Greece has seldom been out of the headlines in the past year. Professor Panos Tsakloglou, of Athens University of Economics and Business, is a world- renowned expert on poverty, inequality and social policy and was appointed Chairman of the Greek government’s Council of Economic Advisers in July, making him Greece’s Chief Economic Adviser.
In a break between crucial rounds of talks with the IMF and the EU, he gives an exclusive view on the tragedy that has beset his country.
What has been the impact of the crisis on ordinary Greeks?
The economy has shrunk by a fifth since the crisis began. That is more than most countries’ economies shrank during the Great Depression. According to the latest projections of international organisations, by the time we start to recover it will have been almost as big a crisis as those that beset the US and Germany in the inter-war years.
Unemployment is around 25%; youth unemployment is over 50%. All other social indicators, like bankruptcies and suicides, have seen a sharp increase. It is very difficult here.
Who has suffered most?
So far one of the few segments of Greek society to be relatively well protected is the elderly. It is those of working age who have had the toughest time.
Unemployment benefit was always meagre in Greece and lasts for one year at most. There is no such thing as a minimum income guarantee here. But our model worked reasonably well until now because the Greeks – like many Southern Europeans – live at home till they get married, so there is an internal distribution of resources within households, with family members helping each other. What has happened in this crisis is that whole families have found themselves unemployed, and that creates a very difficult situation.
As for the young, unemployment – even among our graduates – is very high. Many of my best students are emigrating upon graduation. This may not be a bad thing if they return with more experience
and further qualifications, but for the country it is a waste of very valuable human capital if they do not.
Can you see a route out of this problem for Greece?
Greece entered the crisis with very high internal and external imbalances – that is, with very high budget and current account deficits. The fiscal consolidation undertaken since then is larger than that of any developed economy since 1945. This effort is gradually paying off, and by next year Greece is likely to have a primary surplus in the budget.
Our unit labour costs are coming down, which is a good indicator of improving competitiveness. Our biggest problem is that investment rates are at historically low levels because business owners fear the country will return to the drachma.
We need growth, and for growth we need investment. Fear of a redenomination is a serious impediment to investment. I think that in recent weeks this risk has begun to subside, and I hope that this will continue. If we can remove that anxiety then things will improve.
What are your biggest fears for the country?
The biggest fear I have is that Greece will leave the euro. My generation will tell you that being part of Europe has meant democracy, prosperity and welfare. These are very important things and would be endangered if we abandon the path we are on at the moment. I know it is extremely painful for the Greek population, but I fear that the alternative is far, far worse.