Introduction
Globalization is instrumental to the current economic trends in countries all over the world. These include the intra-industry trade, which brings together or connects the world through the sharing of ideas, technologies, and trade markets among other things.
According to Ricardo’s theory of comparative advantage, countries trading with each other benefit a lot from one another (Zhang & Zhang, 2008, p. 43). Through Globalization every country experiences the economies of scale.
The period of recession affected all countries globally causing many negative effects to the economies and to people in their respective countries (Bellofiore, Garibaldo, 2011, p. 13). This paper critically analyses the economy of Greece.
It discusses the main economic features of Greece, the country’s most important economic sectors, and how they have changed over the last 5 years. It discusses how the recent global austerity crisis affected Greece. The paper also provides an analysis of its future economic prospects.
Main economic features of Greece
Greece is a developed country and its main economic features include the trade, the Gross Domestic Product (GDP), Purchasing Power Parity (PPP), unemployment, inflation (CPI), labor force, and FDI Inflow (Nasioulas, 2012, p. 160).
Trade
Greece exports foods and beverages from the Agriculture sector to foreign countries. It also exports Petroleum products, textiles, manufactured goods, and chemicals from the industry sector (Fioretos, 2013, p. 310).
In the service sector Greece offers Maritime services, tourism, and telecommunication services. The major export partners include Italy, Turkey, Cyprus, Bulgaria, and US among others.
According to statistics its exports accounted for $28.16 billion in 2011 and $26.67 billion in 2012 (BusinessWeek, 2013, p. 1). It took position 69 in a world comparison. This shows a drop in export sales, and hence the decline of the economy.
Barriers to economic integration contribute largely to export reduction in Greece. These barriers may include the increase of intragroup tariffs, different external tariffs, different currencies, and economic policies among others.
The major imports of Greece include transport, equipment, and machinery. It also imports chemicals and fuels. The country imported goods and services worth $ 66.04 billion in 2011. In 2012, the import costs reduced to $57.92 billion (Bitros, 2012, p. 56).
This shows an increase in economic growth since it is economical for a country to export more than it imports. It tallies with the Mercantalist theory which encourages exports and rejects imports.
The value of the credit items should balance or be more than those of debit items in the accounting balance of payment. The Stolper-Samuelson theorem encourages countries to get involved in trade. It is obvious that trade contributes largely to the economic growth of Greece.
The charts below show Greece exports and imports respectively
Unemployment rate
The country’s labor force accounts for 4,984,603 persons with 69.8 percent in the services sector, 17.8 percent in the Industry sector, and 12.4 percent in the agriculture sector (Saad-Filho, 2011, p. 45). The country’s unemployment rate has reached 27.9 percent from 24.6 in 2012.
The country took position 171 out of all countries across the globe in terms of the unemployment rate (Feinman, 2013, p. 455). The rate of unemployment in Greece, particularly among the young people continues to rise.
In reference to the Keynesianism theory, governments should stimulate business activities in order to create more jobs for the unemployed people (Bosworth & Kollintzas, 2011, p. 2). It seems like the Greece government is not taking appropriate measures to curb the unemployment issue.
The chart below shows the Greece unemployment growth rate
The rate of inflation
The current rate of inflation (CPI) of the Greece Economy is 1.1 percent (Mitsopoulos & Pelagidis, 2009, p. 400). The inflation rate also continues to decrease as shown in the following graph.
The changes of both foreign and domestic inflation affect the demand and supply of goods and services in Greece. This shows that the country has not taken appropriate measures to curb inflation because it is still on the rise.
The consumer price index includes clothing and foot-wear, health, furniture and household equipment, communication, culture, and recreation (Vetsopoulos, 2009, p. 280).
The chart and graph below shows the percentage change of the inflation rate of Greece.
Gross Domestic Product (GDP)
According to the 2012 World Bank statistics report, the Greece Economy is worth $255 billion nominal GDP. It is the 45th largest economy in the world. Greece FDI Inflow is $1.8 billion.
