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

IMF Working Papers, June 6, 2025

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

Greece has coped with large current account deficits and negative net foreign assets for a long time.
The European Union’s Recovery and Resilience Facility (RRF) and its associated Recovery and Resilience Plan (RRP) present an opportunity to address this vulnerability through large public investments and reforms aimed at boosting Greece’s long-term potential.
Using a small open-economy model, the study tracks how the RRP may affect savings, investment, and external balances.
Key findings:
- (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.

Methodology: small open-economy model used to assess impacts on savings, investment, and external balances.
Subjects: 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.

The RRP/RRF can substantially improve Greece’s external position if implemented successfully, primarily by raising public savings.
Prudent macroeconomic policies are necessary to lock in and sustain the positive effects of the RRP/RRF over the long run.