We’re the Next Greece

by Rachel Alexander | October 28, 2013 9:50 am



Living conditions in Greece have become shocking. Greece’s universal coverage health insurance, which no doubt was a significant contributing factor to the overspending, is now utterly unaffordable, so the country is relying on volunteer doctors and medical personnel to work for free. It is estimated that 100,000 children are working — illegally — just to help their families get by. It is reported that 70,000 children dropped out of school in 2012 to do so.

In June, the prime minister shut down the state-owned public radio and television broadcasting corporation, ERT, in order to block criticism of the austerity measures. By 2010, the government was still spending 12% more than it was bringing in from revenues. An emergency property tax was implemented and collected through electric bills. In 2011, a “solidarity levy” was levied twice on households. Excise taxes were increased by one-third on fuel, cigarettes and alcohol. 1,978 schools were closed or merged.

Unemployment continues to rise, and is now over 27% — that’s one out of every four workers. Unemployment is above 60% for those age 25 and under. The restaurant sales tax increased to 23%, and only recently did the government agree to reduce it to 13%. The number of homeless people has increased from 7,720 to over 20,000. Almost one quarter of Greek workers and pensioners are living below the poverty line.

25,000 government employees will have their wages cut by the end of the year, and their jobs eliminated next year. This is a massive number of employees, considering the population of Greece is only 11 million. Government employee pensions were cut last year by 12% for all but the smallest pensions, and in 2011, public sector wages were cut by 20 to 30%.

How did this financial meltdown come about? Greece’s unsustainable bloated spending on social welfare programs finally caught up with it. In addition, Greece has the ninth highestminimum wage[1]in the world, at $5.06/hr, which used to be even higher until the government was forced to reduce in it 2012. Germany and Italy do not have a minimum wage. Compounding the problem was Greece’s high defense spending, a result of its hostile relationship with Turkey, and the sensitivity of its main industries, shipping and tourism, to economic downturns.

Consequently, Greece developed massive deficits and debt worse than the U.S. during the 2000’s. The government’s primary spending increased by 87%, while tax revenues increased only by 31%. By 2009, Greece had the highest deficit of any country in the European Union, also known as the eurozone. The interest rate on Greek government bonds increased from 4% in 2007 up to a staggering 177% in 2012. Similar to past Democratic administrations in the U.S., the government had over-optimistically predicted its GDP would increase. When the global recession hit in late 2008, foreign investors lost confidence. Greek’s government debt was downgraded to junk bond status in 2010.


Both bailouts have not had much success. The second bailout required private creditors of Greek government bonds to accept a lower interest rate and a loss of over half the face value of the bonds. Greek’s current government continues to make excuses and ask its creditors for more lenient terms. A third bailout will probably be implemented later this fall, enabling more fiscal irresponsibility and essentially sticking it to the other eurozone countries who are footing the bill. Maybe they are finally realizing that losing half their sovereignty to join a eurozone wasn’t such a good idea after all.

Germany is Greece’s largest creditor, and this has resulted in strained relations between the two countries. Greece is still so unstable there is speculation it may be forced out of the eurozone, and a word has even been coined to describe this, “Grexit.” At this point, there is no end in sight to the misery.


  1. minimum wage: http://www.businessinsider.com/a-look-at-minimum-wages-around-the-world-2013-8

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