In reference to the World Bank statistics, the GDP (Purchasing Power Parity of Greece was $ 320 billion in 2010, $298.7 billion in 2011, and $280.8 billion in 2012 (World Bank, 2012, p. 1).
This shows a decrease in real growth rate every year.
The declining economic growth shows that the country has failed in integrating the best strategies to curb issues concerning its GDP. The chart below shows Greece GDP per Capita PPP.
The real GDP of Greece
Economic Sector of Greece
The most important economic sectors in Greece include the tertiary or services sector, the agriculture sector, and the industry sector (Tsakalotos, 2010, p. 10). All these sectors largely contribute to the growth of the country’s economy.
The major export items of Greece include foods and beverages from agriculture. It also sells petroleum products, textiles, manufactured goods, and chemicals to foreign countries (Vlachou, 2012, p. 180).
The country exports abundant items in the country and imports scarce items into the country. This is in accordance with the HO theory, which emphasizes on the same. The major export partners include Italy, Turkey, Cyprus, Bulgaria, and US among others.
Greece imports transport equipment and machinery. It also imports food, chemicals, and fuels among other items. The country imports goods and services from Russia, Germany, Italy, Saudi Arabia, China, Netherlands, and France among others.
The services sector
This sector is the most important sector in Greece. According to the recent researches, the sector contributes more than 77 percent to the country’s GDP, and 65.1 percent of the country’s labor force (European Commission, 2006, p. 1).
This sector may be beneficial for the country in terms of economic growth, but Greece still needs to focus and improve the other sectors. This will help the country avoid unbalanced growth of economic sectors as shown in the following graph.
The tertiary or services sector in Greece consists of major industries such as the maritime industry, telecommunications industry, transport and energy, and tourism industry among others.
In reference to the UNCTD 2012 report, the Greece maritime industry is the largest in the whole world today, followed by that of Japan (World Bank, 2012, p. 12). However, the current fleet roster is a bit lower compared to the past years.
This drop shows that the country has failed to address globalization issues, which act as, barriers to international trade. The international trade theory emphasizes on the need for countries to embrace globalization because it instruments economic growth.
In the telecommunication industry, there are very many giant mobile telecommunications corporations operating in this country. In 2009, the mobile phone providers in Greece were more than 20 million (Maroukis, 2013, p. 225).
Moreover, the country has more than 5.5 million landlines. The number of people accessing the internet use doubled remarkably over the past five years; from 23 percent in 2006 to 50 percent in 2011, and from 53% in 2011 to 94.8 percent in 2012/2013 (Antonopoulos & Sakellaris, 2009, p. 180).
This can be emphasized well through Keynesianism theory. It emphasizes on the need for governments to increase business activities in their countries to create job opportunities and grow the economy (Pelagidis, 2010, p. 19).
The tourism industry, also in the services sector largely contributes to the economic growth of Greece. Greece has attractive features and established organizations that market the tourist sector globally.
The country attracts more than sixteen million tourists annually, and hence contributes to Greece GDP and creates employment for the jobless people. Many tourists who visit Greece come from Cyprus and Sweden (Mylonas, 2011, p. 80).
The emergence of tourism related organizations over the last five years has placed the country in a good position of attracting many tourists from different parts of the world into the country. However, the country lags behind in terms of using the internet to market its services.
The industry sector
The industry sector contributes approximately 20.8 percent of Greece GDP and 22.4% of the nation’s labor force (Mitsopoulos, Theodore, 2011, p. 45). Greece has its industries concentrated in Athens. The city is not mountainous.
This makes the city favorable because it eases the connectivity of the transportation. The industry sector consists of industries such a mining, petroleum, and metal products. It also includes textiles, chemicals, food, and tobacco industries among others.
Compared to the other EU members Greece’s industrial output is the highest. It has increased by 6 percent in the past five years.
