During the decade that just ended, Greece managed to deal with twin deficits that plunged the country into crisis and austerity. The country also managed to tame its public debt as, despite the fact that this grew both in size and as a percentage of gross domestic product, it is now considered to be sustainable thanks to the reduction of debt-servicing costs and the creation of a cash buffer. Yet it was a Pyrrhic victory.
In order to contain the mammoth current account balance deficit and to turn fiscal holes into surpluses, Greece needed to reform itself on an economic as well as a social level. The population decline, the precipitous drop in the birth rate, the aging of the population, the drastic reduction of income levels, high unemployment rates, the burdensome nonperforming loans and taxpayers’ arrears to the state (all that in a context of excess taxation) make up a hefty legacy at the start of the new decade.
Over the course of the new decade, Greece is called upon to heal the wounds of the previous 10 years, but without relapsing into the mistakes of the past or returning to deficit policies. In order to return to 2009 levels, the country needs measures that will help boost births by an annual 30,000-40,000 so as to restore the size of population to pre-crisis levels. Greece must create about half a million new jobs and the right conditions for the return of about 100 billion euros in deposits – if of course that money still exists. We are looking for cash to erase about 60 billion euros in outstanding debts to the state and about 50 billion euros in nonperforming loans from the banks. And we are basically looking for ways to increase Greece’s GDP by up to 50 billion euros so that the economy grows back to pre-crisis levels.
The past decade also saw a small number of significant achievements; all came at a great cost. One of them was erasing about 36.6 billion euros of budget deficit. 2018 closed with a budget surplus of 1.8 billion euros, while the 2019 figure is expected to be about the same. So over the decade, Greece’s fiscal performance improved by some 38.5 billion euros. A second accomplishment was the improvement in the current account balance of payments.
The 16-billion-euro deficit of 2008 was brought down to 5 billion euros in 2018 (the figure is expected to drop further in 2019). This improvement was mostly the result of tourism growth, while official statistics also recorded a significant increase in exports.
Another positive development over the past decade was debt restructuring. Although the debt over that period increased by 31 billion euros (despite the private sector involvement, or PSI, in the Greek debt haircut), the annual interest on the debt was cut in half thanks to restructuring and a 37-billion-euro cushion was created to ensure the debt is serviced in the medium term. Another welcome development over the past decade was the reduction of interest rates. The yield on Greece’s 10-year bond has also dropped to 1.4 percent from 9 percent in 2010.
Great sacrifices were made to achieve all that. GDP slumped by 47 billion euros, with household consumption down by 35 billion and investment by 20 billion. Up to 488,000 jobs were lost while the number of employed people fell to 4.2 million from 4.7 million at the start of the decade. The number of long-term unemployed stands at 643,000, up from 195,000 at the beginning of the decade. Meanwhile, despite a drop in recent years, the total number of unemployed has increased by 430,000.
About 100 billion euros in deposits left the banks while a freeze on lending pushed loans down by another 100 billion euros. Despite the various haircuts and settlements, bad loans increased by 48 billion euros over the 10-year period. At the same time, outstanding debts to the state soared by 60 billion euros to 105 billion. Using the 2008 poverty line as a benchmark (around 7,000 euros per year), it emerges that 45 percent of the population fall below that income level, up from 18.9 percent at the start of the decade. One in three is suffering severe material deprivation, up from 23 percent a decade ago.
The number of births plunged as deaths soared. There were fewer weddings and more divorces. The percentage of the population aged over 64 is clearly catching up with that of under-24s. The most productive section of the population, the 25-64 age group, has also shrunk. The problem is so acute that it will certainly take more aggressive policies than childbirth benefits or state subsidies to reverse the brain drain.
Statistical data show a major demographic decline over the decade; there are still no signs of a turnaround. The country’s population continued to shrink into 2019 despite the fact that the migration balance is now positive. Births are still outnumbered by deaths and the young-to-elderly ratio is at a historic low and falling. The years of the economic crisis saw fewer weddings and more divorces. The figures are revealing:
1. Greece’s estimated population in 2019 was 10.7 million compared to 11.1 million in 2010. In other words, within 10 years (the population continued to decline over 2019), the country’s population shrank by more than 400,000 people. The reduction is due to the brain drain, the departure of economic migrants (particularly between 2011 and 2015) and the slowdown in births (at least in comparison to deaths).
2. At the start of the previous decade, between 110,000 and 120,000 babies were born every year. At the close of the decade, this figure fell below 87,000; this is according to 2018 data, and the figure could drop further in 2019. The mortality rate, on the other hand, has gone up. From 110,000 in 2009, the number of deaths was over 120,000 in 2018 and in 2019. Thus, every year, because of the negative birth-to-death ratio, the population drops by more than 40,000 people. However, this number has been dropping by about 15,000 due to immigration.
3. The country’s population under 24 years of age was 2.87 million at the beginning of 2010. However, that number had dropped to 2.6 million by the start of 2019. Over the same period, more than 2.3 million people reached the age of 65 compared to 2.1 million at the beginning of the decade. This means that soon there are likely to be more elderly people in Greece than young people. The number of people aged 25-64 dropped by 413,000 as, among other reasons, a large chunk went abroad in search of better employment opportunities.
4. The decline in the number of weddings has been attributed to the economic crisis. In 2009, Greece recorded an annual 60,000 weddings. The figure is now less than 47,500. Over the same period, the number of divorces has climbed to 20,000 per year compared to 13,600 at the start of the decade. Hence the number of married people is falling by at least 15,000 annually. The reduction is to a large degree also due to financial concerns as indebted citizens were better off getting divorced than staying married.