Summing up, internal devaluation has so far had negligible effects on Greek exports, while the fall in the purchasing power of wages has added to the fall in domestic demand generated by fiscal austerity, and thereby contributed to the unprecedented crisis in Greece.
Our July projections have so far been on track, and we predict that even if prices keep falling, as advocated by the troika plan, the response of the current account will be too slow to compensate for fiscal austerity. Strategies to increase employment and income are urgently needed.
Multiplier Effect
Internal Devaluation in Greece Gennaro Zezza | Associate Professor in Economics at the Department of Economics of the University of Cassino, Italy, and a Research Scholar at the Levy Institute of Economics