Causes of Inequality and Poverty in Greece

Causes of Inequality and Poverty in Greece

To understand the causes of inequality and poverty in Greece we have to look back to its joining the European Union in the ’80s and what followed. 

Greece became the 10th member of the European Union on Jan. 1, 1981. At this point, Greece was in good financial shape and had very few economic problems. The 30 years following joining the European Union, Greece spiraled into a debt crisis that was caused by heavy government spending which led to a slowdown in economic growth. Months following joining the EU, in October of 1981, the Panhellenic Socialist Movement (a political party) came into power and for the next three decades, they alternated being in positions of power with the New Democracy Party. This constant change in power and the want to please voters led to a troubled economy, “In a continuing bid to keep Greek voters happy, both parties lavished liberal welfare policies on their electorates, creating a bloated, inefficient, and protectionist economy (Picardo).” The government drastically affected the entire country and put all of its citizens into an extremely difficult situation.  

Looking at page 337 in our textbook we have the concept of government tax and benefits policy. Usually, government tax and benefit policies cause income inequality due to austerity, meaning a government spending too little. However, in this situation, Greece is in the opposite position because they actually spent too much money and this led them into a debt crisis. This eventually leads their economy to crash and when this happened income inequality and poverty significantly increased (Blink). 

The government's excessive spending had a lot of effects on the economy. “For example, salaries for workers in the public sector rose automatically every year, instead of being based on factors like performance and productivity. Pensions were also generous. A Greek man with 35 years of public-sector service could retire at the ripe old age of 58, and a Greek woman (under certain circumstances) could retire with a pension as early as 50 (Picardo).” The government was truly really great to its citizens but they just could not afford to be, a well-known example of them doing so is their additional months pay every December to help families during the holidays. 

Come 2001, as a result of their spending and following a debt binge, Greece adapted to using the Euro which made borrowing money much easier and helped the government tremendously. The economy then boomed. 

While the economy was then doing much better, the growth was unstable. At this point, Greece had exceeded the European Unions Stability and Growth Pact (when Greece adopted the Euro they also joined the Eurozone which made it to where they had to follow specific guidelines).

In 2009 a new party came into power and revealed that the fiscal deficit was 12.7%. 

Greece’s dept-to-GDP ratio later peaked at 180% in 2011.

All of this back and forth within their economy placed Greece at one of the highest rates of unemployment in the EU, a rate of 16.8% (Picardo). Because of this crisis, one in every three Greeks now runs the risk of living in poverty (Chrysolora).

Here is a quote from one of the articles I looked at that really summed up this situation: “The Greek debt crisis had its origins in the fiscal profligacy of previous governments, proving that, like individuals, nations cannot afford to live way beyond their means. As a result, Greeks may have to live with stiff austerity measures for years, if not decades (Picardo).”

Work Cited:

Blink, Jocelyn., &; Dorton, Ian. (2012). Economics: Course companion. Oxford: Oxford University Press.

Chrysolora, Eirini. (2019, June 21). One in three at risk of poverty in Greece, Eirini Chrysolora: Kathimerini. Retrieved October 26, 2020, from https://www.ekathimerini.com/241802/article/ekathimerini/business/one-in-three-at-risk-of-poverty-in-greece

Picardo, Elvis. (2020, August 28). The Alpha and Omega of Greece's Debt Crisis. Retrieved October 26, 2020, from https://www.investopedia.com/articles/personal-finance/061115/origins-greeces-debt-crisis.asp