2 Νοεμβρίου 2014

Transforming crisis into krisis, pt.1: The social impact of austerity measures in Greece

This is the first in a four-part series of articles on austerity in Greece and the response of society.

Crisis. Originally, the word derives from the ancient Greek verb “krinein”, meaning to judge in order to take a decision and its noun, “krisis”, meaning judgment, decision. According to Steven James Venette "crisis is a process of transformation where the old system can no longer be maintained."

In Greece, the obsessive persistence of the ruling elites in rescuing by any means the current socioeconomic system, even during its long phase of death rattle, has fuelled a significant social mobilisation towards the Alternative Route, striving to transform crisis to krisis. Several citizen initiatives and grassroots groups organise, since 2012, the Festival for Solidarity and Cooperative Economy (#Festival4sce) seeking to build the foundations of another world that is not only possible, but already growing.

Following the links between the social impacts of the austerity imposed during the last four years in Greece and the alternatives proposed by citizens themselves, this series of articles is structured around four main axes:

PART I: The social impact of austerity measures in Greece

During the last four years, Greece has undergone a deep and unprecedented multidimensional recession, following the international financial crisis of 2008-2009. As a remedy to the abrupt deterioration of the country’s borrowing capacity and the accelerated accumulation of - the already unsustainable - Greek debt, successive governments have signed special MOU’s[2] with the Troika[3] giving away the country’s sovereignty, in exchange for promises to put Greece back on the path of development and growth; the system, in order to survive, urgently required a redistribution of money circulation, redirecting cash from a huge number of small deposits to a small number of huge accounts. As a result, harsh austerity measures have been imposed including slashing of salaries and pensions, drastic tax increases and generalised dismantling of the social role of the State while in parallel special funds to save the Greek banking system have been created. Furthermore, according to the second MOU, Greece has been obliged to open a special account for debt repayment in the Bank of Greece, as an ultimate priority over the current operational public expenses.  All these policies resulted in a dramatic drop of consumer buying power thus influencing negatively all macroeconomic indicators, such as GDP, unemployment rate, growth rate, deficit rate, etc. Worldwide known economists, scientists and even politicians have been widely questioning the effectiveness of such policies. Peer Steinbrück, the Social Democratic Challenger of Angela Merkel[4] was of the ones to openly denounce this “deadly dose of austerity"; a proven recipe to kill an economy. Even the IMF has reported[5] growth forecast errors in relation to planned fiscal consolidation, admitting that they “failed to realise the damage austerity would do to Greece”[6]. It is interesting to point out that the Troika has recently recognised that Greeks cannot bear new taxes.

During the four years of the After Troika era (2010-2014), the devastating results of the austerity are incontestable[7]: index of wages decreased by 23.8% from 108.2% to 82.5% whereas average increase in tax burden[8] on middle incomes (25.000 € to 70.000 € per year) has reached 25%. Tax on property increased by 514%[9] whereas loss of household income reached 16 bn €[10] during the period 2010-2013 and percentage of over indebted households recently skyrocketed 65%[11]. Additional direct and indirect taxes of more than 2 bn € are expected to cover the financial gap of the national budget of 2014. At the same time, unemployment rate increased by 133% from 11.9% in 2010 to 27,8% in 2014 and youth unemployment (age range 15-25 years old) has already overreached 60%[12]. Moreover, currently in Greece there are more than 450.000 families with no working members.

The dreadful multidimensional social impact of these policies can be depicted by the following illuminating data:

  • Suicide rate[13] increased from 26.5% in 2007 to 43% in 2011, a rise of 62.3% before and after crisis. According to the data provided by the Hellenic Statistical Authority, 45.27% of people that committed suicide in 2012 were economically inactive (unemployed, retired, students, housewives, workless). Moreover, the help line for suicide prevention of the NGO Klimaka reports that 35% of people who call for help are unemployed[14]
  • 145.000 children face food insecurity and hunger: according to asurvey conducted by the NGO Prolepsis[15] on a sample of 152 schools, during the school year 2012-2013, 27% of pupils experience food insecurity with moderate or severe hunger, 37% experience food insecurity without hunger, 62% cannot always afford high quality or variety in their meals, 32% have reduced portion sizes, whereas only 36% of participants attain food security 
  • In 2013, there were more than 160.000 unprivileged families and more than 110.000 people in need[16] in Greece, having received help from the EU’s “Food Distribution programme for the Most Deprived Persons of the Community”[17].
  • The official number of uninsured citizens reaches more than 3 million people, representing one third of the country’s population. Added to this, there are 3 more million citizens, such as traders and small businessmen who have closed their businesses due to the crisis and have consequently lost their insurance rights[18]. The dramatic situation that austerity has inflicted on the country is illustrated by the recent incident where an uninsured and unemployed cancer patient died due to political inertia after repetitive and persistent appeals of the Metropolitan Community Clinic at Helliniko[19] to the Ministry of Health, the Minister himself and the Greek Parliament in order to request free access to the public health system to 10 uninsured patients suffering from serious illnesses [20].
  • Homelessness has risen significantly although there are no data on a country basis survey. Only in Athens, more than 20.000 citizens rely on soup kitchens and housing services supported by the Municipality of Athens[21]. 

