Greece still the EU poster child for economic and social chaos

Despite the current concerns in the economy around Brexit and growing industrial unrest, things could be worse. Much worse.

Greece still the EU poster child for economic and social chaos

If the social and economic life in Ireland feels uncertain at times in 2017, our small island is far better off than another of our EU neighbours further south.

Having endured eight years of a grinding economic crisis, Greece continues its decline into a deeper financial abyss that shows few real signs of ending anytime soon.

Unlike Ireland, where the presence of an established multinational sector and a solid export base helped pull us slowly out of the downturn, Greece remains an ongoing EU crisis showing little signs of improving as the harsh medicine of reform refuses to revive a dangerously ill patient.

Having declined by over 25%, the Greek economy will grow by 2.7% in 2017, according to the IMF — a figure that, for many Greeks, bears little connection to reality.

Unemployment stands around 23%, rising to 44% among the 15-24 demographic. It is estimated that over 20% of the population cannot afford basic services like heating, while up to 50% of households rely on pensions to pay their bills — despite these benefits having sustained cuts of up to 40%.

Moved off the headlines and overshadowed by Brexit negotiations, uncertainty around the new US administration, upcoming EU elections and the growing threat of global terrorism, Greece’s economic crisis has continued its descent into a financial nightmare of insolvency and austerity.

The country’s debt-smothered economy contracted by 1.2% at the end of 2016, confirming it had remained in recession for the eighth straight year, according to national statistics agency Elstat.

The final quarter of last year recorded a 0.4% drop — the worst quarter since the latter half of 2015 when Greece came close to default.

Elstat also said GDP fell 1.1% in the fourth quarter in 2016 against the same quarter in the previous year.

The picture is even gloomier when focused on Greek entrepreneurship, with 244,712 businesses having closed down between 2008 and 2015, resulting in job losses of 842,670.

The estimated loss to the overall economy was over €30bn. Between 2014 and 2015 a total 16,077 businesses closed down, with 45,000 jobs lost.

Greek banks are estimated to have lost up to €4bn in deposits since the start of the year due to fears that a return of capital controls banning cash withdrawals over set limits is imminent.

Bavarian finance minister Markus Soeder, said: “Greece is unlikely to survive in the eurozone over the long term.”

German opposition politician Christian Lindner said Greece should abandon the euro and be offered debt relief.

Eurozone creditors, led by Germany, are against further debt relief, and are calling instead for further spending cuts if deficit targets are not met.

With elections looming in a number of key EU countries, the issue of debt relief is deeply unpopular with electorates and anti-establishment political parties.

Inevitably, the black economy has thrived as the country grapples with ever- tightening austerity.

A survey by Greece’s diaNEOsis research group estimated that almost a quarter of all economic activity in Greece is undeclared.

Encompassing a wide swathe of professions and trades, including electricians, hairdressers, plumbers, taxi drivers, health professionals and freelancers, the illicit sector is worth €40bn, and ranks first in the world at 21.5% of GDP, according to a study by the Institute for Applied Economic Research at the University of Tubingen.

Italy and Spain follow with shadow economies of 19.8% and 17.2% of GDP, while the US is at the bottom of the chart with 5.4%.

Even if Greece meets all of its reform and budget cut targets — an unlikely possibility — its debt profile would continue to worsen without further financial relief.

The country’s debt as a percentage of GDP is expected to recede by 10% from its current level of 180% by 2020 but then spiral to the dizzying heights of 275% by 2060 as a result of the cost of servicing it.

With the current governing coalition controlling 153 of the 300 parliament seats, the possibility of an election is an ever-present reality.

Yet, any new government, regardless of their promises, will find themselves caught in the same unending web of economic blind alleys.

With a population punch- drunk from austerity across all levels of society, it comes as little surprise that a majority of Greeks have turned against the euro.

A recent survey by Alco Polling found that 53% felt the euro was ‘wrong’ for the country, with a third in favour of a return to the drachma.

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