In writing this blog, I have come across several facts about the Greek economy that surprised me. In some cases, it was the fact itself that was the surprise; in others, it was the magnitude of something I already knew about. Here they are, along with links to the relevant posts.
Fact #1. Greek GDP is at 2004 levels, and it will take about a decade to reach pre-crisis levels. Greece’s GDP has been declining since Q4 2008, and is now just above 2004 levels. What is more, the initial program agreed to with the troika forecasted that real GDP would not reach its pre-crisis level until the end of the decade. A greater than anticipated recession means it could take past 2020 for Greece to recover to the income level it had coming into this crisis.
Fact #2. Tourism export revenues have declined 28% since 2000. When analysts discuss how the Greek economy may grow, there is an inevitable emphasis on tourism. But tourism has been in steep decline in the last decade. In 2000, Greece’s tourism revenue was €10 bn (based on customs data). Ten years later, it had fallen to €9.6 bn, a 4.5% drop. But if we factor in inflation, revenues from tourism have dropped 28% since 2000, reflecting the structural flaws in Greece’s tourism industry, which relate, chiefly, to getting more tourists who spend less money.
Fact #3. Net exports from shipping have declined 27% since 2000. Shipping, Greece’s other major export, has performed better than tourism but only marginally so. In 2000, Greece’s revenues from shipping netted €4.6 billion. By 2010, that number had fallen to €4.5 bn. Adding inflation means that the drop has amounted to 27%, although some years were better than others. The chief problem is that from a trade perspective, shipping affects both sides of the equation due to money spent to buy ships and on shipping related services. When we take out the outflow of money, the net effect for Greece has been declining.
Fact #4. Collecting 40% of tax arrears would eliminate the 2011 budget deficit. Weak tax collection forms a big part of Greece’s fiscal problem. In June 2011, the Ministry of Finance reported that tax arrears amounted to €41 bn. Of that number, 90% came from 6,500 people and from 8,200 corporations that owe over €150,000 each. Collecting those arrears would more than cover the projected 2011 budget deficit of less than €17 bn.
Fact #5. Employees in state-owned enterprises (SOEs) earn twice as much as employees in the private sector. One of the recurring themes in Greece’s political economy is the dichotomy between an insulated and well-paid public sector and a low-paid (at least for employees) private sector. According to data released by the ministry of finance, employees at SOEs earned, on average, €38,287 in 2008 – which is twice as high as the €19,147 earned in the private sector. For some SOEs, the gap was much higher.
Fact #6. Greeks are as likely to pay a bribe as Nigerians and Pakistanis. According to Transparency International, 18% of households in Greece reported paying a bribe in the last twelve months, versus an average 5% in Europe. That number puts Greece on par with Nigeria and Pakistan.
Fact #7. When you add private debt, Greece’s overall indebtedness is low in Europe. Everyone knows that Greece’s problem is debt. But it is, in fact, public debt that is the problem. A graph shown in a presentation by the former minister of finance adds public and private debt – when the two are combined, it is clear that Greece is at the low end of the spectrum. What distinguishes Greece is not high debt overall, but high government debt.
Fact #8. Greece’s debt was mostly accumulated in the 1980s and early 1990s. Greek society has yet to have a serious debate about how it got into this mess. What is amazing is to see just how recent this debt accumulation is: in 1980, Greece’s public debt was merely 22% of GDP; by 1993, it was 98% where it stayed (plus or minus) for over a decade before going higher in this crisis. In other words, Greece’s debt problem was mostly created over a 13-year period and it was perpetuated thereafter.
Fact #9: Greece had a relatively small state in 1980. Analysts with an eye to history will always point out that the Greek state has been omnipresent in Greek life since its inception. Yet that fact, while true, disguises the extent to which statism is a post 1980 phenomenon. In 1980, government spending amounted to 24% of GDP; by 1990, that number had risen to 45%. It kept rising, somewhat more modestly to 51% in 2009. The Greek government aims to bring that number back to 45% by 2015.
Fact #10. Greece’s relative standard of living dropped after 1980. In 1978, as Greece was about to join the European Economic Community, its per capita GDP was just 5% below the European average (on a PPP basis). In 2000, the gap was 30%. In retrospect, Greece’s entry into the EEC has been seen as a political gesture, and in many ways it was; but the gap between Greece and Europe was much narrower at the point of entry than ever since. Greece was close to Europe when it joined the EEC; it was only later that Greek living standards stagnated and fell relative to the rest of Europe. Europe moved on and Greece was left behind.