Socioeconomic Fragmentation and Exclusion in Greece under the Crisis

Dimitris Katsikas, Dimitri A. Sotiropoulos, Maria Zafiropoulou, Dimitris Katsikas, Dimitri A. Sotiropoulos, Maria Zafiropoulou

• Publisher: Palgrave Macmillan
• Year: 2018
• Print ISBN: 9783319687971
• eBook ISBN: 9783319687988
• Topic: Politics & International Relations
• Subtopic: European Politics
• Index: Politics & International Relations

This volume uses new empirical evidence and analytical ideas to study phenomena of fragmentation and exclusion threatening stability and cohesion in Greek society in the aftermath of the crisis. The contributors argue that processes of fragmentation and exclusion provoked by the crisis can be observed on both a material and an ideational level. On a material level, rising levels of unemployment, poverty and inequality have produced new social security "outsiders", while on an ideational level, a discursive-cultural shift is documented, which has led to new understandings and categorizations of new (and old) insiders and outsiders. Moreover, the volume attests to the aspirations, but also the limitations, of spontaneous civil society mobilization to address the social crisis. Finally, the volume offers a discussion of the political management of social fragmentation and exclusion in Greece both before and after the onset of the crisis. The book will be of interest to scholars and students of social policy and phenomena of poverty, social exclusion and economic inequality, civil society studies, and comparative political economy and politics.

© The Author(s) 2018

Dimitris Katsikas, Dimitri A. Sotiropoulos and Maria Zafiropoulou (eds.)Socioeconomic Fragmentation and Exclusion in Greece under the CrisisNew Perspectives on South-East Europehttps://doi.org/10.1007/978-3-319-68798-8_1

Begin Abstract

1. Introduction

Dimitris Katsikas¹

(1)

National and Kapodistrian University of Athens, Athens, Greece

Dimitris Katsikas

End Abstract

1.1 An Unprecedented Economic Crisis

For the past decade, Greece has been going through a deep economic crisis of a magnitude unknown for any developed country in the post-war period. The first signs of an economic downturn came in late 2008, following the breakout of the global financial crisis. In 2009, the crisis deepened, as the developed world experienced a sharp recession, which negatively affected Greek exports and inward Foreign Direct Investment. At the same time, the troubles of the international financial system and widespread economic uncertainty affected the provision of credit to the private economy by the Greek banks. This contributed, among other things, to a significant drop in domestic investment, particularly in the—crucial for the economy—construction sector. From the end of 2009, the Greek crisis becomes increasingly decoupled from the world economic crisis, which is gradually overcome, acquires its own dynamic and proves to be a catalyst for the Eurozone debt crisis that follows.

The story is well known by now. Following revelations about the unsustainable size of its fiscal deficit in late 2009, the country’s long acknowledged (but largely ignored by Greek governments as well as the institutions of the Eurozone and the financial markets) structural problems came to the fore, and its already weak credibility quickly deteriorated. In an unfavourable international economic environment, in the aftermath of the global financial crisis, when investors shunned risky assets, Greek government bonds could find no buyers. With the conduits of market credit closed off, the heavily indebted Greek state teetered on the brink of bankruptcy.

The Greek government sought official funding, which came in the form of a bailout agreement in May 2010. The funding was accompanied by a Memorandum of Understanding (MoU) , or ‘Memorandum’, as it is now known in Greek common parlance, under the supervision of three organizations—the European Commission , the European Central Bank and the International Monetary Fund—the so-called Troika.¹ The adjustment programme called for a combination of harsh front-loaded fiscal adjustment, internal devaluation policies,² and a wide array of structural reforms in order to restore fiscal sustainability and international competitiveness.

Given the extraordinary size of the fiscal deficit (15.2 per cent of gross domestic product (GDP) in 2009), this meant the implementation of a fiscal consolidation programme, which has truly been without precedent.³ The aggressiveness of the fiscal adjustment programme, which reduced wages in the public sector , cut benefits and pensions across the board and curtailed public investment, in combination with internal devaluation policies (mainly through labour market reforms), and a pervasive climate of uncertainty regarding the prospects of the economy and its place in the Eurozone , which discouraged both domestic and foreign investment, led to a sharp decline of per-capita income and an explosive increase of unemployment. The ensuing collapse of economic activity undermined the government’s fiscal consolidation efforts since tax revenues and social insurance contributions plummeted . To make up for the deviations in the fiscal targets, the government was forced to introduce new austerity measures, which however deepened the crisis. This vicious cycle plunged the country into a downward economic spiral. Unsurprisingly, the programme’s targets could not be met, the debt dynamics worsened and eventually the country went on to sign a new bailout agreement in 2012, accompanied by a debt-restructuring deal.^{4 , 5}

Despite differences in the fiscal consolidation mix and an increased emphasis on structural reforms , the second programme effectively followed the same recipe, resulting in a further deterioration of the economy, before the latter showed some signs of recovery in 2014. In terms of politics, however, it was too little, too late; following two consecutive elections shortly after the signing of the second bailout agreement in 2012, popular anger and frustration with the austerity programme led to a complete subversion of a long-established balance in the political system. The political shifts which upset the status quo created new political players and pushed to the fore ‘anti-Memorandum’ , Eurosceptic parties from both ends of the political spectrum.

