The Greek
government's debt became unmanageable after autumn 2008, but the EU didn’t
respond until over a year and a half later. (source)
In the
post-national Greece that developed after 1974, the clear winners were the
middle class. Thanks to the strong
purchasing power of other European currencies, and later the Euro, they could
travel abroad and buy imported goods at little expense. Domestic goods and
services likewise remained cheap thanks to outsourcing of jobs to lower-wage
countries and insourcing of lower-priced labor for agriculture, shipping,
domestic help, and construction.
The clear
losers were the working class. Not only did they have to scramble for fewer and
fewer jobs—those that could not be relocated to lower-wage countries— but they
also faced growing competition from legal and illegal immigrants who would work
for half the going market rate. This two-way movement of jobs and workers curbed
the rise in wages of low-income earners and increased the rate of permanent
“structural” unemployment.
And it has been the least skilled who bear the brunt of the effects of
competition from clandestine immigrants on the job market. […]. In the functioning
of the Greek economy, peripheral or marginal workers (women, unskilled young
people, Roma, seasonal workers, etc.), who play a key role in the
functioning of the parallel economy, have seen their status undermined by the
mass entry of clandestine immigrants who offer their labor for even less. But
this is also true for other categories of wage-earners such as construction
workers, who are nonetheless among the most unionized and best protected of all
workers. In this sector, clandestine foreign workers make up over 50% of the
total workforce, and their wages reportedly do not even reach half the legal
minimum.
The rise of unemployment in recent years more greatly affects unskilled
workers whose traditional sectors of employment have today become the main ones
where clandestine workers are most heavily concentrated.
(Pteroudis, 1996, p. 178)
Native Greek workers thus became steadily impoverished, at first in
comparison to other Greeks and, later, in absolute terms.
Responses of the Greek government
The Greek government was aware of the plight of the working poor and
responded by greatly increasing social assistance, pensions, and public-sector employment.
While this response provided displaced workers with more secure incomes, it also
increased their dependence on the State. A kind of clientelism developed where
recipients of government benefits supported the party in power as long as it
maintained or increased their benefits. One example was the lowering of the
retirement age to 55 for men and 50 for women in the case of arduous occupations. The definiton of "arduous" was then gradually broadened to cover even waiters and hairdressers. Early retirement became a way
to create loyal voting blocs and also to thin the ranks of older
unemployed people, thus making the unemployment rate seem lower than it really
was.
The government did try to attack the root problem, i.e., the outsourcing
of jobs to lower-wage countries and the insourcing of lower-priced labor. This
two-way movement, however, benefited the middle class by providing cheaper
goods and services, and it was this class that influenced public policy the
most, either directly as politicians or civil servants or indirectly through the
media and popular culture. For the middle class, it was too easy to portray the
pauperized working class as losers in the new global economy.
As a result, protectionist measures were half-hearted. There was
certainly an awareness that Greece was drifting into an uncompetitive dead
zone: unable to compete against lower-wage countries for manufacturing jobs and
also unable to compete against higher-wage countries for high-tech jobs:
The Greek sectoral structure consists
mainly in low knowledge sectors. Many such sectors have lost their comparative
advantage due both to the low labour costs of some less developed countries and
to the high value added business strategies aiming at niche markets in more
developed countries (Ministry of Development, 1997, p. 7)
For the Greek government, the solution was to specialize in “high
technology and knowledge intensive sectors.” Such an industrial policy would
evidently favor workers with high intellectual capacity, i.e., the upper third
of the IQ distribution. But what about the other two-thirds? To bring as many people as possible into the
knowledge economy, there would be an expansion of technical education and “a
policy to increase the mobility and to improve the quality of the labour
supply” (Ministry of Development, 1997, p. 14).
This industrial policy was never really carried out. Part of the problem
was lack of money. The main problem, however, was wishful thinking. Few of the
structural unemployed were suitable for retraining as knowledge workers. It was
even more naïve to see immigration as a way to meet this need. Finally, more should
have been done to identify specific market niches where Greece could compete
globally. It simply wasn’t enough to point to the knowledge economy as the wave
of the future.
The government might have kept things from getting worse by halting the
inflow of lower-wage migrants. It did make some attempts, which generally took
three forms: 1) legalizing the existing illegal immigrants; 2) taking measures
to prevent further illegal immigration; and 3) penalizing employers who hire
illegal immigrants (Pteroudis, 1996, p. 179). Of the three, the first one was the
easiest to put into practice. But it also made the other two even harder to
implement. By raising hopes that future rounds of legalization would be in
store, it encouraged even more immigrants to come. Employers responded
similarly, seeing illegal status as only a temporary obstacle. Measures against
employers were also difficult because lower-level inspectors could be bribed
and higher-level functionaries pressured to water down enforcement.
