Posts Tagged ‘unemployment’

IMF’s “mea culpa”

In News on June 10, 2013 at 12:07 pm

Last week, the IMF admitted it had been wrong in its predictions about the consequences austerity would cause to Greece and that some of the reforms imposed as part of the loan agreement had been too harsh. (See for instance p.6 of this IMF paper, where the IMF reports mentions that “the macroeconomic assumptions at the initiation of the program proved optimistic” as well as this IMF paper)

So, let’s recap on what has happened in Greece in the past 4 years.

  • Greece is now in its 6th year of recession.
  • GDP has contracted 22% between 2008-2012, one of the deepest peacetime recessions in industrialised economies GreatDepression_Greece




  • Unemployment is now at 28% unemployment




  • Youth unemployment is over 60%
  • Greece’s debt to GDP was 129% at the end of 2009 and prior to the IMF loan agreement. At the end of 2012, it stood at 157%. The aim is to bring it down to 124% by 2020


  • Homelessness has sharply increased. Partly due to the important role family plays in Greece, Athens was unlike other European capitals where homelessness is visible in the streets. In 2009, Athens had about 2,000-3,000 homeless people. In 2012 the number was 40,000 (for more info, see this article).
  • National minimum wage has been decreased by 22% and 32% for the young. It was reduced from €780 gross a month at 25% and 32% as of 1.1.2012. It went down to €586 gross and €511 for workers 15-25 years old, irrespectively of education and skills.
  • Pensions of public servants have been slashed by 40%.
  • Increase of suicides. Until 2008 Greece had one of the lowest suicide rates in the world, with 2.8 suicides per 100 000 inhabitants. Statistics released in 2011 by the Greek ministry of health show a 40% rise in death by suicide between January-May compared to the same period in 2010 (for more info see this EP discussion and this article).
  • The national health budget has been cut by 40% since 2008. As of January 2014, hospitals will also collect a fee of 25€ for each inpatient care, for services which were previously provided for free (see Ministry of Health’s presentation for more)
  • Expenditure for mental health has been cut by 50%. As of December 2012, employees in the mental health sector had not been paid for 6 months.
  • Increase in HIV/Aids; The incidence of HIV/Aids among intravenous drug users in central Athens soared by 1,250% in the first 10 months of 2011 compared with the same period the previous year, according to the head of Médecins sans Frontières Greece
  • Rise of malaria: Malaria is becoming endemic in the south for the first time since the rule of the colonels, which ended in the 1970s, after mosquito-spraying programs were slashed in southern Greece
  • Infant mortality has risen by 40%.
  • Hospitals are forced to cancel operations (for more, watch this short film by Aris Chatzistefanou)

The above provide a snapshot of the situation in Greece, not to mention the rise of the neo-nazi Golden Dawn party, which has entered the Greek parliament and attacks and stabs immigrants, with the cooperation of the Hellenic police (see more here  and here).

I guess it’s ok, since the IMF said they are sorry about the mess, as they had to prevent contagion of the Greek sovereign debt crisis to the rest of the Eurozone. Although it was clear from the beginning that the IMF’s technocratic approach was indifferent to any social cost, it’s ok, they are having second thoughts, even now.

Of course, the Greek government at the time could have resisted signing the loan agreement proposed by the IMF and the EU. There are many Greek technocrats, university professors, economists and experts around the world, which could have been brought forward to make a counter-proposal [and they did, see for instance here, but they were dismissed without second thought]. The Greek government could then have negotiated a different solution which would have been less painful to the Greek people and society. And how knows, maybe that solution would have included a fairer allocation of the costs of lending to high-risk Greece, rather than blame it all on the “lazy Greeks that don’t pay taxes and retire at 50”.

But fortunately for foreign institutions like the IMF and governments, they have always found eager collaborators among the Greek elite, who have been more than willing to disregard the country’s and its peoples’ interest in favour of a “good boy” pat and a cookie from Europe and other foreign “partners”.


How short is the “short-term”?

