Discussion Paper

The Different Paths of Greece and Spain to High Unemployment

Abstract: Euro area GDP remains below its 2007 level due to the global financial meltdown and the subsequent sovereign debt crisis in the periphery countries. Unemployment rates make it clear that some countries have fared much worse than others—the rates in Spain and Greece today are over 25 percent and are much higher than rates in the next highest, Portugal (15.7 percent), and in the euro area (11.6 percent). Quite a change from 2007, when Spain and Greece had lower unemployment rates than the euro area as a whole. In this post, we show that while the unemployment rates in the two countries are similar today, the paths have been very different. The employment decline in Greece, like in the euro area, has been proportional to the country’s steep decline in GDP; Spain’s employment has fallen much more than output, due in part to its notable labor market flexibility.

Keywords: employment; euro area; Spain; Greece; output;

JEL Classification: F00;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2012-11-28

Number: 20121128