25 Jan 2015

Austerity in Greece: a tragedy or triumph?

In a special report, Yanis Varoufakis, tipped to be Syriza’s new finance minister, argued that Greeks were being unfairly penalised during the crisis. But how badly were Greeks affected?

Watch our special report with Yanis Varoufakis from February 2012.

Polls opened in Greece today for an election expected to bring in a government led by the leftwing party Syriza, which has pledged to take on international lenders and roll back painful austerity measures imposed during years of economic crisis.

Read Paul Mason's blog: Five last-minute thoughts about the Greek election

Barring a huge upset, victory for Syriza, which has led opinion polls for months, would produce the first euro zone government openly committed to writing off debt and renegotiating its EU-backed bailout deal.

Combined with last week’s announcement by the European Central Bank of a massive injection of cash into the bloc’s flagging economy, it would represent a turning point for Europe after years trying to fight the slump by clamping down on budgets and pushing countries to pass structural reforms.

Around 9.8 million Greeks are eligible to vote at almost 20,000 polling stations in schools around the country, and a big turn out is expected in what is being seen as a make or break election for Greece.

But has austerity helped Greeks?

After its most severe crisis since the fall of its military junta in 1974, Greece’s economy has shrunk by some 25 per cent, thousands of businesses have closed, wages and pensions have been slashed and unemployment among young people is over 50 per cent.

At the same time, its massive public debt has climbed from 146 per cent of gross domestic product in 2010 to 175.5 per cent last year, the second highest in the world.

Deficit: in the last five years, Greece has swung from a hefty deficity to a small surplus. The country's primary deficit was 10.7 per cent of GDP back in 2009. Last year it ran a primary surplus of 2.7 per cent of GDP, which means that the government managed to collect more money that it paid out.

Banks: banks have become healthier, as the it has been recapitalized and the industry downsized from 18 commercial banks to just four.

Unemployment: five years ago the unemployment rate was about 12 per cent. Last year it was more than double that level, at 26 per cent. And now half of all young people are out of work.

Wages: the employed per currently getting paid less. Wage inflation peaked at an unsustainable 12.5 per cent year-on-year growth in 2010. Then wages began falling sharply. In 2013 they were falling nearly 12 per cent year-on-year, and they are continuing to fall.

Retirement: The retirement age averaged 61 in 2010. It has been pushed out to 65, and expectations are that it will be hiked again to 67 in the coming years.

Debt: Net debt was around 130 per cent of GDP in 2010 according to the IMF. Now it is close to 170 per cent.

Despite some improvement, with the economy out of recession for the first time in six years and unemployment down slightly, it may be years before Greece recovers.

Polls are due to close at 7.00 p.m. (1700GMT), and the first exit polls are expected immediately after voting ends, with the first official projections due at 9.30 p.m. (1930GMT) with results being updated into the night.

While Syriza is expected to form the biggest group in the 300-seat parliament, it is unclear if it will be able to govern alone or have to form a coalition with one or more of the smaller parties.