Greece’s government, a coalition of a radical left-wing movement and a nationalist right-wing party in power since 2015, celebrated the end of the country’s third bailout agreement last August as a “return to normalcy.” Our European Union partners and creditors, who disbursed 288.7 billion euros in loans over the previous years, also rushed to declare victory in the crisis that began in 2010.
Everyone wants to see an end to the Greek crisis — not least the Greek people, who have been exhausted by the long and deep recession, by the continued austerity and reforms whose benefits they have not seen.
But Greece is a long way from “normalcy.” Much has been done to make the economy viable, but the country needs an explosion of confidence and business activity: Recovery would take major new investments, political stability and further reforms to the public administration. But not only is the public debt greater than it was in 2009; citizens’ incomes have been slashed, their assets devalued, their property lost, their debts multiplied.
National elections must be held by the fall. Polls show the center-right opposition New Democracy party leading Syriza, the ruling coalition’s senior partner, in a contest that is already worsening the polarization of our politics. The government, which was always halfhearted about austerity and reforms, promises handouts; the opposition vows to overturn policies and decisions with which it disagrees.
In the most dramatic show of no-confidence, more than 700,000 people are estimated to have left Greece since 2010, seeking opportunities abroad. Deaths outnumber births as people have fewer children or do not dare have any at all. Recent research suggests that at current rates, Greece’s population, which was around 10.9 million in 2015, could drop by between 800,000 and 2.5 million people by 2050. The work force is currently about 4.7 million. A smaller working population will have to support a growing number of pensioners, with lower growth and lower revenues having to cover higher social security costs.
The crisis has hurt businesses. A decrease in domestic demand, tight credit conditions, capital controls, political uncertainty and relocating abroad caused small- and medium-size enterprises to halve their production. Such businesses are the lifeblood of the economy, generating a quarter of G.D.P. and covering 76 percent of the country’s employment.
With a slight return to growth in 2017, businesses began to recover. In the first six months of 2018, the 153 companies listed on the Athens Stock Exchange were reporting pretax profits of 957 million euros, the ICAP consulting firm reported. When placed next to the public debt, however, these figures indicate the challenge that the Greeks face in coming years.
In 2009, public debt came to 299.7 billion euros, or 130 percent of G.D.P. Greece has since borrowed 288.7 billion euros from the European Union member states and institutions, and from the International Monetary Fund. Also, in 2012, some 107 billion euros of debt were written down. And yet, the public debt in 2018 was 357.25 billion euros — higher than the numbers that Greece could not cope with in the first place.
Some indicators suggest that Greece is on the right track. Unemployment is down to 18.3 percent, from a peak of 27.9 percent in 2013. In 2018, the primary surplus is estimated to have exceeded the target set by creditors for a third consecutive year. But this comes at a high cost: delayed payments by the state to individuals and companies, as well as further cuts in funding to social security, hospitals and other services.
The squeeze will continue for decades, as Greece is committed to an annual surplus of 3.5 percent through 2022 and will be under strict supervision until it repays its loans by 2060, according to its commitments. This problem is compounded by the enormous growth of private debt. Nearly half the total loans owed to the country’s four main banks, or about 86 billion euros, are delinquent or close to it. This prevents them from injecting cash into the economy. Companies that try to borrow abroad face high interest rates.
Some 4.2 million people are in arrears to the state, with delinquent tax debts of around 103 billion euros. Authorities have confiscated salaries, pensions and assets of more than one million people. Overdue debts to social security funds are currently at 34.4 billion euros.
With high taxes and with nearly half of the new jobs being lowly paid part-time or shift work, these debts are likely to grow. More people are now classified as being at risk of poverty or social exclusion (34.8 percent of the population in 2017) than at the beginning of the crisis (27.7 percent).
The poor have become poorer while the middle class has struggled under a growing burden. Taxes on property jumped to 3.7 billion euros in 2017, from around 600 million euros before the crisis. Some 19 percent of taxpayers account for 90 percent of income tax revenues, Prime Minister Alexis Tsipras has acknowledged. Property values reflect the higher taxes and lower rents, with apartments losing an average of 41 percent in value between 2007 and 2017, according to the Bank of Greece.
The need to pay taxes and meet other obligations has seen private deposits in Greek banks drop to 131.385 billion euros last November, from 237.8 billion in 2009. Many people have been forced to sell gold heirlooms and other valuables to survive. Pawnbrokers and gold buyers have done a roaring trade across the country, melting jewelry and other items into gold bars.
The police recently arrested scores of people suspected of smuggling gold to Turkey. The daily turnover averaged 400,000 euros — the equivalent of about 11 kilograms of gold each day. The bust was a dud: It turned out that the dealers did not need permits to export to Turkey. The investigation, however, shed light on one of the less visible, personal costs of the crisis.
But nowhere is the hemorrhaging of Greece more severe than in the departure of young people. Greece has seen mass emigration in the past, as poverty, war, dictatorships and lack of prospects drove mostly unskilled people to seek their fortunes in America, Australia, Europe and Africa. This time, though, most of those leaving are depriving the country of their skills and of its investment. Some 92 percent are university or technical college graduates, with 64 percent of the total holding postgraduate degrees, including doctorates, the ICAP consultancy found in a survey of 1,068 Greeks in 61 countries. Some 18,000 medical doctors have left during the crisis; each had cost the state 85,000 euros to train, according to the Athens Medical Association.
The paradox is that Greece trains professionals at great cost but cannot offer them the stability and opportunities they need in order to employ them here. This benefits recipient countries and hinders growth in Greece, when companies cannot find employees with the skills they need. Also, when younger people stay out of the work force, they do not gain from the experience of their elders, leading to further loss of skills and lower productivity.
In May, elections across the European Union will determine not only the European Parliament’s membership but also who gets to run its executive body, the European Commission. And a new president will be selected for the European Central Bank.
In an increasingly unstable world, no one wants the Greek crisis on the agenda. But the country’s struggle is far from over. Recovery depends on the Greeks’ own efforts and on the support of a European Union that is determined to succeed rather than concede to division. This year will show which way Greece and the European Union as a whole are headed.