Is Greece Out of the Woods?

Is Greece Out of the Woods?

Is Greece Out of the Woods?

For Greece, 2018 is inexorably synonymous with the exit from conditional multilateral aid programs.

Greece, it was said, "would be out of the woods thanks to the Troika's fiscal austerity programs". Much like purchasing power or unemployment figures, the macroeconomic situation may look flattering for the Troika and the Greek government... but the social situation, in parallel, has deeply deteriorated. Didn't the Troika claim that the austerity policies would, through a trickle-down effect, "improve the social situation"? The current situation seems embarrassing, to say the least...

1. Greece since the Troika shows some good macroeconomic results

From 2010 to 2014, the recessions finally turned into positive growth and the macroeconomic figures are rather encouraging: improvement of the deficits and even a surplus in 2018, very significant lowering of the country's risk with finally reasonable interest rate levels for the financial markets (around 5% in 2018), balance of payments, employment [1]. Finally, since 2018, when Greece was freed from the Troika's grip, it seems that Greece has finally managed to see the blue sky with high growth numbers [2].

2. Yet, despite this macroeconomic poetry, the situation in Greece has never really improved.

Not on the microeconomic front and even less on the social front, for that matter. On the microeconomic front, even during the troika the situation was not so rosy: on the labor market, the share of long-term unemployment is still very high with 72.2% of total unemployment. Numbers concerning youth unemployment, which is still far above European levels, show a more contrasted situation. Here, precariousness on the employment front is general. It should not be forgotten that most jobs are part-time or on fixed-term contracts.

In the end, the structural problems persisted despite the programs: low productivity, low wages per capita, low profit margins for companies. And above all, the debt has not been reduced at all, with levels still touching 190% of GDP in 2014. Finally, after 2018, that is to say after the Troika, GDP remained far below its highest level, -24% compared to 2008 and a wealth per capita far below the average of European countries, a position that places it behind Croatia. Although Greece is finally borrowing like all other countries on the financial markets, investment has not reached half its pre-crisis level. As of late payments, they are still present absolutely everywhere. The poverty rate, estimated at 22%, has doubled in 10 years and remains three times higher than the European average. The country is the most inegalitarian in Europe. A social situation on the verge of implosion. And as if that were not enough, the social aspect has totally degenerated. The end of the Troika, which should have launched the Greek economy, has instead precipitated it into a vicious social circle. One can glean from the fact that "there are fewer social movements, fewer strikes, less violence", if this is the objective of such an ambitious program, but the reality is that the social situation is catastrophic. Indeed, delinquency has literally exploded, culture and education are in a miserable state and this, while the, yet exceptional, heritage suffers from total abandonment. Inflation has eaten away the purchasing power more than elsewhere. The human development indices show a society in total disarray, not knowing where to go or what to do with the day. The only way out? Emigration for citizens, tax evasion for companies. Culture in shambles, a plethora of street artists, dilapidated theatres, empty cinemas... the Greeks, immense creators recognized throughout the world, in fashion too, have literally been abandoned to their sad fate. In Qatar, France and other EU countries, no less than 500,000 Greeks left the country during this famous "liberation"!  Most of the elderly stayed behind, while the young people (aged 20-30), especially the most qualified, left the country. This exodus not only had a de facto impact on the country's ability to recover, but also intensified the difficulties already present in the social systems.

12 years after the crisis, can we say that Greece is out of the woods?

What is obvious is that the few meagre macroeconomic results obtained "thanks" to austerity policies were achieved at the price of social and cultural sacrifice. What is the situation today? Following the recent Russian-Ukrainian conflict, the rise in gas and energy prices is the highest in Europe, and the state has once again had to intervene by announcing a 50-euro increase in the minimum wage since May. Fortunately, there are no agricultural shortages in Greece, an agricultural country par excellence, but the situation is not good enough... Will the State have to face a return of social tensions? Perhaps we can console ourselves with the fact that Greece is indeed on the Chinese silk road!

[1] Greece's unemployment rate is estimated by the EC to be 15.1% in 2018, which overall is interpreted as progress by international investors.

[2] Removing the covid effect of which all European countries have been impacted.

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Pascal de Lima

Global Economy Expert

Pascal de Lima (PhD economics - Sciences Po) is Chief economist of CGI Business Consulting and Teacher at Aivancity. He is a French economist and knowledge manager (KM). He applies his knowledge of economics to the field of KM to solve management consulting challenges. He lectured economics at Sciences Po in Paris and has also taught economics in several of France's top universities (HEC, ESSEC, Sup de Co, Engineering Schools and PREPA...) for a total of 18 years. As an essayist, he wrote more than 200 Op-Eds for major media outlets in France, 10 books and 5 referenced academic articles. He regularly gives lectures at international economics conferences. He specializes in economic foresight. His work is centered around monitoring and prospective thinking with primary focus on the assessment of the economic, social and environmental impact of innovations. After 14 years in the field of management consulting for the financial and banking sector (Ernst & Young, Cap Gemini, Chief Economist & KM at Arthur D.Little and Altran), he founded Economic Cell in 2013, an idea laboratory and consultancy whose purpose is to study market evolutions in light of economic transformations brought about by innovation. In 2017, he joined Harwell Management as Chief Economist, and in 2020, has become a teacher at Aivancity. He holds a PhD degree in Economics from the Paris Institute of Political Studies (Sciences Po), a Masters in Industrial Economics from Panthéon-Sorbonne Paris 1 and a Masters in Financial engineering from a top French business school.


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