Question

Discuss possible ways Greece can reduce its high unemployment rate.

Answer 1

• Greek Economy is experiencing l problems with Unemployment.
• It is primarily caused by prolonged Recession.
• Led to a fall in out put and decline in Economic activity.

In order to reduce its unemployment, Greece should seek to pursue policies to increase aggregate demand.

Fiscal policy:-

• Government spending in an attempt to reduce the budget deficit.
• Spending cuts are making the Recession worse and increasing unemployment.
• One policy option requires the EU to wipe out Greek debt and enable them to stop Austerity.

Monetary policy:-

• This policy is not set by greece , but the External commercial Borrowings.
• ECB is considering the whole Euro zone and is not setting monetary policy for what greece needs.
• Print money and reduce deflationary pressure and boost demand.
• Help Economies experiencing deflationary pressures.

Devaluation of Exchange rate:-

• This is not possible with in the Euro zone.
• Euro would enable loose monetary policy and devaluation.
• This help increase aggregate demand in long term.
• Therefore it could be a solution of mass Employment.
• Leaving the Euro causes massive disruption.
• Possibility of capital flight.
• Destabilizing the Economy could lead to lower Economic growth.
• Advantage of leaving the Euro is to put the Economy back in the hands of the Greeks , and avoid a repeat of the crisis in the future.
• Labour market reforms increase market flexibility.
• Reduce wage costs.