The Greek Economic Crisis
The topic of my reaction paper covers the current state of the economy in Greece, its short-comings, and how I would remedy the situation if I were in charge. I state that the main problem is Greece’s austerity policy that the government has been enforcing due to the countries large debt burden. I suggest that the country should enact an expansionary fiscal policy to dig them out of recession, and I explain how this type of policy would benefit Greece given their situation.
The Greek economy is currently in the middle of a depression of the same magnitude of the Great Depression. Greece has been on ‘life support’ provided by fellow European countries for the past two years to prevent the collapse of the economy but by doing so has only worsened the current depression. Unemployment has increased dramatically, and the national income has decreased by almost 25% since 2009. The money coming in from the Eurozone is being used to enforce its austerity policy, which is only worsening the current state of the economy. At the current rate Greece is at, its debt burden will soon be three times larger than their GDP. The economy in Greece is dying and the people of the country have been more then out spoken on their frustration with the current situation (the Guardian). Austerity policies are designed to reduce deficit spending by reducing the amount of benefits and public services provided (wages, pensions etc.) by the government. The rationale for this type of program is that decreasing government spending will change future expectations about government spending and taxes, leading to more private consumption resulting in economic growth (Geek Life). However during times of recession Austerity cannot be successful. For one it leads to higher unemployment, and will increase the debt to GDP ratio being examined by creditors. The current policies being encouraged by the Eurozone and being enacted by Greece is just delaying an...
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