The 2007-2008 Global Crises affected the Greece industry sector, making the industrial production and domestic output to reduce by 13.4 percent and 5.8 percent respectively (Radice, 2011, p. 25).
The country has unbalanced growth of economic sectors. This shows that it lacks appropriate measures to balance the growth of all sectors.
The agriculture sector
Agriculture sector contributes more than 3.8 percent of the nation’s GDP, and 12.4 percent to the labor force (Karamessini, 2012, p. 40). The main agricultural products in Greece include wheat, cotton, tomatoes, barley, beef, and dairy products among others.
This sector contributes less to the country’s GDP and employments than the other two sectors. Greece faces several challenges when trying to grow the volume of agricultural production. The country lacks enough natural resources including land, making the agricultural sector inefficient.
Olive oil tops in the nation’s agricultural exports compared to the other fruits produced in Greece (Danopoulos & Znidaric, 2007, p. 275). For the last five years, Greece has received many top rankings in agriculture productions.
For instance, the country was the EU’s largest cotton producer, second largest producer of rice, and the third largest producer of figs in 2010.
In the last five years, the country has experienced remarkable changes in the agricultural sector. Farming methods have improved leading to high yields for instance, the introduction of organic farming.
How the recent global austerity crisis affected Greece
The 2008 global recession and the 2009 ES Debt Crisis affected Greece in several ways. These include
- unemployment,
- health problems,
- un-payable debts,
- economic decline,
- disinvestments,
- poverty,
- corruption,
- lower tax revenue,
- increased deficits among others (Bitros, 2012, p. 21).
All these are issues facing the international /global economy.
Vicious circle of recession
The recent global austerity crisis led to a vicious circle of recession. The GDP continued to drop and surpassed that of the postwar period in 2011 (Fitoussi, 2012, p. 42). According to the Central Bank 2013 report, the Greece economy will shrink this year, and rise in 2014 (Central Bank, 2013, p1).
The domestic demand went down leading to low production. Weak companies in some industries collapsed due to reduced production.
This led to people losing their jobs and further amplified the recession. The country’s debts also increased leading to funders refusing to assist the country because of refinancing difficulties (The economist, 2012, p. 1)
Unemployment
According to Euro statistics, the unemployment rate decreased remarkably within the first 3 years of recession, reaching 25.4 percent in 2012 (Michaelides, Papageorgiou & Vouldis, 2013, p. 805). The Euro statistics also show that more than half of the population, youths to be specific are jobless.
These happenings are as a result of loss of jobs due to lack of enough social protection, increasing population, and lay-offs by firms as a way to cut on costs and maximize on profits (BusinessWeek, 2013, p. 1).
Labor deterioration
This can be confirmed by examining the recent increase of un-insured jobs and insecurity of jobs in Greece.
The other things that show rapid labor deterioration in Greece include deregulating labor agreements, degrading payments, and the weakening of labor rights among others (Louzis, Vouldis, & Metaxas, 2012 p. 1013).
Displacement
The recent global austerity crisis left the lower middle class displaced. For instance, the people with small and medium-sized business enterprises quitted from their businesses (Kazakos, P, 2011, p. 61).
The global austerity crisis led to decline in consumption of goods and services making the businesses unable to survive. Lack of liquidity and the imposition of the emergency tax also contributed to the collapsing of these businesses.
For instance, according to Malkoutzis (2011), more than 65,000 of small and medium-sized businesses collapsed in the recent global austerity crisis. People who depended on these business enterprises suffered the losses (Malkoutzis, 2011, p. 3).
Migration
The other effect of the recent global austerity crisis is that it led to the increased migration of young and highly educated persons. This affects Greece due to loss of talented, skilled, and knowledgeable citizens (brain drain).
According to Mylonas (2011), the crisis instrumented the Greece citizens studying and living abroad to refuse to return to Greece because of the situation in the country.
