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Greek Crisis or the Burden of the New Atlas




Amid talks on proposed labour and pension reforms as prerequisites for a new bailout by its international creditors, Greece appears to be torn between three horses marching in separate directions to the sound of the ever growing cries of the people. The IMF, the German lead EU creditors, and finally the SYRIZA government appear oblivious to the plight of the Greek people, all, as the horses they appear to be leading, with their eyes firmly set on what they deem to be their desired outcomes.

To contextualize the most recent unfolding between Greece and its international creditors it is paramount to understand the gravity of the economic situation Greece finds itself in and the outlooks of the economy as a whole.

Punishment of Tantalus

At the present moment the total debt of the Greek state stands at approximately €326 billion or 170% of GDP, figures of noticeable proportions that, however, do not expose the full gravity of the situation. The month of July will carry with itself a €6bn repayment tranche that must be met in order for Greece to prevent a default. Alexis Tsipras and the Greek government appear ready to meet their obligations, drawing from the 3% budget surplus that the state was able to secure last year. However, the sustainability of the current debt repayment program is highly contingent on the continuation of the participation of the EU’s institutions. Certain figures, chief amongst them the German finance minister Wolfgang Schaeuble, are ardently pushing for the exit of Greece unto capital markets. The confidence of the German finance minister is based on the expectation that Greece would be able to sustain a 3.5% surplus of GDP on average in the next 16 years, an unprecedented occurrence in the domain of economics. In the long-run the situation appears highly unsustainable and hardly consistent with the radical expectations of some of the actors that are involved in the process. However, the Greek question consists of much more than the debt level the country faces but is rather a multi-dimensional crisis that has punctured into, not only the economy, but the very social structure.

The overall economy has proven highly susceptible to the debt crisis the state has underwent. Since 2008, the GDP per capita at Purchasing Power Parity (PPP), has decreased from 32,473 to 24,535, or by 24.4%. Unemployment remains constant at approximately 23%, while youth unemployment has increased to 48%. The severity of the current circumstance is further emphasised in the reappearance of negative trends best evidenced in the 1.2% contraction in GDP the economy underwent in the last quarter of 2016 and the IMF’s and Bank of Greece’s revision of the 2017 growth forecast from 2.7% to 1.5%. Number crunching, even though necessary, does not portray the depth of the situation, making an analysis of Greece’s key economic sectors essential for anyone that wishes to harbour a thorough understanding of the plight the Hellenes find themselves in.

Firstly, it is important to address the issue of the sustainability of the large budget surplus that has been achieved by the SYRIZA government in 2016. Apart from being achieved by politically unsustainable public spending cuts and increased taxes it has also been largely financed by the privatisation of key state assets that have allowed the government to raise large sums of money. The privatisation process has included a diverse asset portfolio comprised of infrastructure, State Owned Enterprises and land, particularly island properties. The most prolific privatisation achieved in 2016 has been that of the port of Piraeus, the largest port in the country, that has in total amounted to €1.5bn of which €350 million were paid for the ownership of state owned assets. Another important agreement has been the concession of 14 regional airports to FRAPORT, the German airport operator, for an upfront €1.234bn concession fee that will grant them the airports for a 40-year period. While other privatisation processes are rolling ahead, such as that of Thessaloniki Port or the 670 km. “Egnatia Odos” Motorway, it is increasingly difficult to see how the Greek state would be able to raise amounts even close to those seen in 2016.

The unsustainability of the budget surplus, both from political and objectively economic reasons, is only one of the structural issues Greece faces. The potential for of growth through supply side capacity increases is even less likely. Namely, since the financial crisis nearly half a million Greeks have left the country in search of better prospects elsewhere. In a recent report, published by the London School of Economics, most worrying is the fact that 75% of emigrants hold university degrees further emphasising the lack of capacity in the economy at present. Furthermore, while past large emigration waves have played distinct roles in advancing the Greek economy through remittances, that stimulated internal demand and investment, it appears that this newest wave of migrants holds little compassion for those left in their homeland, with 69% of those questioned responding that they neither receive nor send money.

In Search of the Golden Fleece

While the flight of human capital does represent a substantial threat to the long-term outlook of the Greek economy and the overall sustainability of the current social structure the performance of key industries represents a much more pressing concern. In this context it is best to begin from one of Greece’s traditional strengths, its merchant fleet. Due to its strategic geographic position, at the convergence of major trade routes between the Middle East and Europe, and the enviable prowess of trade magnates such as Aristotle Onassis, Greece has emerged as the global leader in trade shipping, holding 16.36% of global dead-weight tonnage. In the medium-run, however, the outlook of the entire industry remains ‘subject to downside risk’ as stated in a recent UNCTAD report, particularly to weak global demand and investment. In the Greek context the risks appear even more accentuated due to doubts regarding EU integration, high labor costs that make it more exposed to the already apparent market capacity over-supply.

A point of hope for Greece remains its tourism industry which has always represented one of the strong points of the economy and contributed large amounts to the overall economic performance. A report published by the WTTC has found that the direct contribution to GDP has increased from 5.5% in 2009 to 7% in 2015 to an estimated level of €12bn, with a constant positive trend since the low point seen in 2012. While the predictions for further development of the industry remain positive, projected to makeup 8% of GDP at 17bn in 2025, it is difficult to see tourism as the driving force of recovery. This is in many ways due to the low capital investment into the industry since the crisis, decreasing from €7bn in 2007 to just over €3bn in 2015. Furthermore, the high level of risk exposure of the sector makes high levels of investment highly unlikely in the future, mostly due to the potential of a new migrant crisis that may arise from the ever more tense relations between the EU and Turkey.

