In a country where its Constitutions guarantee public sector workers jobs for life, Greece public sector workers are now on the streets protesting violently against a new wave of austerity measures which involve pay cuts and retrenchment in the public sector as demanded by international lenders in exchange for bailout funds to avoid a default.
Greece has been in a recession since the last global financial crisis of 2008 and is experiencing record high unemployment.
But what were the causes of the crisis?
Greece Economy
Greece is the 32nd largest in the world by nominal gross domestic product (GDP) and the 37th largest at purchasing power parity (PPP), according to data by the World Bank for the year 2010. Per capita, it is ranked 24th by nominal GDP and 23rd at PPP according to the 2009 data.
Greece is a developed country and a member of the European Union, the euro-zone, the OECD, the World Trade Organization and the Black Sea Economic Cooperation Organization. With a high standard of living and “very high” Human Development Index, ranking 22nd in the world in 2010 and 22nd on The Economist’s 2005 worldwide quality-of-life index, GDP per capita in purchasing power standards stood at 94% of the EU average in 2008 according to Eurostat data.
The service sector contributes 78.8% of GDP, industry 17.9%, and agriculture 3.3%. The public sector accounts for about 40% of total economic output. Greece is the 31st most globalized country in the world and is classified as a high-income economy.
Greece’s main industries are tourism, shipping, industrial products, food and tobacco processing, textiles, chemicals, metal products, mining and petroleum. Greece’s GDP growth has also, as an average, since the early 1990s been higher than the EU average. However, the Greek economy also faces significant problems, including rapidly rising unemployment levels, an inefficient public sector bureaucracy, tax evasion, corruption and low global competitiveness.
Greece has the EU’s lowest Corruption Perceptions Index, Index of Economic Freedom and Global Competitiveness Index, ranking 78th, 88th and 90th in the world respectively. Corruption, together with the associated issue of poor standards of tax collection, is widely regarded as both a key cause of the current troubles in the economy and a key hurdle in terms of overcoming the country’s debt problem.
After 15 consecutive years of economic growth, Greece went into recession in 2008 during the global financial crisis.
By the end of 2009, the Greek economy, basing on revised data on 15 November 2010 in part due to reclassification of expenses, faced the highest budget deficit and government debt to GDP ratios in the EU. The 2009 budget deficit stood at 15.4% of GDP. This and rising debt levels (127% of GDP in 2009) led to rising borrowing costs, resulting in a severe economic crisis. Greece was accused of trying to cover up the extent of its massive budget deficit in the wake of the global financial crisis. This has resulted from the massive revision of the 2009 budget deficit forecast by the new Socialist government elected in October 2009, from “6–8%”, which was estimated by the previous government, to 12.7% and later revised to 15.4%.
The Greek labor force, which total approximately 5 million, works the second highest number of hours per year on average among OECD countries, after South Korea. The Groningen Growth & Development Centre has published a poll revealing that between 1995 and 2005, Greece was the country whose workers worked the most hours/year among European nations; Greeks worked an average of 1,900 hours per year, followed by Spaniards with an average of 1,800 hours per year.
As a result of the on-going economic crisis, industrial production in the country went down by 8% between March 2010 and March 2011. One of the sectors hardest hit has been the garment industry, a traditional mainstay of the economy, while the volume of building activity saw a reduction of 73.1% between January 2010 and January 2011.Additionally, the turnover in retail sales saw a decline of 9% between February 2010 and February 2011.
Between 2008 and 2011 unemployment skyrocketed, from a generational low of 7.2% in the second and third quarters of 2008 to a high of 16.6% in May 2011, leaving more than 800,000 unemployed. In the final quarter of 2010, youth unemployment reached 36.1%.
Andrew Michael Teo 