Crisis, credit contraction and labour marker: the Greek case

Abstract

The crisis of the Greek economy broke out in 2009 initially as a fiscal crisis, but then went on to adversely affect the functioning of the Greek financial system as well. As a result, in recent years one of the most important functions of the financial sector, the provision of credit to businesses and households has been disrupted. Credit is necessary for the stability and growth of a modern economy. Although much has been said and written about the "credit crunch" in the Greek economy, an important parameter, which has not been sufficiently explored, is the relationship between the contraction of credit in the Greek economy and the performance of the labour market. This article examines this parameter; the following analysis leads us to the conclusion that the performance of the labour market, particularly unemployment, has been adversely affected by the conditions of credit contraction.