Download THE GREEK ECONOMY IN CRISIS GREEK BAILOUT AGREEMENT

THE GREEK ECONOMY IN CRISIS
GREEK BAILOUT AGREEMENT
Sophia Anargyrou – Helen Michailidou
THE CAUSES OF THE ECONOMIC CRISIS
• New global economic environment since 2007 in
the U.S.
• Mortgage loans crisis affected banks globally
(liquidity reduction)
• Decrease of economic and commercial activity
• Decrease of total income and GDP
• Public debt: 1993: 91%, 2007: 103%, 2009:
113%→127%, 2010: 129,7%, 2014: 177,1% of
GDP (viable up to 120%)
• Creation of EFSF / ESM
Greek Bailout Agreements
• Law 3845/2010 stipulated
– Staff reduction (150.000 employees up to 2015)
– Salaries and pensions reduction
• Law 4046/2012
– Municipality police abolition
– Temporary suspension also for school teachers
– Salaries and pensions reduction
• Law 4336/2015
– Public employees mobility
– Fight against corruption
• Total amount for all 340 bil. €
HOW TO EXIT THE CRISIS
• Stop recession and create growth
• Create an attractive economic environment to
attract investments
• Increase aggregate demand
• Increase productivity and competitiveness
• Set long term goals and evaluate the process
• Eliminate structural problems
HOW TO EXIT THE CRISIS (cont.)
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Use EU funds
Plan reforms carefully
Encourage corporate social responsibility
Conduct re-education programs to reduce
unemployment
• Maintain social cohesion
• Collaboration between public and private sector
BAILOUT AGREEMENTS FOR OTHER EU
COUNTRIES - SOME DATA
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•
•
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Cyprus: 05/2013 – 03/2016
Ireland: 12/2010 – 12/2013
Latvia: 12/2008 – 01/2015
Portugal: 06/2011 – 06/2014
Greece: 2010 - ????
ECONOMIC CRISIS – A CRISIS OF THE
WELFARE STATE
 Bailout programs → austerity/ internal
devaluation measures (e.g. wage cuts) →
Vicious cycle of recession:
Continuous drop in GDP → Rapid reduction in
domestic demand & lower production →
dismissals & loss of thousands of jobs →
reduced disposable income → fall in private
consumption → further amplifying recession (the
cycle repeats itself).
IMPACT OF THE AUSTERITY REGIME
• Rapid deterioration of living standards.
• Adoption of measures incompatible with social
justice, which are undermining social cohesion
(increase in inequalities and social exclusion) →
erosion of the welfare state.
• Even though the economy is gradually
recovering from a deep recession, high social
costs persist.
UNEMPLOYMENT
• Thousands of jobs have been lost under
conditions of insufficient social protection.
• The unemployment rate, at 25%, is still high
despite a moderate decline since 2013 (OECD)
• More than half of the population aged up to 24
years old is unemployed.
• Given the continuation of the crisis, the new
unemployed become the chronic unemployed.
UNEMPLOYMENT AND BRAIN DRAIN
High unemployment rates
Brain Drain:
 Emigration of younger, highly educated people
has risen.
 Those studying and living abroad are
discouraged to return to Greece.
IMPACT ON SOCIAL PROTECTION / SOCIAL
SECURITY
• The spending cuts imposed by the creditors
have diminished social benefits, including
pensions, unemployment benefits family benefits
• Depletion of the pension funds reserves as a
result of the PSI
• Increase in social security contributions and
age limits
Result: widespread impoverishment, destitution
and social exclusion (23.1% of the population
live below the poverty line)
LABOR MARKET REFORMS
• Deregulation of labor market (erosion of
the collective bargaining system)
• Increase in uninsured work
• Job insecurity
• Reduction of minimum wages below
poverty thresholds
• Weakening of labor rights
IMPACT ON PUBLIC HEALTH
• Greek healthcare spending has been falling
significantly below EU average since 2010
• Hospitals and pharmacies have experienced
widespread shortages
• Reduced access to health care services,
particularly for the poorest
• Drug prevention centers and psychiatric clinics
have closed down due to budget cuts.
CALL FOR INCLUSIVE GROWTH
• Top priorities of the OECD (in line with the
“Europe 2020” strategy for sustainable, smart
and inclusive growth)
Sustainable economic growth is needed for
reducing poverty, creating jobs, and ensuring
fiscal sustainability.
 Key structural reforms.
 Adoption of policies aiming to reduce
poverty and inequality and boost
employment in the short run.
Thank you for your
attention
Helen - Sophia