By Maria Negreponti-Delivanis* 08.03.2016


The situation of the Greek economy and society, six years after the enforcement of the Memoranda appears hopeless. It was clear from the outset that the inhuman demands of creditors, as illustrated in the third memorandum, now in force, although accepted by the Government of Syriza, and not only, would be impossible to implement.

The insurmountable difficulty, that makes the Greek debt unsustainable, plunging the people into despair and progressive impoverishment, is not so much its height (in absolute but also in relative terms) as the condemnation of the country to an ongoing recession.

Under these circumstances, even assuming a zero interest rate, it would still be impossible to deal with the debt as the yearly decline of GDP is cumulative. Greek GDP is constantly declining, over the last six years, resulting in an escalation of the debt.

The inability of the Greek economy for growth during the critical period of implementation of the Memoranda is in no way due to the denial or delay of the country to proceed with reforms[1] or even to the failure of the Greeks to properly implement a “very good program”, as the German finance minister is constantly repeating. On the contrary, it is due first, to the tragically wrong IMF program imposed on Greece[2] which multiplied the intensity of the recession, second to the willful disregard of this error, coupled with the irrational insistence of the country’s creditors on its continuation, and third, to the austerity policy implemented not only throughout Europe, not only as a result of ideological commitment to liberalism, but also because the rotten edifice of the common European currency cannot possibly survive without it[3].

Although there is no hope of Greece exiting the crisis, if left in the unhealthy environment of the Memoranda as is undoubtedly apparent from the following, it is nevertheless sadly impossible to explain the policy of all Greek governments, during these last six years, given that:

* They succumb to the relentless blackmail of the institutions, to details that only relieve the tension in the short-term, but in the long-term worsen the dominant problem of non-sustainability of the debt, while gradually dismantling the economy and society of its development potential, plunging into a long and hard to reverse recession.

*They involve themselves into useless negotiations on the regulation of the debt with the country’s creditors.

* They declare that they will supposedly not cross certain “red lines”, defined by themselves, which they then proceed to cross with remarkable ease, thus impoverishing all socio-professional categories, one after the other.

* They agree to implement measures promising from the start to deliver exactly the opposite results than intended, such as among others, the imposition of tax rates and taxes exceeding a critical point.

* They identify themselves with the institutions, which persist to present the transformation of the labor market into a jungle and the selling off of public property as supposedly necessary reforms.

* They reassure the tragically suffering Greek people that their woes are coming to an end and better days are coming when, in fact, the crisis is constantly deepening and no solution is in sight.

In summary, the Greek governments behave as if they are convinced that the memoranda are aiming at our salvation while everything is pointing at precisely the opposite.

The only way for Greece towards salvation and to the possible repayment of her abysmal debt over time is to ensure rapid growth[4]. This expectation however can only be considered utopian under the present conditions, as shown by the following analysis.

Ι. The consequences of the Memoranda to date

The implementation of the Memoranda aggravated every single main economic, social and psychological indicator, so that all the reassurances on the part of our creditors allegedly discerning success stories, an imminent exodus to the markets, positive growth rate records etc, seem totally ludicrous.
Instead of these utopias let me remind some glaring cases of universal deterioration in Greece[5] and subsequently refer to projections for future developments. These reports show without any doubt that the stabs to the economy and society were accurately aimed at all its vital structures and functions, with the result that its revival seems to be a summer night’s dream. In a recent statement, the President of Greek industrialists said that it would take around 100 billion euros to set the economy back on its feet again. I will not hesitate to argue that I consider these 100 bn. euro to be insufficient because the Greek economy is unfortunately in a state of total destruction and needs to be reborn. It is completely insane to argue that this ongoing destruction aims at our salvation.

* Macroeconomic data[6]

At the beginning of the crisis the debt represented approximately 100% of GDP and was sustainable. Today, despite the unsuccessful, due to the fact that it was unacceptably delayed, “haircut”[7], the debt ratio to GDP has almost doubled. Furthermore, it is constantly growing with the result that in absolute terms, it is expected to rise from 324 billion euros in 2014 to 337.6 euros in 2016. The 2007-2015 period shows a dramatic and unprecedented, for an economy in times of peace, drop by 27.6% in per capita GDP, equivalent to 70 billion euros and to 6.100 euros per year in lost income for every Greek citizen. The Greek GDP per capita corresponded to 84.4% of average per capita GDP in the EU Member States, and is now estimated at only 53.6%. 3.800,000 Greeks are at risk of poverty[8]. The official unemployment rate has reached 27%, while informal unemployment has climbed to astounding levels, given the significant decline in full-time employment and the corresponding rise of its uncertain and insecure forms. Before the onset of the crisis, unemployment was only 7.8%. Private consumption, which represents the engine of economic growth has dramatically shrunk by about 47 billion euros. This year’s Christmas holidays made no significant difference, since turnover fell by 8% compared to the corresponding period last year, and by 50% compared to the beginning of the crisis. Both private and public investment is in shambles, given the fact that fixed capital investment dropped from 57.2 billion euros before the crisis to 18.7 billion euros. Wages and pensions have sunk. In the business field, the last report by Price Water House Coopers (PwC) on 2.824 Greek companies with a revenue of more than 10 million euros, comes to the frightening conclusion that 40%, approximately, of them are indebted, with no chance of survival . A decrease of 20% is recorded in real estate in 2015, corresponding to 10% less than the 2007 level. As might be expected, 44% of Greeks are overwhelmed by negative emotions such as fear, insecurity, anxiety, frustration and anger[9]. Greeks appear to be the most pessimistic in the EU regarding their future, since 7 out of 10 believe that the country is moving in the wrong direction[10]. Even the health of low- income Greeks is deteriorating, since 25% is unable to acquire necessary medicines and treatment and 42% of respondents are experiencing chronic diseases[11]. Most destructive as far as the general non reversible nature of the crisis is concerned, is undoubtedly the massive brain drain, in search of a better future. The cost of this drain is estimated at the astounding amount of 170 billion euros[12].