Moreover, the people who previously wanted to stay in the country started leaving the country because of its unfavorable situation (Mylonas, 2011, p. 82).
Homelessness
The global austerity crisis instrumented homelessness in the Republic of Greece. According to Arapoglou (2004), the rate of homelessness in Greece rose by 25 percent within 2 years; 2009 and 2011.
Currently, there is a generation of ‘neohomeless’, and it includes people with either medium or higher educational backgrounds belonging to the social middle class (Arapoglou, 2004, p. 105).
Suicidal cases
The crisis also led to increased suicides in Greece. According to Kentikelenis et al (2011), the record levels of people committing suicide in Greece rose by 25 percent within 2 years; 2009 and 2011. This rate increased to 40 percent between 2010 and 2011.
The increasing poverty level, huge losses due to collapsing of businesses, and increased crimes contributed largely to the suicidal cases (Kentikelenis-et-al, 2011). The recent global crisis also led to the deterioration of public health in Greece.
This can be evidenced by difficulties in accessing health care services in the country. It can also be proofed by the increase of disease infections.
For instance, the HIV infections rose by 52 percent between 2010 and 2011. The national budget cuts led to closure of preventive drug centers alongside the psychiatric clinics (Kentikelenis-et-al, 2011).
Disinvestments
The global austerity crisis also led to disinvestment by the foreign and domestic investors (Fouskas, Constantine, 2012, p. 30). The Greece economy turned unfavorable for businesses, consumers, and investors.
The foreign investors stepped back and looked for markets that were favorable (Hellenic Federation of Enterprises, 2010, p. 1). The main goal of every business is to satisfy customers profitably. If this goal is unattainable, then it becomes hard for entrepreneurs or corporations to start businesses.
They will end up incurring huge losses if they run businesses without both customer satisfaction and profits (Milios, Elias, 2005, p. 45).
The future prospects of Greece
Greece is taking corrective measures to address issues affecting its economic growth. The country has adopted macroeconomic policies aimed at improving its economy. These policies will help the country become one of the leaders in economic growth globally.
The company has also integrated strategies that favor exporting of capital intensive goods. The strategies also promote importing of labor intensive goods. This will ensure steady growth of the economy today and in the future.
Greece is also pursuing the most relevant or suitable strategies that will help it to move or increase its economic growth further (The Economist, 2012, p. 1). Compared to Ireland, Greece does not have a strong export sector.
The country is pursuing ways to cover its unattractiveness for Foreign Direct Investment (FDI). The country’s rates of domestic savings are not sufficient to cater for the high rates of Capital Investment (CI). Greece is instituting the best reforms of its economic institutions.
This will make the country enhance and promote entrepreneurship and innovation, and hence attract foreign investors into the country. It has also adopted dollarization.
This will help it curb issues concerning inflation, or devaluation of its domestic currency, and hence will maintain a consistent growing economy.
Greece is focusing on attaining an accelerated path of economic growth. This will help this nation to keep pace with the rest of the EU economies both in the present times and in years to come. It can for instance, follow Ireland’s experience in achieving this goal.
Greece has lowered its tariffs to attract many investors. This will help the country avoid the negative effects of tariffs to consumption, trade, welfare, price, production, and government revenue. It will attract many MNEs to invest in the country.
The country is also employing strategies that will ensure balanced growth in its economy. The Greece government is planning to develop import substitution and export orientation policies, and promote economic integration and foreign direct investments.
Conclusion
Globalization plays a significant role in improving economic growth of countries all over the world. Greece is one of the countries that have greatly benefited from globalization in improving its economic growth.
The main economic features of Greece include the exports and imports, the country’s population, the Gross Domestic Product (GDP) and Purchasing Power Parity (PPP), unemployment, inflation (CPI), labor force and FDI Inflow among others.
The most important economic sectors in Greece include the tertiary or services sector, the agriculture sector and the industry sector. The country depends mostly on the services sector compared to the other sectors. The recent global austerity crisis affected Greece in many ways.