The debt crisis
As Greece entered the new millennium, the pauperization of native Greek
workers remained a worsening problem. More and more money had to be found to
keep them at a First World level. For a time, this seemed possible, especially
during the boom years of 2000
to 2007 when the economy was growing at an annual rate of 4.2% —one of the
highest rates in the Euro zone.
Yet even
during those boom years, with money pouring into the public coffers, the
government not only continued to run deficits but also ran them at levels
higher than what the EU officially allowed.
At the beginning of 2010, it was discovered that Greece had paid Goldman
Sachs and other banks hundreds of millions of dollars in fees since 2001, for
arranging transactions that hid the actual level of borrowing. The purpose of
these deals made by several successive Greek governments, was to enable them to
continue spending, while hiding the actual deficit from the EU.
[…] the revised statistics revealed that Greece at all years from
2000-2010 had exceeded the Euros stability criteria, with the yearly deficits
exceeding the recommended maximum limit at 3.0% of GDP, and also the debt level
clearly exceeding the recommended limit at 60% of GDP. (Wikipedia, 2012)
The boom ended in autumn 2008 as the subprime mortgage crisis spread to
Europe. Greece’s main industries of shipping and tourism were badly hit, and by
early 2010 the government was openly admitting that its debt level was no
longer sustainable. In April, rating agencies downgraded this debt to “junk
bond” status. In May, the EU finally responded by organizing a bailout loan
with the IMF in exchange for austerity measures.
Why did the EU take so long—over a year and a half—to respond? One
reason was that it had been repeatedly misinformed on the extent of the debt crisis. Another reason was the ongoing effort to
admit Turkey as a full EU member. Greece’s support was crucial, particularly
given the continuing Turkish occupation of northern Cyprus, and there was some
reluctance among EU leaders to come down too hard on the debt issue.
Greece at the crossroads
Today, Greece has two options. One is to remain in the EU, pay off its
huge debt, and accept a package of austerity measures. The other is to leave
the EU, cancel at least part of its debt, and let the value of its national
currency depreciate to bring imports and exports into balance.
For now, Greece will remain in the EU. There is a strong element of
national pride at stake here, and also a fear of the costs of moving back to a
national economy with its own currency. But the status quo will also be costly,
as seen in the measures of the latest austerity package (February 2012):
- 22% cut to the minimum wage from the
current €750 per month
- Holiday wage bonuses to be permanently
cancelled
- 150,000 jobs to be cut from the state
sector by 2015
- Pensions to be cut by €300 million in 2012
- Laws to be changed to make lay-offs easier
- Spending cuts to health and defense
- Industry sectors to be given the right to
negotiate lower wages
- Closed professions to be opened up to allow
for more competition, particularly in the health, tourism, and real estate
sectors
- Privatizations worth €15 billion by 2015,
including Greek gas companies. Over the medium term, the goal will be €50
billion (Wikipedia, 2012)
Staying in the EU is an option that
lacks even the virtue of stability. It will probably worsen the existing class conflict
in Greek society. To maintain their position of relative affluence, the
post-national middle class may openly abandon the native working class and
stigmatize them as bums who deserve to be replaced by hardworking immigrants.
In contrast, leaving the EU would shift
the costs from the working class to the middle class. By going back to the
drachma, and letting it devaluate, the country could stem the outflow of
foreign exchange by making imports more costly and exports cheaper. Less money
would be wasted on frivolous spending, especially trips abroad and imported
luxury items, and more spent on Greek-made goods, thus creating local
employment.
Rebuilding a national economy would
not be easy, but the main stumbling block is not the transitional costs,
however painful these costs may be. It’s the current post-national elite.
Leaving the EU would severely undermine their legitimacy … and their lifestyle.
References
Ministry of
Development. (1997). International competitiveness and a consensus-based
industrial strategy for Greece: The main points of consensus, Project “The
Future of Greek Industry”
http://www.cibam.jbs.cam.ac.uk/research/projects/futuregreekindustry/downloads/fgi003.pdf
Pteroudis,
E. (1996). Emigrations et immigrations en Grèce, évolutions récentes et
questions politiques, Revue européenne de migrations internationals, 12,
159-189 (Espagne, Portugal, Grèce, pays d'immigration).
http://www.persee.fr/web/revues/home/prescript/article/remi_0765-0752_1996_num_12_1_1503
Wikipedia
(2012). Greek government-debt crisis
http://en.wikipedia.org/wiki/Greek_government-debt_crisis