The Social Accounting Matrix, the reduction of borrowing through the reduction of government consumption and its effect on the Greek economy

Abstract

The aim of this paper is to calculate the impact of the reduction or elimination of net borrowing on the Greek economy. The assumption made for this calculation is that a reduction of net borrowing leads to a reduction of government consumption. The effects on the Greek economy of reducing borrowing are calculated by using the Social Accounting Matrix. The results show that a reduction of borrowing must be replaced by a significant increase in production and the resulting reductions relate primarily to sectors in which the state has sizeable participation, such as education, health, security, public administration and defence services.