These include unemployment, health problems, un-payable debts, economic decline, disinvestments, poverty, corruption, lower tax revenue, and increased deficits among others. Greece is instituting the best reforms of its economic institutions.
This will make the country enhance and promote entrepreneurship and innovation, and hence attract foreign investors into the country.
It will also copy from Ireland, which has a strong export sector. With all these accomplishments met, Greece will turn out to be one of the most competitive EU member countries in the future.
List of References
Antonopoulos, C. & Sakellaris, P. 2009, ‘The contribution of Information and Communication Technology investments to Greek economic growth: An analytical growth accounting framework’, Information Economics and Policy, Elsevier, vol. 21, no. 3, pp. 171-191.
Arapoglou, V. P. 2004, ‘The governance of homelessness in Greece: discourse and power in the study of philanthropic networks’, Critical Social Policy, vol. 24, no. 1, pp. 102-126.
Bellofiore, R., Garibaldo, J. H. 2011, ‘The Global Crisis and the Crisis of European Neomercantilism’, Socialist Register, vol. 47, no. 1, pp. 120–146.
Bitros, G. C. 2012, ‘From Riches to Rags or What Went Wrong in Greece’, MPRA Paper 43504, University Library of Munich, Germany, Journal of Economic and Social Measurement, vol. 1, no. 1, p. 4
Bosworth, B. & Kollintzas, T. 2001, ‘Economic Growth in Greece: Past Performance and Future Prospects,” Athens University of Economics and Business, Athens University of Economics and Business’, Department of International and European Economic Studies, vol. 1, no. 1, p 134.
Bosworth, B. & Kollintzas, T. 2011, ‘Economic Growth in Greece: Past Performance and Future Prospects’, CEPR Discussion Paper, vol. 1, No. 2, p. 1. Web.
Central Bank, 2013, ‘Greek economy to shrink 4.6% in 2013, recover in 2014: Greek central bank’, Athens, Greece. Web.
Danopoulos, C. P. & Znidaric, B. 2007, ‘Informal Economy, Tax Evasion, and Poverty in a Democratic Setting: Greece’, Mediterranean Quarterly, vol. 18, no. 2, pp. 67-84.
European Commission, 2006, The EU Economy: 2006 Review, Adjustment Dynamics in the Euro Area– Experiences and Challenges, Directorate-General for Economic and Financial Affairs, European Communities, Belgium.
Feinman, G. M. 2013, ‘Re-envisioning Ancient Economies: Beyond Typological Constructs’, American Journal of Archaeology, vol. 117, no. 3, pp. 453-459.
Fioretos, O. 2013, ‘Origins of Embedded Orthodoxy: International Cooperation and Political Unity in Greece’, European Political Science, vol. 12, no. 3, pp. 305-319.
Fitoussi, J. P. 2012, ‘Europe’s Austerity Mirage’, The New York Times, 28 February, vol. 1, no. 1, p. 27. Web.
Fouskas, V., Constantine D. 2012, ‘The Greek Workshop of Debt and the Failure of the European Project’, Journal of Balkan and Near Eastern Studies, vol. 14, no. 1, pp. 1–31.
‘Greece’s debt burden: Getting real’, 2012, Athens, The economist. Web.
‘Greek businesses: No longer masters of their own destiny’, 2012, Athens, Greece, The Economist. Web.
‘Greek Economy Contracts for 20th Quarter amid Record Joblessness’, 2013, Athens, Greece, BusinessWeek. Web.
Hellenic Federation of Enterprises SEV, 2010, Entrepreneurialism without Obstacles: 30 Fields of Action for an Entrepreneurial-Friendly Environment, Hellenic Federation of Enterprises Report, Athens.
