Greece will exit its stability program on Monday. How has the Greek economy developed since austerity was imposed in 2010? And is Greece prepared to meet the budgetary targets? A data analysis provides answers.
Greece’s government debt is more than twice the EU28 average; the country’s market value as measured by gross domestic product has decreased by a third since the crisis started; and one in five people are unemployed: At first glance, the situation doesn’t give rise to optimism.
Traditionally, the service sector is the strongest contributor to Greece’s GDP, followed by industry and agriculture. But Greece urgently needs new sources of income to avoid slipping back into recession after the third austerity program ends on August 20. Exports are a promising source of income: Despite some tough years, goods exports rose by 35.5 percent from 2010 to 2017, a welcome relief in Athens and Brussels.
With Greek exports slowly on the rise, the big question remains whether this development is sustainable and strong enough for the country to finance its debt repayments and meet strict commitments for its primary budget surplus. To answer this question, DW analyzed trade data from 2010 to 2018. The investigation shows that the idea of trade as a panacea comes with three caveats.
Caveat 1: Labor costs shrank during the crisis
When the crisis hit hardest in 2010, labor costs were the highest they had been in at least a decade. They dropped markedly from this peak: “The fiscal restructuring that took place as part of the stability program with the EU reduced the cost of labor significantly,” says George Pagoulatos, professor of European politics and economy at the Athens University of Economics and Business.
What turned out to be beneficial for exporters came with a downside: Labor costs measure both wages and taxes paid to the state. Wages have decreased even more than labor costs as a whole, and Greek businesses now pay less for skilled workers.