Reference no: EM133553861

Question: Several years into the crisis, the Greek government debt stands at around 180% of GDP and the jobless rate among youth is above 50%. The country's GDP declined by about 25%. Severe austerity measures, such as sharply raised taxes and much reduced pension benefits, were imposed on Greece as conditions for the bailouts arranged by the EU, IMF, and the European Central Bank. In addition, people were allowed to have only restricted access to their bank deposits, to prevent bank runs. Opinion polls indicate that the majority of people in Germany, the main creditor nation for Greece, prefer the Greek exit from the euro-zone, popularly called Grexit, while some people in Greece are demanding Grexit themselves and restoration of the national currency, the drachma.

Discuss the following points:

(i) the root causes of the Greek predicaments;

(ii) the costs and benefits of staying in the euro-zone for Greece,

(iii) the measures that need to be taken to keep Greece in the euro-zone in the long run if that is desirable,

(iv) If you were a disinterested outside advisor for the Greek government, would you advise Grexit or not? Why or why not ?