Karamessini, M. 2012, ‘Sovereign Debt Crisis: An Opportunity to Complete the Neoliberal Project and dismantle the Greek Employment Model. In: Steffen Lehndorff ed.’, A Triumph of Failed Ideas European Models of Capitalism in the Crisis.Brussels: European Trade Union Institute (ETUI), vol. 1, no. I, pp. 135–162.
Kazakos, P., 2011, After Memorandum: Economic Policy in Greece under International Control, Papazisis, Athens.
Kentikelenis, A., et al 2011, ‘Health Effects of Financial Crisis: Omens of a Greek Tragedy,’ The Lancet vol. 378 no. 9801, pp. 1457–1458.
Louzis, D. P. & Vouldis, A. T., & Metaxas, V. L. 2012, ‘Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios’, Journal of Banking & Finance, Elsevier, vol. 36, no. 4, pp. 1012-1027.
Malkoutzis, N. 2011, Greece –A Year in Crisis: Examining the Social and Political Impact of an Un-precedented Austerity Programme, Friedrich-Ebert-Stiftung, Berlin.
Maroukis, T. 2013, ‘Economic crisis and migrants’ employment: a view from Greece in comparative perspective’, Policy Studies, vol. 34, no. 2, pp. 221-237.
Michaelides, P. G., Papageorgiou, T. & Vouldis, A. T. 2013, ‘Business cycles and economic crisis in Greece, 1960–2011: A long run equilibrium analysis in the Eurozone’, Economic Modelling Elsevier, vol. 31, no. C, pp. 804-816.
Milios, J., Elias I. 2005, ‘Capital Accumulation and Profitability in Greece 1964–2004, Proceedings of the INEK Conference on Sustainable Development’, Nicosia, vol. 23, no. 24, p. 1.
Mitsopoulos, M. & Pelagidis, T. 2009, ‘Vikings in Greece: kleptoratic interest groups in a closed, rent-seeking economy’, Cato Journal, vol. 29, no. 3, pp. 399-416.
Mitsopoulos, M., Theodore P., 2011, Understanding the Crisis in Greece: From Boom to Bust, Palgrave MacMillan, New York.
Mylonas, H., 2011, ‘Is Greece a Failing Developed State? Causes and Socio-economic Consequences of the Financial Crisis. In: Konstantina Botsiou (ed.), The Global Economic Crisis and the Case of Greece’, Berlin Springer, vol. 1, no. 2, pp. 77–88.
Nasioulas, I. 2012, ‘Social Cooperatives in Greece Introducing New Forms of Social Economy and Entrepreneurship’, International Review of Social Research, vol. 2, no. 2, pp. 151-171.
Pelagidis, T. 2010, The Greek Paradox of Falling Competitiveness and Weak Institutions in a High GDP growth Rate Context 1995–2008. Paper No. 38, Hellenic Observatory Papers on Greece and Southeast Europe, London School of Economics LSE, London.
Radice, H. 2011, ‘Confronting the Crisis: A Class Analysis’, Socialist Register vol. 47, no. 1, pp. 21–43.
Saad-Filho, ‘A, 2011: Crisis in Neoliberalism or Crisis of Neoliberalism’, Socialist Register, vol. 47, no. 1, pp. 242–259.
Tsakalotos, E. 2010, ‘Greek Economic Crisis, Conference Paper, Annual Conference of the International Initiative for Promoting Political Economy’, Rethymno, vol. 1, no. 1, pp. 10–12.
Vetsopoulos, A. 2009, ‘Efforts for the Development and Stabilization of the Economy during the Period of the Marshall Plan’, Journal of Modern Greek Studies, vol. 27, no. 2, pp. 275-302.
Vlachou, A. 2012, ‘The Greek Economy in Turmoil’, Rethinking Marxism, vol. 24, no. 2, pp. 171-200.
World Bank 2012, ‘World Development Indicators’, The World Bank, Washington, DC. Web.
Zhang, W. B. & Zhang, W. B. 2008, International trade theory: Capital, knowledge, economic structure, money, and prices over time, Springer, Berlin.