A rather gloomy article about the Greek economy was written up in the Financial Times, saying that Greece's good days are nearing an end and that Greece's workers will bear the brunt of the inevitable large downturn in the economy. According to the report, the "risk now is that wage growth, consumer spending and business investment will bear the brunt of an inevitable adjustment process,'' which will cause of mass exodus of Greek workers to Western Europe not seen since the 1960s.
Greece immediately replied to the paper's remarks calling the report unjust. Click here for the official government response.
DF: Yes there may be a global slow down within economies around the world, and maybe the picture in Greece is not as rosy as the politicians may say, but a mass exodus of Greek workers?
DeanMan... ...We hear that Greece has a large public sector, but I would like to see figures on the number of civil servants per capita, compared with other European countries of comparable size, like Ireland or Portugal. Obviously a nation the size of France or Germany can achieve economies of scale not available to a smaller country.
A combination of retirements, as the Greek population ages, and implementation of new computer technologies may enable the Greek public sector to slim down while achieving greater levels of productivity and efficiency.
tomstaph... ...Just to add: what does an expanding current accont deficit actually mean for a country like Greece? Traditionally, a large trade imbalance was associated with debt-burdened emerging economies. To pay for imports, countries just printed money, triggering inflation and pushing down the value of their own currency. This translated into more expensive debt; interest payments alone would absorb a huge chunk of the national budget sending the country into a recession or worse, financial collpase (Argentina). Greece uses the euro, arguably the world's strongest currency keeping its debt payments at a manageable rate. It doesn't need to print money; it just issues bonds to raise capital. It's total debt as a % of GDP is high but lower than Italy's or Japan's. I think FT may have exaggerated a bit. Greece is the only true, stable, regional hub in the area acting as the most logical springboard for investment in the fast-growing Eastern Med. Greece also ppears to be doing more to maintain that status by attracting foreign direct investment (technology park outside Athens, trimming bureaucracy, etc.). As for losing people to W. Europe, let's not forget that Greeks already study abroad more than other EU country as a % of the total population but many still come back post-graduation. Finally, Greeks may be fiercely indepedent but financial expenses are generally shared by the family unit, keeping costs down for individuals (think of all your Greek friends who still live in the apartment above their parents who own the building). It's hard to give that lifestyle up!
DeanMan... ...“We're not a manufacturing country" says Plutarchos Sakellaris, chief economic adviser at the finance ministry in the FT article. That means Greece has to do more to become a service oriented economy. That means investment in education and telecommunications infrastructure, for example, Fiber Optic lines.
The US has lost most of it's manufactirng base to China, but retains the creative and design part of the process on the front-end of the product development cycle and the marketing part of the process on the back-end of the product cycle. These front and back end development stages are more profitable than manufacturing - hence the term, the "smile" for the profitability related to each stage of the product development process.
There's no reason a more advanced and educated Greece cannot have this same relationship with it's Balkan or Turkish neighbors, farming out the maufacturing, but capturing more of the design and marketing.
DeanMan... ...Rising labor costs in Greece would imply a shortage of workers, not a surplus forcing migration out to other European countries.
However, I agree with FT that Greece has too many eggs in too few baskets (tourism and shipping) and must diversify its economy. Investment in education (technology and business) and infratructure, combined with strategic trade agreements are key. Greece must move to take more advantage of it's geographic location between Europe, Asia and the Middle-East. It must move aggressively to become the commercial hub of Southeast Europe and Eastern Mediteranean basin, so that it can take advantage of emerging markets in the Balkans, Southern Russia and Turkey.
Greece impressed the world with its successful planning and hosting of the 2004 Olympic games. It's now time to move with purposeful resolve towards other economic goals.
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