The last 100 days of the Greek crisis

By Thimios Tzallas
3 April 2018
Greece Greece
As Greece leaves the bailout behind, could a moderate alliance provide hope for the youth still struggling for economic independence
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On June 21 Greece will formally leave the financial crisis behind, after some ten years, as the bailout programmes come to an end. Since 2010, Greece has received €320bn from European institutions and the IMF, as well as a debt haircut in 2012 amounting to €100bn. The Greek case was widely publicised internationally, not so much for the unprecedented levels of financial assistance involved, but as a case-study of mismanaged public finances that combined in a spectacularly depressing way with the mechanics of a clientelist state and extensive corruption to create catastrophe.

On the islands of Zakynthos and Chios hundreds of people collected life-long blindness benefits, though they were not blind. Workers in the public transport organisation were entitled to a €420 bonus for merely washing their hands. Those in the state telecommunications organisation received a monthly bonus of €690 for warming up their cars – in a country where the annual average temperature in the capital is a balmy 18.5°C

As is often the case, the brief snippets of information that reached us from this corner of south-eastern Europe were just fragments, lacking nuance and telling only part of a much longer and more complex story.

Greece is a state that was almost compulsively driven to emulate the model developed by the advanced countries in northern Europe. Its accession to the European Economic Community in 1981 as its tenth member, and its participation in the eurozone as of 2002, were not the logical next steps in the evolution of Greek institutions. In 1981, less than a decade had elapsed since democracy was restored to the country following the regime of the colonels (1967-1974) and in 2002, Greece adopted the euro after experiencing a very problematic 20-year financial period. The country aspired to the model of a modern European state and the European institutions, for their part, recognised these ambitions and the dynamic they implied.

In the Greek case we see the structural problems that many modern western societies face, but played out on a massive scale. The European baby boomer generation enjoyed pay, pensions and access to the housing market that younger generations can hardly dream of. An aging population and the pressures of the financial crises challenged welfare systems across Europe, but the situation in Greece is particularly acute. With a small number of working people to pick up the costs of the welfare system (the ratio of working people to pensioners currently stands at 1.27 to 1), Greece’s pension system has been notoriously difficult to handle, and half of Greek households currently live on pensions.

The weakness of the private sector and the clientelist nature of the public sector also made the Greek case particularly explosive. The deficits of the Greek social insurance system accounted for an 84% increase in public debt between 2000 and 2009, rising to a 405% increase during the crisis. Among EU member states, Greece has the second highest percentage of people aged over 85, and the third highest of those aged over 65. The situation deteriorated further during the crisis. In the last five years, the country has experienced a major brain drain as some half a million people emigrated abroad, many of whom are highly qualified and 65% of whom are aged 15 to 44.

The political handling of the pressures wrought upon the Greek economy by these demographic issues, was disastrous. The state is not merely struggling to fulfil its social insurance obligations, particularly towards those aged over 65. It also hands out €7bn annually in pensions to people below the age of 65 and, in 2015, one in three public servants received a pension while being under the age of 55.

This demographic issue has grown alongside extremely high levels of unemployment, which reached 27% in 2014. Out of these 1.3m people out of work, only 158,000 received unemployment benefits – and even then only for six or seven months. It is hard to believe that such evidence of the Greek state’s inability to provide basic assistance to large swathes of its population hasn’t fueled a massive rise in social unrest. But it hasn’t. The pensions of those aged 55 to 70 operate as an unofficial family income, often supporting the children and grandchildren living at home in multi-generational households.

The issue of subsidies for the unemployed is not a major part of the public discourse in Greece, at least not to the extent that increased in VAT or the recently instituted, and widely loathed, property tax are discussed. That discourse is dominated by the interests and priorities of those that have already ‘made it’, such as entrepreneurs, pensioners and homeowners. As is the case elsewhere in Europe, the young (those aged 18 to 25) are not the generation the political class seek to prioritise. But they are the generation that has been hit hardest by the crisis and are emigrating in droves. In 2012 youth unemployment reached 55%, more than twice the EU average of 27% and almost three times that of the US, with an equivalent rate of 18.6%.

One could argue that, in a distorted manner, the Greek welfare state is addressing past injustices, subsiding older generations who can in turn help their young family members in need. Here, however, we touch on another significant Greek peculiarity – with roots that run much deeper than the insanely high benefits or the ridiculous pension age. At the core of the crisis lies the role of the Greek family and the difficulty young Greeks face in emancipating themselves.

The Greek state was not created in a vacuum, but by Greek society. A forgiving attitude towards illegality, generous benefits, and jobs obtained through family connections and graft have rendered the public sector an extension of family networks. The economy was organised around extensive, close families that regarded the state as a competitive field for obtaining privileges rather than a neutral set of institutions designed for the mutual benefit of everyone in society. For young Greeks the labour market was traditionally identified with the state and, most importantly, with the political access their parents enjoyed.

On June 21, Greece will be liberated from the guardianship of its creditors, but the emancipation of the generation hardest hit by the crisis will take much, much longer. Many underlying problems that led to this generational inequality have yet to be addressed and it is yet unclear whether any political party – or combination of parties – will have the political courage to make the tough decisions needed to defend the interest of young Greeks, as well as old.

After several years of crisis, a unique political opportunity has arisen. SYRIZA has developed a more realistic outlook, while New Democracy is led by Kyriakos Mitsotakis, a moderate who is able to converse with the reformers in PASOK and Potami, the two centre-left parties merging to form Movement of Change. Everyone agrees that the country needs a fairer welfare system based on emancipating the new generation, rather than perpetuating old inequalities, and the electorate would likely approve such a consensus by progressive forces. Recent polling indicated a 12 point lead for New Democracy, and less than a quarter of Greeks agree that increasing pension payments is the right way to pursue economic recovery. With the next general election to be held no later than October 2019, progressives will be watching closely to see whether such promises are fulfilled.


Image credit: dimitris_k /