An Economic report on Greece
Since the crisis began Greece has lost nearly 25% of its GDP.
The percentage change in Greek GDP was volatile but overall declined from 1991-2006. During this 15 years the highest percentage change experienced was 23.5 %( 1991), while the lowest was 6.6 %( 1999). This did start to pick up after the country joined the Eurozone and reached a 6 year high percentage increase in GDP of 10%. This may have been due to the cheap finance available to Eurozone. This compares to Germany where the percentage change in GDP got no higher than an 8.4% change and no lower than 0.7% over the same period. Indicating the changes in German GDP were much more stable. A decline at a faster rate in the percentage change in GDP then occurred from 2008. The percentage change was a 4.6% change to a -0.5% decrease. A decrease was recorded in 2011 and the same was expected for the next year.
The percentage change in GDP and the rate of unemployment generally follow the expected trend in the graph above, the rate at which GDP was increasing decreased from 1991-93, while unemployment increased during this period, in 1999 unemployment is at an all time high for the years leading up to the period and the rate at which GDP is growing is also at its lowest up until this time.
Greek government debt peaks at 168% in 2013 according to estimates. You can see more effects of the 2008 crisis on the Greek economy as government debt increases at an alarming rate from 2008 onwards, and while even German debt is increasing as well, it is at a stable rate.
Since Greece’s acceptance into the Eurozone it has run a budget deficit every single year. The austerity measure Greece has had to implement has meant that whilst they are trying to cut G, T just carries on falling. Making their job nearly impossible to try and balance the books or even stop the deficit without some sort of fiscal stimulus (boosting AD through G). The deficit from 2008-2009 was the largest deficit increase in the period (nearly doubling).
Government spending in Greece peaked at 48% in 2009, this may have been expected as unemployment increased during this period and benefits would have increased. This also explains why the budget deficit in Greece would have increased significantly at this time as they would have received less T due to the increased unemployment, combining with an increased amount spent on G. Government expenditure was stable for the 15 year period to 2006, no lower than 36% and no higher than 41%.
So what’s wrong with Greece?
A combination of various types of problems have lead Greece to the situation it finds itself in today, high unemployment (especially youth unemployment), national debt, tax evasion and a large underground economy. There is no magic cure for these issues as they may be embedded into the culture of society, however I will look at suggestions on as how different policies can help solve these specific issues. Youth unemployment reached nearly 62% for 15-24 year olds in Greece. Figures released on the 14th February show youth unemployment are a long term issue that can have a severe effect on the long run potential of an economy if the productivity of the labour force is not sufficient. Studies have shown that the long term unemployed usually are not as productive as their employed counterparts. One method adopted by Germany to lower youth unemployment(currently stands at 8%) is to give employers tax incentives to higher younger workers, this sounds very simple however has proved very successful and the long term gains from having as much young people employed as possible cannot be understated. However the problem with this is that the Greek government would have to find the finances to do this due to their austerity package...
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