The economic and social implications of the Greek government-debt crisis

Abstract

The main aim of this dissertation is to highlight the economic and social implications of the Greek government-debt crisis and the imposition of the austerity measures that followed. From a review of the literature on the impact of economic crises, key indicators have been selected, and trends have been observed over a period between 2000 and 2015, with particular focus on the effect that the global financial crisis brought in 2007, followed by Greece’s own national crisis in 2009. The main areas that are studied are unemployment, earnings, savings and investment, and inequality and poverty. The results suggest that the crisis’ impact has been wide and far-reaching. The unemployment rate stood at 27.9% in 2013, and youths endured the largest burden of all age ranges, while those with low levels of education attainment also suffered severely. The number of part-timers tended to increase, and employment rates for full-timers fell, suggesting a shift from the former to the latter. Long-term unemployment rates were still rising in 2014. Average annual earnings fell by roughly €4,500 for the average worker, and this translated into falls in disposable incomes of households by roughly the same amount, causing a lack of economic activity. Naturally, gross savings doubled within a year, while total investment stood at 11pp below the EU average in 2014. Income inequality also rose, whereby the lowest income brackets suffered the most, while some higher income groups saw their incomes rise. Poverty in Greece rose dramatically since the onset of the crisis, especially for youths, as did the rate of material deprivation. The prolonged critical state of the Greek economy suggests the need for drastic reforms, despite current austerity. This dissertation provides policy recommendations covering potential labour market reforms and changes in the tax system that are duly needed.