Greek Political Economy in the Post-crisis Period 2010–2019

Krugman argues that the Greek depression “has devastated Greece just about as much as defeat in total war devastated imperial Germany” (Krugman 2015). Moreover, it is worth mentioning the paper by Sklias et al. (2018) titled: “Was the Great Depression of 1929 harsher than the Greek Depression?”, which makes a comparative evaluation of the consequences of the Great Depression of 1929 on the US economy and the Greek fiscal crisis on the Greek economy, studying how each crisis affected the evolution of key macroeconomic aggregates of the corresponding country, such as overall income loss, GDP, debt, deficit, unemployment, stock exchange index, duration of the recession, and the time required for the recovery of the aforementioned macroeconomic indicators. The study concludes that the recent Greek depression has been harsher than the Great Depression of 1929.

There is no doubt that, during the pre-accession stage, there was a coincidence of opinion regarding the expected benefits (Kotios, 2000; De Graw 2000; Kotios and Pavlidis 2012: 203); however, the debate that took place in Greece was dominated by arguments in favour of EMU membership, while the challenges that go together with potential opportunities are almost totally disregarded (Thygessen 1990; Kotios 1997; 2000; Kotios and Pavlidis 2012: 204–205). Despite efforts to exaggerate the benefits, there were sober scientific voices, both in Greece, and abroad, who pointed out that Greece’s accession to the EMU was also a major challenge, which carried serious risks (Thygessen 1990; Kotios 1997, 2000; Kotios and Pavlidis 2012: 204–205). The emergence and intensity of these challenges had to do both with the condition of the Greek economy at the time of accession [both its fiscal condition (public debt and budget deficit) and its condition as regards competitiveness], which is closely linked to its ability to cope with the demands of the new competitive environment of the enlarged market (Feldstein 1998; Kotios and Pavlidis 2012: 205). Therefore, objective researchers stressed that the final outcome would be, to a great extent, determined by the national economic policies implemented in regard to both the above issues, i.e.: a) proper fiscal management, and b) the improvement of competitiveness through the development and differentiation of the Greek economy’s productive base. It is a fact that Greece’s EMU membership did not, in its own right, ensure that the above issues were efficiently dealt with, but instead aggravated any pre-existing problems (Kotios and Pavlidis 2012). This is also due to the weaknesses of the Economic Governance of the EMU (for more information on this, see: Hazakis 2014; Kotios et al. 2012; Kotios and Pavlidis 2012).

This does not imply complacency as regards the effort to rationalise public spending during the first sub-period.

The fact that the growth of incomes in Greece outpaced labour productivity growth acted as a mechanism that led to unsustainable economic growth.

More detailed interpretations of the long-term development of growth rates and investigations of the causal relationships can be found in many studies (Christodoulakis 2009; Sklias et al. 2017; Dimeli 2010; Bosworth and Kollintzas 2002; Stournaras and Albani 2008, etc.).

It should also be noted that Greece’s growth rates exceeded the average for the 16 member-states of the eurozone in most of the years under review, exceeding even the growth rates of Germany and France, as seen by the comparative analysis of the macroeconomic performance of EMU countries. (Eurostat in Roukanas 2011: 227).

This argument also takes into account the fact that Portugal, Ireland, Italy, and Spain, which had equally large public debt or deficit to GDP ratios, saw their macroeconomic position deteriorate as a result of the economic developments of 2007/08.

Primary surpluses are not an end in themselves in an economy; on the contrary, the existence of a manageable deficit for investment activities and, by extension, the managed maintenance of moderate debt levels is necessary for financing sustainable economic growth in deficit countries and, consequently, has a positive effect on the sustainable reduction of the debt to GDP ratio (Sidiropoulos 2009; Krugman 2011; Kazakos et al. 2016: 51; Wolfson 1994: 221; Gelos et al. 2004: 4). However, the occrrence of the problem was due to the high debt level (Cecchetti et al. 2011) and the way this debt was utilised (Cohn 2009).

This is attributed to the “insufficient” loan haircut.

At this point we will take into account the size of the labour force, given that the unemployment rate and the number of the employed are examined in relation to the total labour force.

The same conclusion is drawn by a SEV study on Greece’s labour force, which, in particular, finds that: “a large part of the decrease in the unemployment rate is linked with the negative change in the size of the labour force” (SEV 2018:3).

Pursuant to Law 4144/2013 and Joint Ministerial Decision 27,397/122/19/08/2013.

This inconsistency in statistical measurements occurs because new hiring forms do not include the question whether a person had been working legally or illegally under their previous work status, while there are almost no truthful responses to this specific question as part of the Manpower Survey regarding new jobs.

The same conclusion is drawn from the study of the data concerning the monthly earnings of new jobs (SEV 2018).

See the study by Sklias et al. (2017), on the quality and sustainability of the Greek economy’s growth during the boom period.

The same conclusion is reached by the paper by Alderman et al. (2015), titled “Is Greece Worse Off Than the U.S. During the Great Depression?”.

According to a study by the Ministry of Education, titled “Higher Education Strategy in Greece, 2016–2020”, expenditure per tertiary education student stands at 3571 euros per annum, without factoring in the cost incurred in other educational levels, which is also estimated in a study by S. Papaefthimiou at 1347 euros per annum per primary and secondary education student (Lakasas 2018).