* Fiscal and Financial data

The tax storm caused by the previous, as well as the present government, aimed at satisfying the increasingly inhuman demands of the country’s creditors. They seem to have forgotten however, that during a period of constantly dropping incomes, this tax frenzy is doomed to results diametrically opposed to what is intended, as a constantly increasing proportion of taxpayers faces an objective inability to fulfill its obligations[13]. Let me mention some of these, which were due to the implementation of ineffective and / or inhuman measures:
* In the 2010-15 period taxes of 31 billion euros were imposed, but revenues fell short by 5 billion euros compared to before the crisis. Thus, while in 2009 personal incomes declared amounted to 100.3 billion euros, in 2014 the corresponding amount was just 73 billion euros[14]! Moreover, the result of nine painful fiscal interventions in 2014 was that government revenues increased by only 0.08%! As to the total tax revenue of the country, this amounted to 51.266 billion euros in 2009 and is estimated at only 43,162 euros respectively in 2015.
* The IRS withholds 49% of wages, which is the highest rate in the OECD countries. The taxes paid in 2014, according to estimations, reached the indeed unbelievable rate of 53.3% of personal incomes.
* Since 2009 tax evasion is constantly increasing (although suppressing it is apparently a primary target), resulting in a loss of 10 billion euros.
* The state fails to fulfill its obligations, exceeding 5 billion euros.
* The private sector owes 150 billion euros to the IRS, customs, pension funds and banks[15].

And within this total devastation some are still seeking a primary surplus, the estimated level of which has officially been declared at 4.3 billion euros for 2015[16].

The combination of all of the above measures and omissions resulted in the initial extermination of wage-earners and pensioners. Then the lenders proceeded to killing-off real estate owners, farmers and professionals, as well as tourism. The disaster has affected the totality of the country’s growth potential.

Let us now take a look at the tragedy of deposits, which eventually led to capital controls[17]. The available money is estimated to have declined from 262 billion euros in 2009 to 153 today. Moreover, Greece has essentially been left without banks. Indeed, since the beginning of the crisis banks lost 3.500 branches and 50.000 jobs within and outside the country, their value was ultimately zeroed, and from a position of approximately 215 billion euro of weighted assets they were finally plundered by foreign funds, who bought them out for the astounded price of 750 million euros, and thus the 40 billion euros borrowed by the Greeks for their recapitalization were lost.

Under these dramatic developments, which do not yet include the devastating consequences of the migration problem, I frankly wonder whether there is a single serious economist or even a conscientious well-informed citizen, who fosters any hope for the revival of the Greek economy. And yet, not only all Greek governments during the last six years, but the creditors as well envision an eventual end of the recession, an upcoming growth, investors crowding in, success stories, and other similar jokes!

ΙΙ. The prospects for the future (if we remain under the Memoranda)

It is certain that there are utopian lenses in operation with respect to the future of our hapless country. Despite the devastation brought on by the tragically mistaken memoranda policy, those in charge dare promise that our future will be better. Unfortunately, however, it will be worse in perpetuity if we remain prisoners of the Memoranda. Let me present some compelling evidence not only for the present generation but for future ones as well.
Let me start with the predictions of the world report for 2015 by PROGNOS AG[18]. According to these, and assuming that Greece will remain in the Eurozone, the ratio of debt to GDP is expected to rise to 245% in 2022, while the economy will be simultaneously shrinking at an annual rate of 0.8%, up to 2020. Let me remind that the optimistic predictions that the recession would supposedly equal zero in 2015 were belied once again, given the fact that the year ended with a decline equal to 0.7%[19]. It is also estimated that the unemployment rate would need 25 years to drop below 10% of the working population and only in 2034 Greece will be able to witness before crisis levels. It is predicted that state revenues will continue declining in 2016, mainly as a result of direct taxation, but also because of an impressive decrease of social security revenues which are estimated to drop to € 19 billion compared to 26 billion respectively before the crisis. Dozens of citizens, who ought to be in intensive care fail to be awarded a hospital bed. A further drop in per capita income is expected for 2016, estimated at a total of 30% and the official unemployment rate is also expected to rise to 30%. In spite of our extinct economy, the creditors demand an additional 9 billion euros until 2018. Finally, we are often reassured that it is certainly worth our while to bear this last sacrifice in order to be free of the memoranda. These reassurances are totally misleading, since the truth is that we will necessarily be under surveillance until we pay back 75% of the debt.

