Why Did the Forceful Internal Devaluation Fail to Kick-Start an Export Led Growth in Greece?

Much has been said about the results of the austerity program dictated in Greece by the ‘Troika'. The official creditors initially sanctioned an implementation of the agreed conditionality program (included in the Memorandum of Understanding that also provisioned the official loans to the Greek government) that principally focused on increasing taxes and labor market reforms that facilitated the sharp fall of private sector wages. During the third year of the implementation of the program they did complement this tax spree with horizontal cuts in pensions, medical benefits and public sector wages, failing to touch the key distortions of both the pension system and the public sector wage structure. Growth enhancing progressive structural reforms, were not deemed a priority and basically were off the agenda with the exception of a few half-hearted and therefore incomplete attempts. To make matters worse, a number of ill advised policies and strategic political decision directly undermined the ability of the productive part of the economy to contribute towards the stated goal of an export-led recovery of the Greek economy. In this paper we present facts that document the impact of the adopted strategy on employment and wages, updating our related previous analysis, and extent the arguments to further elaborate on the impact of the adopted policies on the export performance of the Greek economy