In News on April 26, 2012 at 3:34 pm

Today European Central Bank (ECB) chief Mario Draghi speaking at a hearing in the European Parliament urged the Eurozone to continue supporting austerity and “fiscal adjustment”. His comments come after the first round of French presidential elections, where Socialist leader Francois Hollande came first and ahead of the second round of the French elections and the Greek parliamentary elections on 6 May .

One of the arguments Draghi used – and supporters of austerity measures generally reproduce – is that the recession and high unemployment levels that Greece, Portugal, Spain, and Ireland to name a few are experiencing, are the “necessary steps” on the way to growth. More importantly, this “necessary pain”, the adverse, contractionary effects, which are only to be felt in the short/ medium term.

Let’s clarify a few things about the short-term: In economics and finance, the short-term is defined as a short period of time, usually 12 months. In fact, in some fast-moving business sectors, the short-term is 6 months, but let’s be generous and round it up to 12 months.

Now let’s review some data. Greece has been in a recession since 2008 [A recession is defined as 6 months of negative growth rate. Negative growth is when the country produces less than the year/ month before. A good, healthy growth rate is usually considered to be between 3-6%]. Greece’s recession is expected to become worse in 2012. Greece’s recorded unemployment is 22%.

Ireland has been in a recession since 2008. It moved to a growth rate of 0.7% in 2011 and is to grow by 0.5% in 2012.  Unemployment is at 15%.

Portugal had  zero growth in 2008, recession in 2009, and really low growth in 2010, before moving back into recession in 2011. The recession is expected to become worse in 2012. Unemployment levels are at 15%.

Spain had a marginal growth rate in 2008, before plunging into recession in 2009 and 2010. It rebounded slightly in 2011 and is moving back into a recession for 2012. Unemployment is 25%.

These are all countries that are implementing austerity measures either because they are forced to through their Memorandum of Agreement with the IMF or through political pressures EU or nationally driven.

Draghi’s and European leaders’ remarks about the short-term are not only unfounded economically but also socially provocative.

People don’t wait for the long-term to live, gentlemen. People actually try to “live” in your “short-term”. They lose their jobs, they can’t pay their bills and taxes, they can’t afford to buy basic products. They fall below the poverty lines and leave their country to find work.

It is short-term that matters. Besides, as Keynes said, in the long-term we are all dead. But then again, his economics actually made sense.

1. People in crisis, Greece

2. All the economic data can be found here

The social cost of debt repayment

In News on October 23, 2011 at 4:11 pm

On 21 October, finance ministers gave the green light for the latest payment (€8 billion) of Greece’s first financial package. This last tranche will be signed off by the International Monetary Fund, and the funds would reach Greece my mid-November. The announcement by the finance ministers followed the Greek parliament’s approval of a new package of austerity measures on 20 October. The Greek parliament’s vote took place amidst a two-day general strike in Greece, populous demonstrations and riots. However, this did not stop Greece’s political elite from passing measures, which in effect will deconstruct Greece’s welfare state and weaken its social policies.

Indicatively, the new austerity package measure includes a solidarity levy of between 1% and 5% of income, an increase in the property taxes, an increase in VAT taxes, lowering the tax-free threshold for income tax from €12,000 euros to €5000 euros (the original plan for €8,000 was abandoned), and cuts in the public sector wages by 20% (on tops of the 20% which they experienced last year). Furthermore, there health spending will be cut by €310 million in 2011 and a further €1.81 billion in 2012-2015, and education spending will be cut by closing or merging 1,976 schools. Social security will be cut by €1.09 billion in 2011, €1.28 billion in 2012, €1.03 billion on 2013, €1.01 billion in 2014 and €700 million in 2015. (Austerity plan in full)

Naturally, the government expressed its mere “hopes” to crack down tax evasion, despite the fact that the names of Greek businessmen, contractor companies, top newscasters and pop-singers who have been systematically evading taxes for decades are well-known among government and journalistic circles. Finance Minister Evangelos Venizelos continued its scaremongering rhetoric, describing the government’s choice as between a “difficult situation and a catastrophe”. According to the BBC, he said “We have to explain to all these indignant people who see their lives changing that what the country is experiencing is not the worst stage of the crisis,” he said.

