in some of the key affected countries. We draw broader conclusions from it at our peril.