Report highlights economic slowdown and employment problems
The Greek economy is suffering the effects of the global economic crisis, according to a June 2008 report from the employer-linked Foundation for Economic and Industrial Research (IOBE), and growth is slowing. So far, employment and unemployment rates, which have improved in recent years, have been little affected by the slowdown. However, the report highlights a number of structural problems in the labour market.
The Foundation for Economic and Industrial Research (IOBE, www.iobe.gr), is a private, non-profit, research organization founded in 1975 at the initiative of the Hellenic Federation of Enterprises (SEV, www.fgi.org.gr), the central body representing employers. In June 2008, it published its latest report on the Greek economy.
Developments in the Greek economy
The IOBE report predicts that the growth in gross national product (GNP) will have slowed in 2008, possibly to below 3.5%, compared with the 4% rise in 2007. According to the authors, this slowdown possibly marks the end of a long period of development, based mainly on the rapid growth of consumption by Greek households. In the year to the first quarter of 2008, domestic consumption rose by only 2.3%, the lowest rate of increase since 2000.
The report states that the biggest problem for the Greek economy is the rise in inflation. While increases in the prices of oil and goods have created high inflationary pressures globally, it seems that the consequences in Greece are particularly bad, because they are magnified by distortions in the national economy. Such distortions are mainly related to the defective operation of competition in many sectors, which are directly or indirectly state-controlled or protected by specific governmental interventionist policies. Thus, the abolition of ‘oligopolistic’ practices that are fostered by the state and the opening up of markets to competition would have a positive effect on anti-inflation efforts, IOBE argues.
Developments in employment and unemployment
The report finds that so far in 2008, employment and unemployment rates have changed only marginally compared to 2007, and both rates have improved since 2004. There has been a 2.7% rise in the number of employed people since 2004 (employed people represented 53.4% of the total population aged 15 and over in the first quarter of 2008), whereas the unemployment rate in the first quarter of 2008 was 3 percentage points lower than in the first quarter of 2004.
However, despite the drop in recent years, unemployment-related structural problems persist, the authors state. For example, the unemployment rate among women is still more than double that of men (12.3% compared to 5.5% in the first quarter of 2008). Despite its reduction in recent years, the unemployment rate in Greece is still higher than the EU-15 average, which means that growth in the Greek economy is still less capable of creating new jobs than that of other euro-zone countries. The report states that, according to the Bank of Greece, the Greek economy’s inability to create as many new jobs is explained by: the ongoing restructuring of the economy, whose main feature is a significant restriction of the agricultural sector and resulting loss of jobs therein; a lack of flexibility in the domestic labour market; and certain incompatibilities between labour supply and demand .
As pointed out in the IOBE report, Greek economy has now entered a slowdown phase for the first time in a number of years. The developmental pattern that has marked the Greek economy in recent years, based on strong domestic demand and increased private consumption, is now compromised, and will have consequences for economic growth, which has already slowed. Although the employment and unemployment rates are seemingly unaffected by the slowdown of the Greek economy so far, there are still unanswered questions regarding the quality of jobs offered in the labour market; and how to achieve the employment goals set by the EU’s Lisbon strategy in the current conditions of economic slowdown. Greece has not made the necessary progress – for example, with regard to the unemployment rates of men, women and young people – and there is still a long way to go if these goals are to be achieved.
Stathis Tikos, INE/GSEE