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In September 2003, the Institute of Labour (INE) of the Greek General Confederation of Labour (GSEE) and the Confederation of Public Servants (ADEDY) released its annual Economic and Employment Outlook. It finds that employment is not increasing, despite the fact that the Greek economy is rapidly expanding, fixed investment is accelerating and profitability is high.
On 2 September 2003 the Institute of Labour (INE) of the Greek General Confederation of Labour (GSEE) and the Confederation of Public Servants (ADEDY) presented its fifth annual Economic and Employment Outlook (GR0209104F), covering 2002-3.
According to the INE/GSEE-ADEDY, during 2002 the unemployment rate continued to fall, from 11.7% in 1999 to 9.6%. Thus the period from 1999 to 2002 saw the first significant recent decrease in unemployment in Greece. This improvement, however, was not the result of a satisfactory increase in employment. On the contrary, employment has been on a downward course; it fell over 2000-1 and there was only a marginal increase (of 0.8%) in 2002. Indeed, data from the European Commission (DGII), whose method of calculating employment is slightly different, show a reduction in the number of employed people in 2002. Thus the reduction in unemployment over 1999-2002 was not the result of an increase in employment but of a decrease in the labour force, states the Outlook. In other words, this was an adverse development, which saw the labour market participation rate come to a standstill, whereas convergence with the EU average has been set as a target. The stagnation in the participation rate inhibits real convergence of the Greek economy with the average level of per capita GDP, claims INE/GSEE-ADEDY. This lack of employment growth has come despite the fact that the Greek economy is rapidly expanding, fixed investment is accelerating and profitability is high.
The decrease in employment is due to the fact that despite a rise in production since 1995 – which should have brought about a rise in employment – there has been an even more rapid increase in productivity in recent years. Employment stagnation is explained by the report as a result of productivity increases following modernisation and 'labour-capital substitution'. This stagnation, the Outlook states, is leading to a fall in the active population as discouraged workers are leaving the labour force. This results in a fall in the unemployment rate, but this can hardly be considered as a success since it is the outcome of stagnating employment and a declining labour force.
The INE/GSEE-ADEDY study raises questions regarding the number of employed people in relation to coming developments in the Greek economy between 2004 and 2010. In the anticipation of changes in certain important 'exogenous' elements of the Greek economy following the 2004 Olympic Games in Athens, such as a drastic reduction in transfers from the EU to Greece over 2004-8, the report asks: does the Greek economy have sufficient internal strength to sustain its economic development in the medium term; or should a recession (possibly a profound one) be anticipated in the Greek economy between 2005 and 2010, which would have a serious impact on employment?
The Outlook observes that part of current expenditure on public works is made up of national resources, which will be 'set free' in the years to come so that they can be put to other uses. However, the reduction in transfers from the EU will be substantial, and for that reason an important reduction in internal demand should be expected. Furthermore, Greece’s balance of external trade in goods and services will most probably continue to worsen, resulting in further decreases in internal demand and the GDP growth rate. A possible slowdown in economic growth in Greece will exert pressure on wages, and therefore also on private consumption, resulting in a further decrease in internal demand. This in turn, states INE/GSEE-ADEDY, will have a negative effect on private investment, and all the 'virtuous circles' on which the growth of the Greek economy currently depends may be transformed into 'vicious circles' sustaining the initial stagnation which may result from an initial reduction in total demand.
According to the report's analysis, maintaining high rates of growth in internal demand after 2004 thus takes on considerable importance, if the Greek economy is to continue growing at the potential GDP growth rate, which INE/GSEE-ADEDY estimates at 3.7% per year. The 'demand deficit' which may arise after 2004, should be offset in ways to be defined as part of a public debate.
Moreover, states the Outlook, an analysis of capital accumulation indicators in Greece, along with macroeconomic performance, offers strong indications that the Greek economy has – on the supply side – substantial internal robustness. However this robustness will have positive effects only if increased demand remains at high levels.
The INE/GSEE-ADEDY annual Outlook for 2002-3 shows clearly that although other problems of the Greek economy have been resolved, the problem of stagnation in employment remains unresolved. In addition, the situation may possibly become worse if demand falls off significantly after the 2004 Olympic Games are over. This viewpoint of INE/GSEE-ADEDY, supported by a 'post-Keynesian' interpretation of the economic cycle, is not shared by the government, the Central Bank or the employers’ associations: in their opinion, Greece’s economic boom during the years 1996-2004 resulted from market deregulation, privatisations and the resulting heightened competition, lower inflation and macroeconomic stability – in short, from the 'neo-liberal' policy pursued in Greece since 1986. (Elias Ioakimoglou, INE/GSEE-ADEDY)