Introduction
Greece can find its way out of recession by ensuring that their debt ratio is reduced by increasing their GDP. Greece has a debt ratio of 174%, which is dangerous to its economy because its implication has gradual effect to the GDP of that country. In fact, Greece is cutting employees’ wages in order to reduce the amount of money indebted to other states. People have been threatened with reductions in credit ratings by the government with the aim of reducing debt ratio in Greece.
This country should come up with ways of cutting down taxes for people with potential to create jobs in order to boost their GDP. This means that investors should be encouraged to venture into its economy by tax exemptions and reductions. This can attract potential investors into the economy hence boosting their GDP; therefore, debts ratio will come down, and the country will be slowly getting out of recession.
Body
Greece should embrace production of substitute products in order to take advantage of the cross-price elasticity of demand. This is where price increase for one product decreases its demand and increases demand for its substitute in the market. This means that the GDP of Greece will keep on growing because the country sells products all the time.
When demand for certain products goes down, that of substitute products goes up increasing revenue generation. This can be immensely helpful for this country as it struggles with recession because continuous production, which contributes to the Gross domestic products, reduces the debt ratio hence easing recession.
Greece relies on foreign investors who own up to 70% of the Greek government bonds. This means that premiums are paid to people who develop their countries, as opposed to facilitating the development in Greece. The Greek government should come up with a policy of ensuring that money circulates within its economy hence leading to growth in GDP.
This means that it should restructure its system to ensure that its citizens own majority of government bonds since they are the tax payers. As a result, part of the money paid as dividends to citizens end up in government treasury in the form of taxes either directly or indirectly.
The Greek government has failed to control its financial markets for long due to poor leadership policies. This government has experienced rising bond yields affecting its economy in a great way. In fact, in the year 2010, their sale of treasury bills was oversubscribed.
This means that the demand in financial markets was higher than expected, and this was hectic for the finance personnel in Greece. They had to seek assistance from European Union to lower their cost of financing their public debt, which kept on hitting on the bond market.
Conclusion
In order to tackle this problem, the Greek government should seek advice from successful countries within EU. This is important because all its neighboring countries are economically doing well, therefore, can be of considerable help to Greece. The administration should consider hiring financial experts to advise them on how to tackle recession effectively.
Greece should embrace activities that contribute to the Gross Domestic Product in order to deter the increasing debt ratio. This is essential because, GDP and debt ratio are inversely related hence increase on one leads to decrease on the other. Finally, the government should be able to come with a strategic plan aimed at pulling the country out of recession.