In order to piece together the puzzle of the Troika’s growth scenario, one should take also into account:

  • the gradual dismantling of the structure of the Greek public administration, expressed mainly through the closing or underperformance of public institutions (such as hospitals, universities, schools, research centres, etc.), the outsourcing to private companies of some of the most significant operating areas of the public sector and the shrinking of the social role of the state 
  • the privatisation of common goods and natural resources, mainly expressed through the huge privatisation programme of 50 bn € imposed by the MOU’s, which includes privatisation of public companies, of common goods such as water, waste management or energy, as well as state property, varying from natural resources to public buildings, semi-private companies and public infrastructure
  • the deviation from democratic and constitutional procedures and European directives, mainly expressed through the application of urgent legislative acts and the signing of treaties never voted by the Greek Parliament[22], the imposition of not elected governors[23], the placement of managers of controversial career paths to key-positions in public administration[24]and the rise of authoritarianism. As a result, extreme state repression[25], maximal police violence and government’s tolerance to illegal processes and actions combined with mass media propaganda, have led Greek society to polarisation giving space for fascism to rise uncontrollably.

Realising the limits of the capitalist growth scenario and questioning the fundamental engines of capitalism -overconsumption and borrowing- considerably large parts of the Greek society are in search of other economic models of living, working, producing and consuming under an alternative perspective: notions such as localisation, degrowth, solidarity or cooperativism have come in the foreground of the social dialogue, aiming to put man and nature in priority over profit making.

Next: Part 2, The societal response to the austerity measures through the creation of solidarity networks


[1] Venette, S. J. (2003), “Risk communication in a High Reliability Organization: APHIS PPQ's inclusion of risk in decision making”, North Dakota State University.
[2] MOU: Memorandum of Understanding is a bilateral or multilateral agreement where all parties agree on common actions maybe before a more detailed contract is signed. Greece has already signed MoU’s accompanied with special treaties with the IMF, the European Commission and the ECB –in other words the Troika-, defining the terms of “financial aid” -which in fact concerns a new debt- towards Greece and its subsequent obligations.
[3] Troika: originates from the Russian word “тройка”, meaning three of a kind or triad. It can also be used to refer to a group of three, especially government officials (Source: Cambridge Professional English Online). The term was increasingly used during the Eurozone crisis to describe the European Commission, International Monetary Fund and European Central Bank, who formed a group of -three- international lenders that laid down stringent austerity measures when they provided bailouts or promises of bailouts for indebted peripheral European states – such as Ireland, Portugal and Greece – in the financial crisis. (Source: Tony Quinn, Financial Times).
[5] Blanchard Olivier & Leigh Daniel, “Growth Forecast Errors and Fiscal Multipliers”, IMF Working Paper, January 2013
[7] Unless otherwise mentioned, primary data is retrieved by the Hellenic Statistical Authority, the statistical review Hellas In Numbers-2014 and the Greek Ministry of Finance. The comparison, if not otherwise mentioned, refers to the period between the 1st quarter of 2010 and the 1st quarter of 2014.
[8] Tax burden is based only on tax on income without taking into account the huge increases of indirect taxes (VAT, special taxes on fuel, cigarettes, etc).
[9] Household income paid for Tax on property increased from 487 million € collected by the State in 2010 to 2.99 bn € eventually collected in 2013 (according to the MOU 3.2 bn € were expected to be collected in 2013 for tax on property).
[10] Household income decreased from 98 bn € in 2010 to 82 bn € in 2013.
[16]  Data retrieved from the Ministry of Rural Development and Food
[17] EU Programme on Food Distribution for the Most Deprived Persons of the Community http://ec.europa.eu/agriculture/most-deprived-persons/index_en.htm
[22] It is interesting to note that deputies in the Greek Parliament were obliged to vote for the first MOU that followed the agreement already signed by the then Minister of Finance and the ex-Prime Minister in a very pressed  time span, with no official translation of the complicated and multipaged official documents. Many of them admitted afterwards in public that they voted without having read it first and some denounced the extreme political pressure of their parties on them for voting for it.
[23] During the Greek political turmoil in the wake of the Greek debt crisis after Prime Minister George Papandreou’s resignation, Loukas Papademos was appointed as Prime Minister of Greece from 2011 to 2012, leading a provisional government. He was previously the Governor of the Bank of Greece from 1994 to 2002, before leaving to become Vice President of the European Central Bank from 2002 to 2010 (Source: Wikipedia). He was never democratically elected by the Greek citizens but was a common choice after long negotiations among the ruling parties and the Troika to play the subtle role of a “transition governor”.
[24] Some interesting examples: 1. the initial placement of Mr. Petros Christodoulou, a former high level manager in Credit Suisse First Boston, Goldman Sachs, J.P. Morgan and National Bank of Greece as general manager of the Public Debt Management Agency. He was afterwards replaced by Mr. Stelios Papadopoulos, a head director in several private banks such as BNP Parisbas, SSSB/Citigroup, EFG Eurobank, Societe Generale.  2. The placement of Mr. Andreas Georgiou as President of the Hellenic Statistical Authority in June 2010. His previous career as a high level manager with IMF since 1989 opened a big debate in the Greek Parliament. He stopped working for IMF in July 2010, from where he asked a leave without payment until December 2010. He officially resumed his responsibilities in the Hellenic Statistical Authority in August 2010. His role in the Greek statistics” of 2009 is controversial and had been the subject of one of the inquiry committees of the Greek Parliament.
[25]Operation of detention camps, banning of demonstrations, penalisation of civil disobedience or socially vulnerable groups of people such as drug addicts, refugees or HIV positives are only some of the aspects of the extreme state repression recent governments have introduced to everyday life in Greece.