Sunday’s national elections in Greece were widely seen as a vote on years of punishing austerity that its citizens have had to endure, and whether they can handle much more.
And it appears Greek voters rejected it.
The incumbent prime minster conceded defeat, and exit polls reported by state television showed the anti-austerity Syriza party poised to win. Syriza has attracted significant public support on promises to renegotiate bailout terms and deliver relief to fed up Greeks.
The apparent victory for Syriza casts doubt on the still fragile country’s economic future.
Back in 2010, the country accepted its first bailout: €240 billion ($277.8 billion) of international aid to rescue its battered economy. In return, Greece agreed to deep cuts in government salaries, tax hikes, a freeze on state pensions and bans on early retirement.
Nearly five years on, Greece’s economy is in better shape, but life for many Greeks is much worse. Unemployment has soared and wages have fallen even as people are working longer — all of which are fueling demand for change.
So how far has Greece come since the start of its financial crisis?
1. Back in the black: In the last five years, Greece has swung from a hefty deficit to a small surplus. The country’s primary deficit was a whopping 10.7% of GDP back in 2009. Last year it ran a primary surplus of 2.7% of GDP. That means when you strip out interest payments, the government collected more money that it paid out. And it hit that target earlier than promised to lenders.
2. Healthier banks: Greece’s banking sector is much more resilient. Banks have been recapitalized and the industry has downsized from 18 commercial banks to just 4. Recent stress tests have underscored their stronger capital position and confidence in the financial sector.
3. Unemployment soars: But the biggest trouble spot is jobs. Five years ago the unemployment rate was about 12%. Last year it was more than double that level, at 26%. The job shortage is even worse for young Greeks: half of all young people are out of work. And that’s a problem both in the short and long term.
“It’s a ticking time bomb for national health care and public sector pension bills,” said G+ Economics managing director Lena Komileva, “The taxpayer will need to pay the future public sector bills.”
4. Economy is shrinking: Many of the job losses are tied to a sharp contraction in the size of the Greek economy, which is roughly 25% smaller than it was before the crisis. Last year, the country returned to modest growth after five years of recession — but output remains far below levels seen in 2007.
5. Wages tumble: Those who have a job are getting paid less. Wage inflation peaked at an unsustainable 12.5% year-on-year growth in 2010. Then wages began falling sharply. In 2013 they were falling nearly 12% year-on-year — and they’re still falling.
6. Working longer: 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.
7. Debt deluge: Greece’s debt was very high then, and it’s very high now. Net debt was around 130% of GDP in 2010 according to the IMF — now it’s close to 170%. The economy has shrunk so the debt ratio has increased and it’s put the country in what G+ Economics Komileva describes as the “debt trap”.
“Greece cannot possibly generate the level of income to pay back its debtors, ever,” she said.