Tassos Giannitsis, Stavros Zografakis

Greece: Solidarity and Adjustment  in Time of Crisis

Macroeconomic Policy Institute, March 2015

tassos giannitsis stavros zografakis

The analysis of economic developments and policies over the period of the crisis, as well as the impact on incomes, employment and inequality, showed that new inequalities, divides and balances emerged in Greek society during these years. The findings of this study depict a reality as shaped both by what has been done and by what has not. The answer to the question of what could have been done differently is not easy. Any answer, however, that would convincingly suggest that the impact could have been milder would mean that the policy management of the crisis involved, ultimately, “reverse solidarity”.

Further to the more specific conclusions presented in individual sections, our analysis allows also some central observations to be made:

First, in the 2008-2012 period we can see a surge in inequality regarding certain variables, such as income from wages, while overall inequality exhibits a mixed trend. Although the limited variations in overall inequality during the crisis is an important fact, what is more important is that it occurred amid growing poverty and total pauperisation of a substantial part of Greek society, mainly in terms of “absolute poverty” but also partly in terms of “relative poverty”. By this downspiralling, the “bottoms” drifted much further apart from the “tops”, even if they had suffered relatively lesser income losses.
It is crucial to recall the importance of distinguishing between those who are reflected by the various statistics and those who are not even included.

As mentioned in Th. Piketty (2013), p. 417ff., inequality is a complex question, which cannot be highlighted by just one index. It is for this reason that in this study we focused on households, individuals, deciles and top incomes and more inequality indices, showing how different aspects of inequality are hiden behind average figures.

Thus, overall inequality revealed limited changes, but specific groups were hit in an extremely unequal degree while society experienced a drastic and violent reduction in incomes and living standards. The at-risk-of-poverty rate began to increase in 2010; by 2013 it stood three percentage points above its 2009 level, while a significant number of households could no longer afford goods or services that are considered as basic necessities. New social strata fell into new forms of poverty. Shrinking incomes were partly the result of state intervention in wages, pensions and the labour market, but also to a large extent stemmed from the crisis itself. When the crisis starts to subside, those who lost income as a result of government austerity measures will probably be worse off than those who lost as a result of the crisis, with the exception of the unemployed. The automatic mechanisms of the market will work in favour of the latter category, and the degree of inequality will begin to increase, at least in an initial phase of the recovery.

Inequalities due to the crisis were exacerbated by the fact that the tax burden on the weaker groups of the population was much heavier than that of the stronger ones. This was not a solidarity factor. It can be argued that the burden, e.g. on the property of the richest or even the less rich strata, had been unduly nonexistent before the crisis. However, the burden imposed during the crisis on these two groups and the lowest-income groups was strongly asymmetric, occurred in an extremely adverse economic environment and very abruptly, which made the adjustment particularly painful.
Second, during this period a number of new divides emerged in the Greek society, between:

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