Unemployment in Greece: Causes and Effects

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ECONOMICS ASSIGNMENT

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The economy of Greece has been going through a lot of turbulence and its
repercussions have affected many indicators of macroeconomics. Unemployment is one such
macroeconomic indicator of the country which has been severely affected. The aim of this
paper to answer questions related to the unemployment in Greece.
The unemployment of Greece is measured by taking the percentage of the labours
who are working out of the total workforce of the country. In the case of Greece, the
unemployment has been similar to the figures of European Union as a whole till 2008 (Farber
& Valletta, 2015). However, due to the financial mismanagement and the crises after the year
2008 the unemployment rate fell sharply compared to the European Union.
Figure 1: Unemployment rate in Greece compared to the European Union as a whole
(Source: Kroft et al. 2016)
There are two types of problem in the country in terms of unemployment. First one is
the long run unemployment which is also called the natural rate of unemployment. This is not
the result of the mismanagement it has committed in the past. Another problem of the
economy is the cyclical unemployment which fluctuates around the normal rate as a result of
the changes in the business cycle and the national product of the economy. Menzio (2016)
stated that negatively sloped GDP of the country also reflects in the employment of the
country as well. According to the figure 2, the falling GDP of the country shrank the
economy increasing the frictional unemployment in the economy.