On September 10, at 8 p.m., Greek Prime Minister Kyriakos Mitsotakis (New Democracy, ND, conservative proper) delivered the opening speech on the Thessaloniki Worldwide Honest. In Greece, it’s a custom that the chief govt speaks at this nice financial rally which additionally marks the return to politics.
However this yr, the prospects drawn up is not going to have been validated beforehand by Brussels. On August 20, Greece got here out of the European Fee’s enhanced financial surveillance. It was “a historic day for Greece and all Greeks” after a “twelve-year cycle that has made residents undergo”, then greeted the Prime Minister on tv. Portray the image of a rising nation, he mentioned that “Greece at this time is totally different”.
Troika and austerity
You need to return in time to know this satisfaction. On the finish of 2009, Prime Minister Giorgos Papandreou, chief of Pasok (social democrat) revealed the truth of the Greek public accounts inherited from his predecessor Kostas Karamanlis (ND). The general public deficit (12.7% of GDP) and the general public debt (133% of GDP) are outdoors the European convergence standards. The unbridled banking hypothesis that’s sweeping the nation is pushing it to the brink of default.
Athens appeals to a few establishments, the Worldwide Financial Fund (IMF), the European Central Financial institution (ECB) and the European Fee, and indicators with this troika a memorandum, a mortgage settlement in trade for reforms to be utilized. Two extra will comply with. In whole, three rescue plans of 289 billion euros have been put in place by the collectors.
To enhance public funds, they imposed an entire collection of austerity measures: discount in pensions, wages and social minima, tax will increase, hiring freezes within the public sector, discount within the budgets of the administration, hospitals and training, privatizations, and so on. In 2012, the minimal wage is ready, for a full-rate job, at 486 euros for these below 25 and 520 euros for others. Collective agreements are abolished. The port of Piraeus is granted to the Chinese language large Cosco, the Greek railway is purchased by the general public firm Ferrovie dello Stato Italiane…
“The memoranda have introduced personal governance into the state”recounts Filippa Chatzistavrou, assistant professor of political science on the College of Athens. “Greece has turn out to be the prototype of personal administration of public property. Worse, it continues to cede main ports, shipyards, water, and so on., it not has management over its pure sources. »
A brutal pension reform
Removed from recovering, the financial system is collapsing: between 2009 and 2015, GDP fell by 1 / 4, from 237.5 billion euros to 176 billion euros, and till 2017, it continued to fall (174.4 billion euros)!
In consequence, the productive base, already weak earlier than the disaster, is crumbling. Unemployment exploded to achieve 27% in 2013. Poverty impacts a 3rd of the inhabitants. On the finish of the day, the Greeks multiplied the demonstrations and elected, in January 2015, the Syriza social gathering, from the unconventional left and led by Alexis Tsipras.
However the EU, notably German Finance Minister Wolfgang Schäuble, doesn’t intend to offer in to its rhetoric rejecting austerity. The federal government is urged to signal, in flip, a memorandum in 2015, for a interval of three years. Athens should decide to attaining a main finances surplus (excluding debt curiosity compensation) of three.5% of GDP till 2022, then 2.2% till 2060. Collectors are asking it specifically to implement a brutal pension reform. The quantity of the minimal pension is now set at 380 euros.
“The target was to scale back the load of pensions in GDP which, in response to the OECD, would have weighed almost 20% in 2040”, recollects Savas Robolis, professor emeritus on the Panteion College of Athens and specialist in Social Safety. After reform, this ratio will likely be lower than 15% within the coming many years, in response to Eurostat calculations. This goal is achieved at the price of an impoverishment of Greek pensioners.
After 2018, Greece stays below enhanced Fee surveillance. Though the federal government of Alexis Tsipras reintroduces collective agreements and raises the Smic to 650 euros, it loses the regional and European elections of 2019. Mockingly, a number of weeks later in July, Kyriakos Mitsotakis wins the legislative elections by promising to use, on the financial degree, a liberal programme, which absolutely corresponds to the insurance policies desired by Brussels.
After having reimbursed final April, with a number of months upfront, the maturities of debt to the IMF, Athens has now come out of the improved surveillance of the European Fee.
“The Greek authorities are clearly decided to proceed the reforms”observes Chris Allen, Resident Financial Adviser within the Fee’s Directorate-Common for Financial and Monetary Affairs (DG ECFIN). “We’ll now comply with them as a part of the usual post-programme surveillance which is already utilized to different international locations resembling Portugal and Cyprus. »
Particularly since Greece should proceed to repay loans contracted below the memoranda till 2059.
“In actuality, this exit from enhanced surveillance is solely normative. The burden of the Greek debt stays extraordinarily essential, whether or not it’s public debt or personal debt”emphasizes Filippa Chatzistavrou.
The numbers are certainly staggering. Public debt exploded: it peaked at 206.3% of GDP in 2020 earlier than falling again to 193.3% in 2021. Personal debt additionally climbed to 200% of GDP, from 174% in 2019. The Public deficit first peaked in 2013, at 13.4%, earlier than steadily bettering till 2019 when Greece posted a surplus of 1.1%.
However the pandemic has revealed the fragility of its financial system. It returned to a deficit of seven.3% in 2020 and a pair of.9% in 2021. Its GDP stays greater than 15% decrease than that of 2008, closely depending on tourism, which represents 1 / 4 of it.
Regardless of the whole lot, the European Fee sees, “All in all, purpose to be fairly optimistic about future progress prospects, now that the affect of earlier reforms is starting to be felt, advances Chris Allen. The financial property of the nation usually are not restricted to tourism, logistics and agriculture. Greece additionally has a extremely expert workforce in IT, engineering and drugs, and an more and more sturdy start-up tradition. »
Alongside the identical strains, the Chief Economist of the Greek Prime Minister, Alexis Patelis, is pleased that between 2010 and 2022, exports have doubled, rising from 20% to 41% of GDP. He additionally factors out that unemployment is falling, now standing at 11.4%.
Nonetheless, with galloping inflation, Greece’s structural weaknesses stand out. The value improve was one of many highest within the EU. In line with the calculations of Professor Savas Robolis, from 1er January to August 31, the typical inflation fee is 8.1%. It even peaked at 12.1% in June, in response to Elstat.
These developments fear this tutorial who factors “the discount within the buying energy of family and enterprise earnings, particularly small and medium-sized ones, with a big improve in manufacturing prices”whereas these classes have suffered from austerity insurance policies.
Nevertheless, he continues, the rise within the minimal wage that the federal government has simply handed doesn’t completely compensate for the rise in costs. For him, “this impoverishment of the bottom earnings households weakens social cohesion”.