We are often asked by visitors and friends from abroad about what is happening here in Greece as regards the economic situation and related economic and social conditions and rather embarrassingly, the truth is that we don’t know! Living where we do in a small village in relatively prosperous Crete, we have only anecdotal evidence to go on and so we end up giving a rather lame response.
I was reminded of this last week when we met up with a young Greek friend, his wife and their very young son, for coffee in Ierapetra. The purpose of the meeting was to check out the new baby, offer up the presents and see how our friends were coping. Well, in that respect all seems to be well. The young lad is a very good baby, appears to have two of everything he should have and ten of everything else, sleeps a lot at the right times and the parents are very proud, as indeed they should be!
After the initial baby talk, the conversation turned to politics and the economy. Our friend is trained as a teacher of Greek but has been told that it will be 2025 before there is a job for him within the State sector! As a family, they get by financially but life is clearly difficult and their situation sums up life here for the young professional. If you have transferable skills, the temptation is to emigrate because in Greece, there is little work but Greeks are generally proud and understandably, want to stay and bring up their families among their own culture.
Our friend is of the left but clearly disillusioned both with politics and the EU and in this respect, he seems to reflect what we see about us. The Greeks see little hope for improvement, no way out of the mess and irritated that the increased taxes (as they see it) go straight to Germany without doing any good to help anything improve here!
Anyway, as a result of this conversation, I decided to find out more about the current situation, so in future I can answer the perennial question more informatively!
Facts and figures (Source: FOCUSECONOMICS)
Greece Economic Outlook
July 26, 2016
Greece’s GDP contracted significantly in the first quarter of the year and recent economic indicators suggest that a recovery remains elusive. While some improvements have been recorded in economic data—the manufacturing PMI returned to expansionary territory in June—overall the picture is bleak as high unemployment persists and austerity dampens consumption. In addition, the Brexit vote has sparked concerns over the implications for one of the Eurozone’s shakiest economies. A large share of incoming tourists to Greece are from the UK, which is expected to face weaker growth prospects following the vote. On a positive note, fears of a near-term Grexit have been dispelled as the country has made over EUR 2.5 billion in debt repayments in recent weeks and its international creditors gave the green light to ease capital controls in mid-July.
Greece Economy Data
2011 2012 2013 2014 2015
Population (million) 11.1 11.1 11.1 11.0 11.0
GDP per capita (EUR) 18,613 17,190 16,306 16,152 16,028
GDP (EUR bn) 207 191 180 178 176
Economic Growth (GDP, annual variation in %) -9.1 -7.3 -3.2 0.7 -0.2
Exports (G&S, annual variation in %) 0.0 1.2 2.2 7.5 -3.8
Imports (G&S, annual variation in %) -9.4 -9.1 -1.9 7.7 -6.9
Unemployment Rate 17.9 24.6 27.5 26.6 25.0
Public Debt (% of GDP) 172 160 178 180 177
Greece Economic Growth
July 26, 2016
The economy is expected to remain in a deep recession this year amid fiscal tightening and poor confidence levels. On top of this, downside risks to the outlook have increased against the uncertain European backdrop following the Brexit vote. The FocusEconomics panel sees the economy contracting 0.8% in 2016, which is down 0.2 percentage points from last month’s outlook. For next year, the panel sees the economy rebounding to a 1.2% expansion.
So there you have it! I am not an economist but even I can see that these figures do not make good reading and whilst there some indications of a small improvement, as the commentator concludes, the outlook is bleak.
Is the medicine working then? Well, even the IMF who were and remain, one of the instigators of the bail-out apparently accept that they knew from the outset that the programme would not work, at least for Greece!
Commenting on a recently published report by the IMF’s Independent Evaluation Office, the Telegraph journalist Ambrose Evans-Pritchard, writes:
“While the Fund’s actions were understandable in the white heat of the crisis, the harsh truth is that the bail-out sacrificed Greece in a “holding action” to save the euro and north European banks. Greece endured the traditional IMF shock of austerity, without the offsetting IMF cure of debt relief and devaluation to restore viability.”
“The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.”
So what of the future? If one reads Yannis Varoufakis, the ex-Finance Minister then more of the same just means that things get worse.
Understandably he is bitter that the Troika refused to listen to him and finally forced his resignation but he argues forcibly that debt relief for Greece and extended terms of debt repayment are the only solution.
But and here is the rub, it seems that unless and until Greece rejects its left-wing Government, a Government, it must be remembered, which is heavily criticised by its erstwhile supporters here in Greece, for slavishly following Troika demands for more cuts and discounted privatisations, there can be no such debt relief available to the Greek people. This is an intensely political decision on the part of the power brokers in Europe to support the right wing administrations (particularly in Spain) who support the Schauble line. Evidence for this less than even-handed approach is shown in the ‘relief’ allowed by the German Finance Minister recently, to Spain and Portugal who were in breach of EU budgetary deficits and liable for a fine. German magazine Der Spiegel criticized Schauble for his double standard approach: treating Spain and Portugal mildly, while he pushed for tough austerity measures that strangled Greece’s economy and people. “In case of Greece, Schauble vehemently rejected any proposal for mild treatment.” The reason? Mariano Rajoy is one of Schauble’s political allies and he is at the moment facing difficulties in forming a government in Spain. On the other hand Greece’s SYRIZA government is not favoured by Schauble who has openly expressed hostility against it.
Our new bougainvillea
How is all this gloom reflected in lives of ordinary folk in Kavousi, Crete, you may well ask? Bear in mind firstly that Kavousi is a fairly traditional Greek village with an ageing population. Most people have some land on which they grow fruit and vegetables, largely for their own consumption. They are not self-sufficient but with their pensions can get by. However, their pensions have been cut by upwards of 25% and taxes have gone up too. Everything in the shops including food has gone up in price. Belts are being tightened and there is less money around but here in Kavousi at least, it does not seem that folk are starving or losing their houses.
Contrast this situation with Athens and other large cities and there is a stark contrast however, assuming that press reports can be believed. Here there have been huge increases in unemployment and resultant hardship but we have no direct experience of this except to see on TV the crates of fruit and veg being sent to the Capital from generous farmers in Crete. OK this is probably surplus produce but it would not be going unless it were needed.
Greece has largely disappeared as a news item on foreign TV screens because it is no longer news. The German and French banks have been saved, largely at a cost to the Greek National debt and so the richer countries of Northern Europe have lost interest. Those responsible at the IMF have been promoted or have moved on but none of this means that the problem for Greece has been solved. It has not!
Don’t let anyone tell you that the European capitalists have done anything good for Greece. They have not. The country has literally been raped and with the forced privatisations is now being effectively pillaged in a blatant exhibition of mainly German economic imperialism. Perhaps the worst example of this that I read about somewhere, is the case of the Greek State Oil Company which apparently the Germans are trying to get their hands on. As yet unproven reserves of oil and gas have been identified under the Aegean which if reports are correct, would more than clear the Greek debt. Such assets are held by the State Oil Company and Schauble and his chums are apparently trying to buy it for a song as part of the privatisation process! How true this is, I don’t know but based on the last eight years, anything is believable of these people.
On a lighter note, the sun continues to shine, the sea is warm, the food delicious and the wine tasty. The Greeks as always, argue good-naturedly with one another, are interested in the wider world and drive erratically. Oh and the beer is cold! We love it.