IMF Working Papers

No Quick Fix: The Recovery and Resilience Plan and External Position in Greece

By Zamid Aligishiev, Robert Blotevogel

June 6, 2025

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Format: Chicago

Zamid Aligishiev, and Robert Blotevogel. "No Quick Fix: The Recovery and Resilience Plan and External Position in Greece", IMF Working Papers 2025, 110 (2025), accessed July 17, 2025, https://doi.org/10.5089/9798229006347.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Greece has coped with large current account deficits and negative net foreign assets for a long time. Now, the country has an opportunity to address this vulnerability through the European Union’s Recovery and Resilience Facility (RRF) and its associated Recovery and Resilience Plan (RRP). The plan involves large public investments and reforms, aimed at boosting Greece’s long-term potential. The crucial question is: can this ambitious plan fix Greece's external imbalances over the long run? Using a small open-economy model, we track how the RRP may affect savings, investment, and external balances. We find that: (i) a successful RRP/RRF can correct most of Greece’s external imbalances, through a large increase in public savings; (ii) the RRP/RRF is no magic bullet, as prudent macroeconomic policies will remain necessary to lock-in the positive effects over the long run.

Subject: Balance of payments, Consumption, Current account, External debt, Income, National accounts

Keywords: Annex I. RRF implementation, Annex II, Associated Recovery and Resilience Plan, Consumption, Current account, External position, Fiscal policy, Global, Greece, Greece's Recovery and Resilience Plan, Income, Macroprudential policies, National savings and investment, Recovery and Resilience Facility, RRF shock

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