Repayment of EU bailout loans in a member-country of the ES: the case of Greece

Dimakopoulou, Vasiliki, Economides, George and Philippopoulos, Apostolis (2025) Repayment of EU bailout loans in a member-country of the ES: the case of Greece. Open Economies Review. ISSN 0923-7992

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Abstract

This paper quantifies the future implications of repayment of bailout loans received by Greece from the EU in the previous decade. These debt obligations amount today to around 240 billion euros or 70% of the country’s total public debt and have to be repaid by 2070. This is investigated in a dynamic general equilibrium model calibrated to the Greek economy, in which fiscal policy is conducted under the rules of the new fiscal governance framework and quantitative monetary policy is subject to the rules of the Eurosystem. Our simulations show that, other things equal, repayment will have recessionary implications in the years to come, although the magnitude of these unpleasant implications will depend on how much privately-held public debt rises as the EU-held public debt falls. We then search for ways to mitigate these recessionary effects. While NGEU/RRF funds as they take place at the moment, as well as a new hypothetical support from the ES in the form of more quantitative easing are found to have small and/or temporary beneficial effects only, our simulations show that what can really help is an improvement in total factor productivity.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	LSE
Subjects:	J Political Science H Social Sciences > HG Finance H Social Sciences > HB Economic Theory
JEL classification:	F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System
Date Deposited:	01 Aug 2025 13:54
Last Modified:	01 Aug 2025 16:03
URI:	http://eprints.lse.ac.uk/id/eprint/128999

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