The Vulnerability of the Greek Economy and the Recovery Requirements After Covid-19
This chapter concludes the first of a series of books, The Political Economy of Greek Growth up to 2030, focusing on the appearance and effects of Covid-19, with the aim of identifying key forecasts for the Greek economy. In order to achieve this, develop
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The Vulnerability of the Greek Economy and the Recovery Requirements After Covid-19
13.1
Introduction
This chapter concludes the third part of the book where the emergence of Covid-19 crisis is analyzed. Based on the deep and rapid nature of the pandemic’s impact on the economy, with accelerating and strengthening features of existing trends, a strong recessionary environment was created dominating 2020 with the weaknesses of the Greek economy deepening the recession. The chapter addresses the main issues related to Covid-19 crisis and contains key short to medium-term forecasts reflecting the impact on the Greek economy. Briefly, the channels diffusing the effects on the Greek economy (Sect. 13.2), the developments in the world economy (Sect. 13.3), the epidemiological and economic policy dealing with the crisis (Sect. 13.4), the vulnerability of the economy to Covid-19 (Sect. 13.5), and the evolution of the epidemiological and economic curve in Greece (Sect. 13.6) are described. Section 13.7 presents the main forecasts for the Greek economy in Eurozone, including a Debt Sustainability Analysis, while in Sect. 13.8 the recovery requirements by 2030 are shown. Finally, in Sect. 13.9 the main points of the political economy in the Greek economy after Covid-19 are commented on.
© The Author(s) 2020 P. E. Petrakis, The New Political Economy of Greece up to 2030, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-030-47075-3_13
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13.2 The Diffusion Channels of the Economic Impact Covid-19’s effects can be felt through four main channels: supply, demand, uncertainty, and international financial markets. One way in which the virus harms the economy is to stop the supply of labor, goods, and services. People get sick, schools close, and parents stop working, staying home to take care of their children. Thus, quarantine can force people to work from home or even entire factories to suspend operations. Strict social distancing measures introduced in China and Italy exacerbated this effect through the supply channel. Restrictions on people’s movements create a negative shock on labor supply (in essence, they create an increase in unemployment). It is estimated that these conditions will last for at least one or two quarters in China as well as in other countries with large outbreaks (Italy, Germany, France, and Spain) depending on the conditions that arise. An additional channel transmitting coronavirus’s effects in the Greek economy is the disruption in global value chains. Although the participation of Greek companies in global value chains is still limited, the reduction, or even cessation in some cases, of the disposal of intermediate and capital goods is estimated to have negative effects on their production capacity. Additionally, the production of goods and particularly services may be adversely affected by the extended absence of workers from their duties as part of precautionary measures to prevent coronavirus spread. On the demand side, people generally buy
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