The signs of recovery in 2014 were not enough to change the political dynamics, and in January 2015, Syriza , a radical-left party , won the elections on an aggressive, anti-memorandum campaign and went on to form a coalition government with the nationalist right-wing party of ‘Independent Greeks’, which had also led, though from a different perspective, an anti-memorandum, Eurosceptic campaign. After a failed six-month negotiation, which sought a solution outside the ‘Memorandum framework’, in July 2015 the new coalition government ended up signing a third bailout agreement, accompanied by a new Memorandum, which in terms of policy continued where the previous two had left off,⁶ promoting austerity policies, which are now projected to be continued for decades after the completion of the programme.⁷

Meanwhile, the implementation of structural reforms progressed slowly throughout this period. On the one hand, the design of reforms was far from optimal; in a number of cases, reforms proved at best ineffective and at worst counter-productive.⁸ On the front of labour market reforms in particular, internal devaluation policies (e.g. the reduction of minimum wage) have contributed to further income reductions, without having the expected effect on Greece’s international competitiveness , as other equally crucial reforms (e.g. in the product markets) did not progress fast enough. On the other hand, the scope and speed of structural reforms stretched the resources of a state apparatus, already known (even before the crisis) for its poor record in designing and implementing reforms.⁹ Public administration was further constrained by the aggressive fiscal adjustment, which reduced state services’ budgets and led many public servants to early retirement, leaving these services seriously understaffed. Political uncertainty and consecutive changes in government did no favours for policy continuity, while all the governments in the period under examination exhibited to varying degrees a tendency to avoid politically difficult reforms.¹⁰ To an extent, the procrastination in reforms has been tolerated by the Troika, as throughout the programmes, the overriding priority has always been fiscal consolidation (Manasse 2015; Petralias et al. 2018).

All in all, the scope and depth of the problems facing Greece, mistakes and omissions in the design of the MoU’s policies,¹¹ a record of partial and often superficial implementation of reforms by the Greek governments and intense political polarization, which sustained a climate of permanent political and therefore economic uncertainty, led to the derailment of the bailout programmes and the gradual collapse of the economy to a degree which is truly astonishing. During the crisis years, domestic investment collapsed, while foreign investment stayed away; mean disposable income decreased by more than 30 per cent, while private consumption declined by 25 per cent; approximately half of the deposits left the banking system, while 45 per cent of all loans are in the red; unemployment rose to more than 27 per cent at its peak in 2013, remaining above 23 per cent in early 2017. All in all, GDP fell by more than 26 per cent during this period. Despite official projections for a moderate recovery in the medium term, the economy remains subdued and prospects seem uncertain.

1.2 From Economic Crisis to Social Degradation

The economic collapse led to a deep social crisis. Although, in principle, a severe economic crisis is expected to negatively impact living conditions, a deterioration such as the one witnessed in Greece is by no means a necessity. Beyond the intensity and duration of the crisis, the causes of this development are also to be found in the weaknesses of the Greek welfare state, which proved incapable of alleviating the impact of the crisis.

Traditionally, the welfare state in Greece has been criticized for being inadequate and fragmented and operating on a clientelist basis.¹² Not surprisingly, researchers have found that its contribution to the reduction of poverty, social exclusion and inequality has been lacking, particularly when compared with other central and northern European countries (e.g. Dafermos and Papatheodorou 2010; Balourdos and Naoumi 2010). What is more, most of the reduction in poverty in Greece comes primarily through pensions, which make up almost half of the total social expenditure in Greece, while the contribution of other types of transfers (e.g. disability, family or housing benefits) to the reduction of poverty is much less significant (Andriopoulou et al. 2013). This is due to the fragmented nature of the Greek welfare system, which does not provide universal social services to the entire population; rather, the provision of services is differentiated among different occupational groups and different types of social protection (Papatheodorou and Dafermos 2010; Petmesidou 2014). The inefficient operation of the welfare system in Greece is made worse by the lack of resources since traditionally the expenditure for social protection has been below European averages. For the period 2000–2008, Greece spent on average 19.7 pe...

Table of contents

• Cover
• Front Matter
• 1. Introduction
• Part I. Socio-Economic Developments and Social Policy During the Crisis
• Part II. Discourses and Perceptions on Poverty and Social Exclusion
• Part III. Civil Society’s Reaction to the Crisis
• Back Matter