Greece’s economic implosion has been the subject of intense debate in the international media, as well as among politicians, academics, researchers, the financial institutions community, and technocrats.
And yet, many of the arguments heard, particularly in the press, are filled with stereotypes which muddy the waters and provide little helpful analysis of what has really happened in the country.
One of the most common narratives is that the Greeks “live[d] beyond their means”. The numbers, however, tell a different story. The truth is that Greeks as a whole – meaning the state, the people, the financial institutions and the private corporations – are not as indebted as the stereotype suggests.
A detailed report by McKinsey, a global consulting firm, showed that, in 2009, when the sovereign bonds crisis broke, Greek total debt (public and private) stood at 230 per cent of Gross Domestic Product (GDP). That figure is half of what it was in the UK (466 per cent), and significantly less than it was in Germany (285 per cent) or France (323 per cent).
Greece has also fared much better than the UK, France, Belgium, Portugal, and Ireland, when it comes to total external debt.
Greece’s low total debt levels, at least at the onset of the crisis, can be explained by the fact that private and corporate debt in the country is small by Western standards. Greek banks were also careful to avoid exposure in the US, Irish and Spanish real estate bubbles, as well as the subprime loans market.
Who are you calling ‘lazy’?
Another favourite media stereotype is of the lazy, inefficient, eternally-sun-bathing Greek. Again, reliable data shows that this could not be further from the truth.
According to the latest European Commission “Quarterly Review on Employment” published in September, “Greece and Austria recorded the highest number of hours worked by full-time employed persons in the first quarter of 2012, while Finland, Italy and Ireland recorded the lowest number”.
Moreover, according to 2011 OECD data, the average annual hours actually worked per worker in Greece, were 2,032, compared to 1,413 in Germany and 1,776 hours on average in the developed world.
It therefore appears that while an ever-increasing number of columnists, populist politicians and tabloid journalists claim to be experts on Greece, very few of them bother to look at the actual data.
Take the persistent cliché that Greece is an “empty barrel”, for example. The Greek border – or so the narrative goes – is the earthly equivalent of what astronomers call “event horizon”: as soon as European taxpayers’ money gets in, it disappears into the black hole of Greek profligacy.
But such caricatures cannot withstand serious critique. Between 2010 and 2012, Greek public deficit dropped from 15.6 per cent of GDP to 6.6 per cent, and primary deficit (excluding interest payments) from 10.5 per cent to approximately 1.4 per cent of GDP. These figures are almost double than the ones achieved by Portugal, which is generally considered a “well performing country under adjustment program”.
Given the fact that the aforementioned correction was carried out in an arduous international macroeconomic environment and under conditions of steep and persistent recession, it constitutes an unprecedented performance by international standards. The sum total of austerity measures required to achieve this adjustment exceeded €49 billion, or 22.6 per cent of Greece’s GDP, in just two years.
Progress in structural reforms has been slower, but still impressive: for example, the country earned the first place on responsiveness to OECD growth recommendations in its Going for Growth report in March 2012.
Moreover, according to the World Bank’s Doing Business Report, Greece will improve its global ranking by a staggering 22 places in 2013, when it comes to the legal framework for doing business.
Social impact
This violent adjustment took its toll on Greek society. Unemployment recently hit 25.1 per cent in the general population, and it has exceeded 54 per cent among the youth. Whoever loses their job in Greece today, has virtually no prospect of finding another one in the foreseeable future, since Greece records the highest percentage of long term unemployed in the EU.
Six out of ten Greek companies operated on losses in 2012 (ICAP Databank), house prices have plummeted by up to 60 per cent and more than 18 per cent of mortgage-holders have now defaulted.
Accumulated GDP contraction is projected to exceed 25 per cent between the end of 2008 and the end of 2012.
Suicides have increased by 22 per cent between 2010 and 2012.
Greek police data show a significant increase across the spectrum of violent crimes and the number of homeless people has also increased by 25 per cent over the last two years. Moreover, an ever-increasing number of insurance companies are refusing to insure exports to Greece.
Oil and gas suppliers require cash down payments to provide fuel to Greece. Virtually all private electricity suppliers have gone bankrupt and the state electricity provider is facing an unprecedented cash crunch due to the inability of households to pay their bills. The same is true for the state-owned gas supplier.
Tens of thousands of apartment blocs were without heating last winter, because the owners of their flats were unable to pay service charges. Hospitals lack even trivial supplies, and prior to the elections in June, Greece was even struggling to import medicines. The Greek state owes €8 billion to its suppliers who, in turn, are unable to pay their own bills and employees.
Greek banks have suffered huge losses, due to debt restructuring, and are essentially unable to provide credit to the economy, which is on the brink of a depression.
In short, all of the little things that place a society in the developed world – being able to find fuel for your car in the local petrol station, adequate healthcare, central heating, the sense of reasonable security, a job – are all under threat in Greece, dissolving the myth that Greeks are enjoying a “free ride” with European taxpayers’ money.
All this is not to suggest that Greece’s problems – public finance mismanagement, over-reliance on public and private consumption, lack of medium and large export-oriented enterprises, extremely high percentage of self-employed professionals, low competitiveness, tax evasion, and unbelievably weak administrative capacity – are negligible.
But the borderline racist stereotypes that one reads about in the tabloid press, and hears repeated by German and Dutch politicians, contributes nothing to the debate, or to the efforts to overcome these problems.
On the contrary, these comments undermine the legitimacy of even sensible EU policies in Greece and fuel far-right, anti-European extremism in the country.
