confidence, weak retail sales growth was underpinned by a reduction in household spending. Indictor 2: Unemployment Rate Figure 3: Long-term Unemployment Rate (%) Source: Tradingeconomics.com A contracting economy in Greece correlates with job security in its country and thus, first time labour market entrants and re-entrants have been severely impacted. In 2010, policies were implemented to boost youth employment and labour market flexibility. With a stimulus, housewives and teens, aged 15-19, were seeking employment. This resulted in an oversupply of labour which did not match its demand. Lastly, entrants that find a job were more likely to be recruited on a part-time or fixed term job rate, creating a long-term unemployment as a result of a lack of job security. Figure 4: Short-term Unemployment Rate (%) Source: Tradingeconomics.com From the table above, we can conclude that Greece’s unemployment increased significantly from 26.7% to 27.4% in just one quarter. In 1st January 2012, the suspension of automatic wage increased up to a maximum of three years with collective agreements. If new agreements are not reached, remuneration reverts to base wage and allowance for all to apply. Page 3 of 6
Page 4 of 6 ECON1016, sem1 2019, assignment Changes were also made to help youth entrance into the labour market. However, this did not help youths either(as seen in the graph), the unemployment rate still increased. Briefing for the Prime Minister Subject: Reduction of Fiscal Deficit Through Tax Reforms and Tighter Budget Executive Summary Since the 2008 financial crisis, Greece’s economy has contracted notably with a shrinking GDP and a surging unemployment rate. A long term evaluation of government spending commitments and reduction in spending to sustainable levels is crucial to improving domestic businesses which would essentially, promote employment. With a combination of policies, Greece would be able to reduce its fiscal deficits. Recommendations The government should undertake a tighter budget stimulus to maximize its available resources and boost domestic investments. Concurrently, through the implementation of an expansionary fiscal policy to reduce taxes, consumer demand and employment will be improved. Economic Rational Financial sustainability of Greece’s consumptions and investment system is a major challenge that is underpinning the country’s economic growth. Greece’s economy plunged into prolonged recession, which resulted in a skyrocketing cost of borrowing as confidence levels nosedived. Despite being able to get bailout packages, Greece economy remained in recession.
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