Back to the basics of a sick economy
So many more opportunities have gone down the drain again, this time from the Recovery and Resilience Fund, worth some €36 billion. It’s as if the Greek economy is doomed to change only as much as allows it to remain mired in its customary model of cheap labor and low productivity. It is a model that relies chiefly on high consumption and less so on investments (hence the investment gap), which, however, are still centered chiefly in the labor-intensive, low-output and low-added value sectors of transportation and construction. They do not enhance productive capacity, strengthen the knowledge-based economy or improve productivity in modern sectors, in internationally tradable goods.
Ultimately, we are losing competitiveness, imports are increasing disproportionately compared to exports and the trade deficit is growing and creating a black hole in the current account balance, which widens as soon as gross domestic product increases slightly, pushing us toward fresh borrowing and fiscal deficits, increasing the absolute size of the debt.
This vicious cycle needs to be broken and the Greek economy must be put on a new trajectory because what lies ahead otherwise is another crisis and bankruptcy, similar to the ones that have plagued Greece’s modern history and laid waste to the belief that this time around, things will be different. They never are and they aren’t now.
We are losing competitiveness, imports are increasing disproportionately compared to exports and the trade deficit is growing
In fact, two recent announcements have proven as much.
One came from the Bank of Greece and demonstrated the impact of this economic model on the trade deficit in the January-May period: It rose 22.4%, or €2 billion, compared to the same five-month period in 2023, reaching €10.95 billion. Low productivity, which translates into sluggish competitiveness for the goods we produce, lies at the core of this development.
The second concerns the core of the Greek economic model: Figures from the Ergani database on employment confirmed that the Greek economy is largely supported by and reliant on cheap labor. What does the data tell us? That more than half of private sector salaried employees earn €800 or less a month, net, that seven out of 10 take home €950 per month or less, that only one in 10 has a salary above €1,450, and only 3.63% earn more than €2,025, net.
If the aim of an economy is to create sufficient jobs with decent wages, then it’s safe to say that the Greek economy is in a very bad way. What’s worse, it is failing. Around €60 billion was spent in the 2020-2022 period during the Covid and energy crises, yet we are currently discussing measures for compelling doctors in private practice to prop up the National Health System. In the meantime, hopes have also been dashed for the EU-backed Recovery and Resilience Fund, the National Strategic Reference Framework (ESPA) and the new Common Agricultural Policy (CAP) – which together add up to nearly €100 billion for spending in the space of just four or five years – triggering a dynamic restart and setting the Greek economy on a more promising path.
So, following the rather favors-driven management of tens of billions of euros in 2020-2022, the latest, one-off fruits of the European money tree are being spent just like that, without any proper programming, and even with the odd whiff of corruption. And the few things that are changing appear to be changing simply so as to ensure that the basics remain the same; the basics being the parasitic model.
