Chapter 5: The Greek social model: Towards a deregulated labour market and residual social protection
With a 25.9 per cent fall in gross domestic product (GDP) over six years of continuing recession, starting from 2008, the unemployment rate currently at 26.6 per cent (second quarter of 2014), and rampant impoverishment that already affects 35 per cent of the population, Greece is undeniably facing a situation similar to or even worse than the Great Depression of the 1930s, pointing to economic collapse. Unfortunately for the country and its people, four years of fiscal consolidation and internal devaluation of wages and assets caused not only social suffering but also the demise of the pre-crisis social model, and a prolonged recession. Since 2010, rounds of austerity have been administered under two Economic Adjustment Programmes (EAPs) agreed with eurozone partners and the International Monetary Fund (IMF) as a condition of financial aid. Both the European Commission and the IMF underestimated the recessionary impact of austerity measures and the design of these EAPs seems to have been using extremely low fiscal multipliers in their macroeconomic model, as recently acknowledged by the IMF on the basis of ex-post evidence (Blanchard and Leigh 2013).
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