Examine how Greece(or the other three from PIGS) is covering from the euro crisis. Euro crisis: Greece spend more than they can afford. Solution: austerity, cutting spends, increase tax. Delimma: Cut spends will increase unemployment rate, thus decrease tax income. By investing the total government debt from Greece and unemployment rate, check whether the austerity is working positively (negatively)?
1999, Eurozone => Significant increase in Government debt while employment rate also increases. 2008, us crisis => employment rate decreases while debt continues to grow. 2008-2011 (critical moment to detect furture crisis) 2011 - 2014 euro crisis (even in 2016, 2017) 2014 - now => debt slowly decreases and become steady, and employment rate increases. Summary: 1. The Greece economy severely sufferred from the euro crisis. The employment rate is less then that in 1998-1999 before the euro zone. 2. The austerity economic policy seems to work. Despite the decrease in government debt, the employment rate reach the record low(trough) in 2013 and bounce back afterwards. 3. Confusing point: why gdp, debt decreases, while employment rate increases? Okun's Law: 1% GDP => 2% employment rate
Conclusion: 1. Government debt has a stronger relationship between employment rate than GDP. 2. The posible reason is in 1960s, when Okun's law is developed, Milton Friedman (Free market) is popular in the states. 3. in the 1990's, especially after 1997, alive of John Keynes.