The importance of investment, both foreign and domestic, has in large part been downplayed in the assessment of the future economic performance of Greece. Since the financial crisis large amounts of cash deposits have been removed from Greek banks by private individuals and companies due to the perceived insolvency and instability of the banking sector. In recent months this has been accentuated by whispers coming from the government of potential capital controls. The months of January and February have seen the total removal of €2.7bn by households and businesses. Inward Foreign Direct Investment (FDI) has on the other hand been highly volatile recovering from the 2010 low point of €330m to €1.7bn in 2014 only to fall to €-289m in 2015, a highly worrying occurrence. The lack of a distinct and sustained capital investment within the economy makes structural recovery highly unlikely with Greece being unable to take advantage of a fast changing global economy ever more based around the internet and software production. This lagging has furthermore been enforced by flanking infrastructure, with Greece being ranked 46th according to UNCTAD’s E-commerce Index, below such countries as the Former Yugoslav Republic of Macedonia. Other major capital projects include oil and natural gas exploitation in the seas south of Crete, which however remain untouched due to low global market oil prices and the lack of risk-taking willingness of capital.

Labours Worthy of Heracles

Having taken a short glance at the perilous situation the Greek economy finds itself in and the sector by sector analysis of what the author deemed to represent the key aspects of the Greek economy, it is pertinent to attempt to find an Atlas to bear the blame on his shoulders. Witnessing the most recent rounds of negotiations has left little doubt that the SYRIZA government represents in its own part the biggest scourge that the Greek people could have brought upon themselves, combining a populist left-wing rhetoric, product of elections fear, and an accommodating smile for the EU finance ministers. The IMF has, in part, appeared to be the only institution interested in the long-term prospect of the Greek people, referring to the EU imposed budget surplus requirements as unsustainable and the need for debt relief as paramount, never, however, bringing into question its high interest tranches. To speak of the behavior of EU creditor at this moment appears obsolete, they, as rightly they should be, are solely focused on maintaining a status-quo that would allow them to gain back their money at interest while appearing as the protectors of national interests at home. The most striking extrapolation from the overall Greek crisis has been the unabashed focus of each individual actor solely on their narrow interests ignoring the social destruction that their bickering and endless negotiations have left behind.

The SYRIZA government has proven that the fear of losing elections is far above national interests, with the party’s senior leadership declining to schedule pension cuts for 2019, not due to the injustice of them, but rather due to the proximity of elections to the scheduled date. SYRIZA faces an almost certain defeat at the 2019 parliamentarian elections, with the polls showing it 10 percentage points behind the center-right New Democracy party. Whether the technocrats will be able to save Greece remains an open question, whether there is any saving left to do an even more important one.

A final particularly important observation to be derived from the situation is the great fear exhibited by the leaders of the EU to take concrete measures towards making debt repayment possible and sustainable in the long run, more precisely; debt relief. The German lead creditors, have exhibited a profound fear of domestic public opinion never truly attempting to explain to their own voters that the gravity of the situation in Greece and present to them that solidarity with their fellow Europeans is necessary. Instead the political elite of the European core has played into the rhetoric of the Eurosceptic parties they appear to be fighting at home, refusing to even recognize the possibility of debt relief. This dependence on public opinion has revealed the challenges European democracy faces, stuck between necessary, unpopular measures and the fear of elections. The outlook at present remains limited to short-term solutions, morphine injections given to a patient in dire need of an amputation he does not want to accept.

A solution to the Greek problem at the current moment appears remote and the consequences of failing to achieve one dire. A comprehensive remedy would entail the cooperation of all the parties involved, simultaneously participating in a process that would require sacrifices on all sides. The SYRIZA government should find the courage and remove the taxes imposed on households and businesses, bring back the pension levels and work towards reforming the structural issues that have for decades been present within the state, those being an inefficient judiciary and high levels of corruption and incapability within public administration. The EU creditors should come to the conclusion that Greece cannot be merely be let back onto private capital markets and that the continuation of stability measures must be continued while certain parts of the debt must be written off, in this I find hope in the upcoming German elections that may give legitimacy to such decisions. The IMF on its part should reduce its interest rate and, colloquially said, put their money where their mouth is, and write of part of the Greek debt it holds.

Greece’s Future as a Vague Prophecy of Delphi

All this may not be enough, and is furthermore very unlikely but it is certainly a step towards a recovery that the Greek people deserve and are hoping for. At the present it is difficult to imagine the consequences that failing to improve the Greek situation would bring, but 2 more years of austerity may be in all likelihood enough to bolster support for the more radical political options such as the Golden Dawn. This last, unfathomable scenario should linger in the minds of all those that call for further austerity and hence poverty for the Greek people, in simple layman’s terms; there is only so much beating a man will take.

Hope remains that those leading the horses that are tearing the Greek people may at last stop marching to their cries, turn around and see what has been done to the people they have for so long claimed to be saving. The horses must be brought back and the people released from the ropes that have kept them down; else, the horsemen will find themselves startled when the man decides to pull on the ropes himself, and the horses they are currently riding on not to be stallions but wooden toys.





Ognjen Millićević


The author is intern at the European Movement in Serbia

The views and opinions expressed in this essay are those of the author and do not necessarily reflect the official views of the European Movement in Serbia.


The essay is published within EMinS Reserch forum activity titled ‘European Challenges’. Authors examine the trends in Europe during 2017.


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Vladimir Djordjevic  -  
05.05.2017 22:17
Gromoglasno pozdravljam tvoj profesionalni razvoj.

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