Greece is unfortunately and without the slightest doubt doomed, if it remains within the poisonous embrace of the quartet. This fact has long been recognized by representatives of international organizations, as well as numerous economic researchers, but not by the Greek government.

To be more specific, the efficiency of neoliberal inspiration programs, that revolve around internal devaluation, wage minimization and unjustified panic against inflation, was challenged almost from the start of their implementation. Under the black shadow of extreme liberalism, which has miserably failed, it is not only Greece that suffers, the whole of the EU is plagued by recession, high unemployment, unprecedented inequality in income distribution, as well as a constantly increasing public debt[20],, although to a lesser extent compared to Greece. In this respect it is worth mentioning a recent study by OFCE (French Observatory of economic conditions)[21] economists, which concludes[22] that insufficient EU investment is a result of insufficient demand. It is well known that the neoliberal vision of the economy downgrades the importance of demand, leading to disastrous results worldwide, but mainly within the EU.

The conclusion that effortlessly follows from the above analysis is that the salvation of Greece requires rapid development which is impossible in the unhealthy, strangling environment of the Memoranda. Therefore, a breach with our partners / creditors and the compulsory reversal to the national currency is, ceteris paribus, the only passport to survival for Greece .

*Former Rector and Professor at the University of Macedonia , President of the Dimitris and Maria Delivanis Foundation


[1] Let me mention that the reforms insisted upon by the creditors up to now (with the exception of the necessary reform of the insurance system, which however does not represent a Greek particularity) consist of:
* shrinking the public sector, for strictly ideological reasons and no previous study, in spite of the fact that its size is absolutely comparable to corresponding average of the EU member states, thus proving the existence of total confusion between the necessity for adoption of quality measures aiming at increasing its efficiency and the dangerous (as already proven by the case of public hospitals, education and public administration) imposition of quantitative criteria.
* the gradual abolition of almost all labor rights
* the rash selling out of public property, allegedly in the name of exploiting it.
[2] This has been recognized by the IMF, as well as Christine Lagarde, Dominique Strauss-Kahn and many more
[3] M. Negreponti-Delivanis (2004) «The fate of the Euro following the funeral of the Stability Pact», Delivanis Foundation and Cornelia Sfakianaki ed., Thessaloniki.
[4] Assuming that writing off a considerable part of the debt is excluded in the present circumstances, mainly because the people of Northern Europe have been wrongly convinced that loans to Greece are used for the “wellbeing” of the Greek people, while in reality they are absorbed by German, French and Italian banks. We should also keep in mind that an extension of the obligation to pay the interest and the loan itself is not a solution for Greece, since its GDP continues to decline or increases at a slower rate in relation to the debt.
[5] Former manager of the Bank Of England Mervin King declared in a recent speech at the London School of Economics that he “would never have expected to see a developed country plunged in recession for more years than the USA in 1930″.
[6] OECD
[7] The delay concerning the haircut was officially recognized as being due to the unwillingness of putting the EU at risk. The Independent Evaluation Office of the IMF is investigating responsibilities for the IMF’s error.
[8] Newspaper To Paron, 07.02.2016
[9] Relevant study, 16.12.2015
[10] Eurobarometer, 02.03. 2016
[11] Study for the National Public Health School
[12] Athan. Papandropoulos “The cost of brain drain equals 170 billion euros” (europeanbusiness)
[13] Irving Fisher has since 1930 mentioned the danger in the case of countries aiming at reducing their debt by shrinking expenses, given the fact that this policy leads to a drop of prices and incomes and eventually to the expansion of the debt. This has been forgotten however, along with many important past facts.
[15] Newspaper To Paron, 07.02.2016
[16] Newspaper To Paron, 07.02.2016
[17] According to Newspaper Kathimerini and ellinopaligenesia.blogspot
[18] Its headquarters are in Basil and the results were published in the German Newspaper Die Welt, while the part concerning Greece was published in the Newspaper Proto Thema on 02.11.2015
[19] Kathimerini (English version), 13-14.02.2016
[20] On the world level, the debt has been rising at a yearly rate of 5.3% since 2007, while the growth rate is as low as 3.3%
[21] Alternatives Economiques, No. 353. January 2016.
[22] Obviously expected but its emergence as a conclusion of a serious recent study is significant and hard to question.

ΠΗΓΗ: International Hellenic Association