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'Grexit': Who would pay for it? CEPS Policy Brief No. 272, 23 May 2012

Alcidi, Cinzia. and Giovannini, Alessandro and Gros, Daniel. (2012) 'Grexit': Who would pay for it? CEPS Policy Brief No. 272, 23 May 2012. [Policy Paper]

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    Abstract

    The eurozone countries are currently sitting on an aggregate exposure to Greece exceeding €300 billion. If the country were to exit the eurozone, it would certainly not be able to service its debt in the short run when the exchange rate overshoots. Over the longer run, however, the exchange rate is likely to return to a longer-run equilibrium and growth is likely to slowly resume closing the output gap. Moreover, exports are likely to grow by more than GDP, thus increasing over time the capacity of the country to service foreign debt. Therefore, the authors conclude, whether or not an exit from the eurozone is followed by default on the official debt depends decisively on the willingness (and ability) of Greece’s European partners to wait and finance the bridge between the short and the long run.

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    Item Type: Policy Paper
    Subjects for non-EU documents: Countries > Greece
    EU policies and themes > Policies & related activities > economic and financial affairs > EMU/EMS/euro
    EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on and consequences/reforms
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > CEPS Policy Briefs
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 24 May 2012 08:57
    Number of Pages: 8
    Last Modified: 24 May 2012 08:57
    URI: http://aei.pitt.edu/id/eprint/35054

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