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Deal or no deal: The Greece standoff

Thursday, June 25, 2015

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Question 1:  

Do you agree that, on balance, the implementation of the agreement as outlined in media reports will have a non-trivial negative effect on Greek GDP?

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Question 2: Do you agree that Greece would be better off defaulting right now rather than signing to the agreement under consideration?

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Question 3: Do you agree that implementation of the agreement will lead to an expected decrease in Greek debt repayments?

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Last week (week of June 22nd), the Greek authorities presented a new proposal to its creditors, consisting of increases in contributions to the government pension scheme,  a widening of the 23% VAT rate (but a reduced rate of 13% on energy, basic foods, catering and hotels), an increase in the corporate tax rate from 26% to 29%, an increase in the "solidarity" income tax rate that had been initiated under previous bailout programmes, and a reduction in defense spending. Details can be found at  http://www.theguardian.com/business/2015/jun/23/greece-debt-crisis--offer-athens-details.

Although the survey asked panel members about the economic consequences of this particular proposal, the answers of several panel members were focused on countercyclical austerity programmes in general.

The survey asked three questions - and 37 economists participated. These are the headline results:

A large majority of respondents think that these types of measures would have non-trivial negative effects on Greek GDP. Moreover, a majority thought that such measures could actually reduce the amount of money that creditors would eventually receive, for example, because it would have negative effects on Greed GDP.

Although quite a few respondents think that Greece could just as well throw in the towel and default on some of its debt right now, the majority think that this would not be beneficial right now.

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