Well, he is right about that. The worst is yet to come. This latest wave of taxes and spending cuts will not only increase unemployment, dampen growth and depress the economy. The measures are purely anti-developmental and will have a direct effect on the social and humanitarian situation in Greece. The government is reducing the number of hospitals from 133 down to 83 and reducing the number of clinical units from 2000 down to 1700, without any serious impact assessment or research. More and more Greeks turn to NGOs for basic medical services. As the Lancet medical study concludes, “the picture of health in Greece is concerning. It reminds us that, in an effort to finance debts, ordinary people are paying the ultimate price”. Unfortunately, it is hard to find any glimpse of hope. The Papandreou government’s priority is primarily the satisfaction of the lenders’ demands, rather the interests of the Greek people.

A three-level play

In News on June 19, 2011 at 1:58 pm

The Greek debts crisis is now unravelling in three different levels. The national level, the European level and the citizen level.

At the moment of writing, the Greek parliament is in its first day of a three-day debate, at the end of which the Prime Minister George Papandreou will ask for a vote of confidence of the new cabinet. The new cabinet was announced on 17 June, following two days of drama politics. One of the key changes was replacing the current Finance Minister Giorgos Papaconstantinou, with Evangelos Venizelos, which the Guardian described as “physically imposing presence”  (this apparently is a prerequisite for being Deputy Prime Minister, judging from the equally imposing Mr. Evangelos Pangalos). Mr. Venizelos is Mr. Papandreou’s longtime rival. He come from the Socialists’ “old guard” and was Mr. Papandreou’s opponent in the 2007 race for the party leadership. According some analysts, Mr. Papandreou forged an alliance with his “chief enemy”, with the aim of appeasing some members of his party who were opposing the new austerity programme. This reshuffle will presumably consolidate the Socialist party and will lead to greater support for the tough austerity measures. The hope is that the new government will win the vote of confidence (which is due on 21 June), and the new austerity programme will pass through parliament the week after.

At the same time, the Eurozone finance ministers are meeting in Luxembourg to discuss releasing a loan of up to €12 billion to Greece. This is the late payment of the €110billion EU-IMF aid package that was agreed in May 2010, without which Greece will not be able to pay forthcoming debt repayments. On 16 June, EU Commissioner Oli Rehn urged  Eurozone Finance Ministers to come to a “responsible agreement” on Greece’s bail-out. He also said that the Greek government should endorse the economic measures agreed.  On 17 June, the French President Nicholas Sarkozy and German Chancellor Angela Merkel agreed on principle that any extension of the maturities of the Greek bonds will be purely voluntary (the point of disagreement was the private banks’ contribution to the new aid package). Ms Merkel conceded to the demands of France and the ECB that the private banks’ contribution in the new bail-out package for Greece should be voluntary, she insists that it is “substantial” . However, while European frets, the financial markets jolt every time news were coming from Athens and Brussels. There are fears of a Greek default which could jeopardize the stability of the Eurozone. At the moment of writing, the next Eurozone meeting is 19-20 June is taking place, where it is expected that this agreement will be sealed off. The hope is that there will be an agreement and the new loan will be given to Greece.

Meanwhile, according to the latest poll, 47% of the Greeks are against the new austerity programme, which includes tax increases, cuts in civil servants’ wages and a long list of privatization. Since the bail-out, 400,000 have lost their jobs. Total unemployment is now 16%. Greece’s “indignant citizens” have been camping out in Athens’ central square (Constitution Square) since 25 May in protest against the government’s new measures. For some Greeks the hope is that their pension or their wage will not be reduced any further, that there will not be asked by their employer to work longer hours on the same wage, or that they will still have a job in a few months’ time. For the younger generation, there is no hope.