Greece in 2014: Where are we?
Greece has entered its year of growth and recovery. At least that is how the government, its eurozone partners and a number of commentators have billed 2014. Many analysts and politicians also insisted last year that the country had begun this upward trajectory. In reality, though, Greece’s narrative was far from linear in 2013. There is no reason to believe this year will be a straight story either.
The government and its supporters believe that by surviving 2013, after a tumultuous 2012, Greece has also assured its revival. This narrative stresses the positives: the primary surplus, recapitalised banks, shrinking current account deficit, a battered coalition that is still fighting on and a society which, despite the incessant pressure it is under, is just about holding together.
It is true that there have been significant achievements to look back on in 2013 but to claim it was a year of success, or even stability, means disregarding a lot about Greece that is extremely worrying.
For example, how can the primary surplus be the standard bearer for "Grecovery" when more than 3 billion euros of new arrears, taking the total to over 6.5 billion ), have been created; the cash deficit has widened to nearly 10 billion euros and less than half of the funds allocated for social protection this year were actually spent?
Seeing the banks, which have absorbed some 40 billion euros in recap funds, as the driving force behind an imminent economic recovery is also problematic. The injection of these funds has to be balanced against the fact that lending is falling and the percentage of non-performing loans rising to almost 30 percent. At the same time, deposits have been vanishing as Greeks dip into their savings to pay their rising tax bills and make up for a lack of income.
Greece's current account deficit, which ballooned in the pre-crisis years, is getting smaller but this is tempered by the knowledge that a better year for tourism and fewer imports have helped achieve this rather than the much-vaunted export boost that the country's internal devaluation programme was supposed to bring.
Progress on the reform front, such as improvements in the tax administration often pale into insignificance next to the decrepit state of Greek institutions and the hamfisted or cowardly way the government has executed some of these changes.
While Greece's coalition is still hanging, it is doing so by its fingernails. Its parliamentary majority is down to just three, whereas it started with a surplus of 29 seats after the June 2012 elections. Prime Minister Antonis Samaras's decision to shut down public broadcaster ERT overnight, thereby triggering Democratic Left's decision to walk away appears a more politically rash decision as each day passes. In the meantime, PASOK is withering and it is doubtful whether there will be a serious centre left political presence in May to stand at the European Parliament and local elections.
When it comes to assessing the state of Greek society, it is true to say that there were some remarkable achievements in 2013 despite the adverse circumstances, such as the mobile app designers who are bringing in more revenues than olive oil exporters and the wine makers who are tapping into new markets.
However, exceptional accomplishments cannot disguise that reality for a growing number of Greeks is laced with doubt, disappointment and despair. The desire among local and European decision makers for a “success story” has made them blind to the fact that many Greeks are in torment and losing faith that the country will recover its economy and, most important of all, its dignity.
There are people in Greece and Europe that have come to accept that it’s okay for a developed country to have a jobless rate that’s nearing 30 percent. They accept, without much fuss, that Greece has lost a quarter of its gross domestic product in five years, and that its citizens have seen their disposable household income plummet by a third during the same period.
This blinkered approach means they do not see the other Greek narrative: The story of those who live with the daily effects of an economy in deep decline and a state that is struggling.
We cannot ignore that more than 23 percent of Greeks are at risk of poverty, a leading figure in the EU and almost three times higher than in Iceland; almost 20 percent of Greeks are materially deprived, nine times the rate in the Netherlands; suicides doubled between 2009 and 2011; and births fell 14 percent between 2009 and 2012.
As more Greeks are being pushed to the fringes of society, those who are still muddling through are finding it increasingly difficult to believe that a recovery is imminent. Talk of primary surpluses, positive current accounts and record manufacturing PMI means little to them now and is not enough to re-instill faith when they have suffered the effects of five years of recession, three years of austerity and endless uncertainty. How can decision makers convince beleaguered Greeks that recovery is around the corner when they made the exact same predictions in 2010, 2011, 2012 and 2013?
As belief erodes, it will become more difficult for the government and its lenders to make their message of retaining faith in the adjustment programme credible. Already, Greeks have the least confidence in their government among OECD countries, four in 10 teenagers say they are prepared to emigrate and 91.7 percent of adults fear the lack of justice in their country. Furthermore, the social conditions are perfect for hate and violence to brew.
The onus, therefore, is on decision makers to offer these people genuine hope in 2014. Instead, what is on offer so far is a recovery that will apparently be driven by will (or magic): Greece is willing the economy to grow at rates it didn’t achieve in the last decade’s boom years; its debt to become sustainable when the option of a new haircut is off the table and for there to be liquidity when the banks are not lending and there is a lack of investment.
Going into 2014, there’s a serious risk that people will lose this will. Given the strain that Greek society is under and the fact that unemployment is only likely to rise this year, it is difficult to see how trust in the current path will be maintained.
The local and European Parliament elections in May provide the angry and disillusioned with a perfect opportunity to let rip. A sizable defeat for the two ruling parties would bring their democratic legitimacy into doubt. Perhaps the only factor that is preventing this outcome being a certainty is that SYRIZA has done such a mediocre job as an opposition party. Ridden by an existential struggle and unable to provide a coherent, concrete and realistic alternative to current policy, the leftists have failed to inspire and gain the trust of Greek voters.
If SYRIZA puts together a viable plan to heal Greece economically, politically and socially, it could enjoy a hefty victory at the polls in May. It’s possible that even with a less convincing argument, SYRIZA could ride the wave of exasperation and come first with a notable difference. If that happens, it is difficult to see how the country would avoid its fourth general elections in five years. Given the fragmentation of Greek politics and the lack of viable coalition partners for SYRIZA or New Democracy, a stable government is unlikely to emerge from new elections. Incredibly, this could leave the country even deeper in the mire.
Looking back on 2013, it's certainly worth debating the small steps of progress Greece made. But looking ahead, it would be a monumental error not to consider the dangers that 2014 could hold for the country and its people.
An in-depth analysis that we are proud to republish in our website. Thank you and best wishes for 2014 to Greece and the Southern European economies that managed to escape Grexits, Spailouts and other clichés.
Mr. Malkoutzis, your analysis is convincing.
Good luck and best wishes for 2014!