This helps to create job opportunities and reduce unemployment Limitations to

This helps to create job opportunities and reduce

This preview shows page 5 - 9 out of 9 pages.

Lastly, it will boost the tourist industry as it is less expensive to travel to Greece. This helps tocreate job opportunities and reduce unemployment.Limitations to Devaluation of Exchange RateA devaluation would cause inflation as imports prices increase. As a result, it will increase thecosts of living and reduce the standard of living. Devaluation also involves leaving the Euro.Therefore, there is a risk of substantial capital loss as Greek savers want to protect the value oftheir savings by moving into Euro bank accounts. This capital loss would cause banks to run outof liquidity (cash).ConclusionIn order to reduce fiscal deficits, the government is advised to use a combination of policies. Akey factor is the timing of the implementation of policies. If Greece is already in recession, it ismuch more difficult to reduce the deficit because fiscal consolidation tends to worsen theeconomic situation leading to lower tax revenues. The best way to reduce government budgetdeficit is to aim for positive economic growth, but in the long-term evaluate governmentspending commitments and reduce spending to sustainable levels. In addition, implementing adevaluation of exchange rate will boost the demand of Greece products and lead to an economicrecovery.
Background image
References:Amadeo, K 2018, Natural Rate of Unemployment, Its Components, and Recent Trends, The Balance, viewed 26 March 2019, <-definition-and-trends-3305950>.BBC News 2018, Greek bailout crisis in 300 words, BBC, viewed 29 March 2019, <>.BBC News 2018, What it takes to be young, Greek and able to pay your bills, BBC, viewed 26 March 2019, <-to-pay-your-bills>.Council on Foreign Relations n.d, Greece’s Debt 1974 - 2018, Council on Foreign Relations, viewed 25 March 2019, <>.Economicshelp n.d, Economic Costs of Unemployment, Economicshelp, viewed 29 March 2019, <>.Pettinger T 2012, Would Devaluation Help Greece? , Economicshelp, viewed 29 March 2019, <>.Riley, G 2011, Revision: Consequences of Unemployment, Tutor2u, viewed 29 March 2019, <>.Statista 2019, National debt in EU countries in the 3rd quarter 2018 in relation to gross domestic product (GDP), Statista, viewed 11 March 2019, <-domestic-product-gdp/>.
Background image
Micro credential
Background image
Background image
Image of page 9

You've reached the end of your free preview.

Want to read all 9 pages?

  • One '17

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture