Yves here. This report includes on-the-ground details.
By Evita Nolka, a Greek political scientist, holder of a MSc. in Strategic Studies and International Politics from the University of Macedonia. Her current research interests include the European financial crisis in the Mediterranean region. Originally published at Triple Crisis
Sticking with Austerity
For six years now Greece has lived under unprecedented austerity policies demanded by its lenders and accepted by a succession of governments. The social and political reality created by austerity was sharply shown by two events that occurred on the same day in October.
First, a report on poverty and social exclusion in Greece was released by Eurostat, the European statistical service, indicating that, in 2014, 22.1% of the population lived in conditions of poverty, 21.5% were severely materially deprived, while 17.2% lived in families with very low work intensity. Altogether, 36% of the population faced one or more of these terrible conditions. The percentage was 7.9% higher than in 2008.
Second, the Greek parliament approved a new piece of legislation imposing further austerity measures as demanded by its creditors – primarily the EU and the IMF – to meet the terms of Greece’s recent, third, bailout agreement. The new package involves cutting 14.32bn euros of public spending, while raising 14.09bn euros in taxes over the next five years. The measures will affect primarily private-owned businesses, homeowners and employees close to retirement.
Austerity policies were first adopted in 2010 as a “solution” to the economic crisis that burst out in 2009-10. Severe cuts in public spending, deep reductions in wages and pensions, enormous tax increases, and a stripping back of labor protections have sought – presumably – to stabilize the economy and gain the confidence of financial markets.
In practice the measures have plunged the Greek economy into a prolonged recession that has had the disastrous social implications outlined by Eurostat. Unfortunately, the current Greek government, formed by the left-wing SYRIZA party, appears determined to keep the country on the same path.
The Crushing Burden of Unemployment
In the course of the recession the Greek economy has shrunk by more than 25%. At present more than one in four of the workforce is currently unemployed (one in two among the youth), and more than one million jobs have disappeared. The prospects for improvement, given the third bailout, are dim at best.
In Thessaloniki, Greece’s second largest city, located in the heart of Macedonia, Giannis and Lena agree to discuss the economic crisis over a cup of coffee. Both in their early 30s and MBA degree holders consider themselves lucky to be employed. Giannis is a merchandise buyer at a company that imports household items and Lena works in the export department of a pasta-producing enterprise.
“Every Greek family is experiencing the crisis their own way”, Lena tells me, “Unemployment, wage and pension cuts, taxes and increases in prices of basic goods have caused despair to millions of people”.
Giannis shares a bit more. His family’s income has taken a real hit. His father’s wage has been reduced by one third and his mother got laid off three years ago. She used to work at a ready-made garments industry that went bankrupt soon after; for a year and a half she hasn’t been paid and she is still claiming the money she is owed.
Like so many others, Giannis has been unemployed for years. There was nothing he could do other than hope to get accepted at one of the five-month temporary work programs in the country funded by the EU.
“You’re being deprived of the opportunity to work during the most productive years of your life”, Giannis tells me as he explains the psychological burden of unemployment. “There’s a feeling that you’re standing still even though the whole world keeps moving and after a while you feel numb, you accept that’s how things are and you are unable to get out of the rut”.
“No legislation can guarantee even the most basic labor rights”, Lena says describing the way employers have systematically exploited people’s need to work using the specter of unemployment as an excuse to further reduce wages. “It’s no wonder that so many well-educated young people choose to leave the country”, she adds.
Since the unemployment rate for people with tertiary education is current just under 20% – the highest in the world – it is no surprise that more than 200,000 young Greeks have already left the country in search of better opportunities abroad.
I discuss Greece’s brain drain with Victoria, a first-year electrical and computer engineering student at the University of Thessaly. Victoria is just 18 but she is already considering leaving Greece once she finishes her studies. Who can blame her? She is highly unlikely to find a job in her chosen field after graduation.
“Don’t be mistaken”, she says, “all those young people that seek a better life abroad care deeply for Greece and won’t hesitate to return once things have improved”.
Collapse of Production
The austerity policies have also led the country’s productive sector to near collapse. The decline in industrial production after 2008 reached a staggering 35%. Industrial production in Greece is currently below 10% of its GDP.
To be sure the deindustrialization of the Greek economy started a lot earlier, in the early 1980s. The country’s development model, systematically favoring the services sector and ignoring the primary and secondary sectors, limited its competitiveness and contributed decisively to the dismantling of its production base.
A case in point is provided by United Textiles (ENKLO), a 140-year-old company operating in Central Macedonia and Thrace with a strong presence in international markets, skilled workforce, advanced technology and excellent product quality. The company closed down in 2009, sinking under a debt burden of 350 million euros
The laid-off workers, unable to find another occupation and refusing to accept that the company would never operate again, have been guarding the buildings and maintaining the equipment ever since its shutdown
“We are here night and day to make sure that the machines remain unharmed”, says Petros, who has worked as an electrician for 25 years.
But things got immeasurably worse after 2009. During the recession, about 250,000 Small and Medium Enterprises have closed down. Many more have been at the verge of closure due to reduced income and increased financial obligations to social security funds, tax offices and banks. Thousands of small business owners have opted to relocate to neighboring Balkan countries that offer lower labor costs and corporate tax rates
“Reality has shown that the austerity measures applied across Europe are not the most effective response to the crisis”, says Costas, a civil engineer from Patra, the third largest city of Greece in the southern region of the Peloponnese. Costas is 45 years old and a former member of SYRIZA, the current governing party
“No other country in the Eurozone has had to impose such far-reaching austerity programs”, he says, “and I just don’t see how the Greek society can sustain the burden of yet another bailout”.
The policy is simply not working even on its own terms. After five years of austerity and three bailout agreements, Greece’s national debt currently amounts to 320bn euros – it is right where it was in 2010. But the ratio of its debt to GDP has shot up to 174%, and it is projected to rise to 200%. The country’s destroyed economy would never be able to sustain this huge volume of debt.
The first article in a series