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Grexit (2): Austerity, poverty and morosity persist, as brains flee the country

By       (Page 2 of 3 pages) Become a premium member to see this article and all articles as one long page.   1 comment, In Series: Grexit Euro Crisis
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This exodus is not surprising. Household income has been negatively affected in an unprecedented manner during the current crisis. The Gross Domestic Product ('GDP') per capita has fallen by 24% since 2008, from 32,408.19 to 24,501.53 Euros in 2015, while average annual inflation has remained around 3.5%.

Entrepreneurs are most vulnerable among all businessmen. More than 16,000 small and medium enterprises closed down in the 2014-2016 period. A total of 244,712 have been lost from the economy in the period 2008 to 2015.

The number of companies and individuals who default to their payments to the Greek State has surged, with dramatic effects. More than 150,000 bank accounts have been seized since the beginning of 2016, practically doubling in comparison with 2015 and 2014 (136,000 and 130,000 annual bank asset confiscations respectively).

Even tourism, a sector that has had excellent performance in 2013-2015, is now showing signs of fatigue. The Hotel Owners Union of Athens-Attica has just announced that occupancy rates in the capital have declined in the first half of the year by 1.8%, in spite of the fact that Greece has benefitted from the security concerns in neighbouring countries and the boycott of Turkey this year by Russian tour operators.

And, more depressing for the young generation, the prospect of improvement of the country's economy is bleak.

The latest report by the International Monetary Fund ('IMF'), "Debt Sustainability Analysis (DSA) for Greece" published in May 2016, claims that the Greek banks will need another 10bn Euros (on top of the 43bn Euros the Greek government has already borrowed to bail them out).

According to the DSA,

"Demographic projections suggest that working age population will decline by about 10 percentage points by 2060. At the same time, Greece will continue to struggle with high unemployment rates for decades to come. Its current unemployment rate is around 25 percent, the highest in the OECD, and after seven years of recession, its structural component is estimated at around 20 percent. Consequently, it will take significant time for unemployment to come down. [IMF] Staff expects it to reach 18 percent by 2022, 12 percent by 2040, and 6 percent only by 2060."

Was the decision by the Greek government on 6 and 13 July 2015 to abide by the Eurogroup and EUCO rules, in order to remain in the Eurozone, a wise one? This is a dilemma, the answer to which will occupy economists and academics for many years to come. For the moment, it looks as the Plan X, architected by then Finance Minister Yanis Varoufakis and U.S. economics professor James Galbraith, to take Greece out of the Euro and restore the country's currency Drachma, could have made sense. Galbraith certainly believes so in his recently published book Welcome to the Poisoned Chalice: The destruction of Greece and the future of Europe (Yale, 2016).

Plan X was first supported, then disowned on 5 July 2015, by Tsipras.

Greeks, and those who know about Hellenic ancient and modern history, are confident that the nation has a destiny and the Greek ship a destination to reach. The question is whether its captain and crew know where that is.

For a detailed account on the Greek Euro Crisis of 2015, click here

Also click here

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J N Couvas is an academic, journalist, and an international corporate and political adviser, specialising in Middle East and Balkan affairs. He teaches international strategy and executive leadership at universities in the region.

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