Discussing EU Policies and Mechanisms towards the COVID-19 Pandemic Crisis: A Case Study of Greece

Abstract

This paper discusses the effectiveness of EU economic measures towards the pandemic crisis in the case of Greece. As the pandemic crisis was an exogenous and symmetric crisis, EU member states decided to take supply and demand side measures to tackle economic recession. Not only the Recovery plan for Europe (NGEU), but also the Escape Clause, as well as non-standard monetary measures, were implemented in order to achieve growth. Furthermore, fiscal expansion, as well as common debt extraction, using green and social bonds led to higher government spending and sovereign debt. The paper’s research question is “Could fiscal expansion mitigate the economic consequences of pandemic crisis?” In other worlds, the research gap which this paper tries to fill is that for the contemporary EU response to two different crises, the economic and the pandemic. Our analysis, by using a comparative approach, shows that government spending and fiscal expansion is effective in the short-run, as the temporary measures led to higher GDP growth rates and lower unemployment rates, but in the long-run demand side measures led to higher inflation and higher sovereign debt.

The Fiscal Policy of Greece and Its Macroeconomic Performance Within the Framework of the European Economic Union

“…This strong effect of the level of inflation on the Greek GDP is also confirmed by the course of the Greek economy so far, which managed to achieve high growth rates after the Second World War and the civil war until the period before the outbreak of the global economic downturn of 2008 with the budget deficit and public debt decreasing (Kaplanoglou and Rapanos, 2011). This resulted in high growth rates and great economic activity, high GDP, a reduction in inflation, stabilization of public debt in relation to GDP, and a particularly low unemployment rate (Alogoskoufis, 2012). However, the fiscal situation remained precarious as the underlying fiscal problems persisted and accumulated throughout the growth of the Greek economy.…”