Opinion Pieces

Healthy Slimming or Fiscal Starvation?

In Greece, the crisis is leading to an ever increasing chasm between rich and poor. The austerity measures imposed by the EU are also contributing to growing social injustice. How much saving can the country cope with? Sophie Diesselhorst investigates for SGI News.

Greece – is it the writing on the wall for the European Union? Alarming headlines and figures are reported by the media on a daily basis from the European country which most dramatically epitomises the severeness of the Euro debt crisis. The result leaves Greece struggling with a dramatic deterioration in what were, in any case, grave structural problems.

The Greek State and Greek society are confronted by a dilemma. On the one hand, the European Union is demanding that public spending be drastically reduced, and that radical austerity measures are implemented in all areas, as a condition of Greece remaining in the Euro zone. On the other hand, many people in Greece are already well on their way to a life of poverty. One can expect that the implementation of EU austerity measures could only make the social situation more drastic.

“Labor market inclusion and intergenerational justice are the most urgent issues, because of soaring youth unemployment, which has exceeded 50 per cent since the end of 2011, on one hand, and because of the deep divide between ‘insiders’ and ‘outsiders’ in the labor market, on the other,” says political scientist Dimitri Sotiropoulos, from the University of Athens.

Sotiropoulos, who also worked as an expert on the Greece country report for the Bertelsmann Stiftung’s Sustainable Governance Indicators, counts “well-protected and well-paid salaried employees of the numerous state-owned enterprises,” among the ‘insiders’. The ‘outsiders’, on the other hand, comprise “women, the young, high-school graduates and migrants, who enter the labor market last and leave it first.” To date, all the Greek political parties have had regard exclusively to the interests of the ‘insiders’ and the ‘rich strata’ (business owners, large property owners, and professionals including lawyers, doctors and engineers). According to Sotiropoulos, “this huge deficit of expression and representation should somehow be repaired, before a plan to implement social justice is put together.”

In addition to labor market inclusion and intergenerational justice, the Bertelsmann Stiftung’s 2011 study, Social Justice in the OECD – How Do Member States Compare?, nominates poverty prevention, access to education, health, social cohesion, and non-discrimination as substantial factors for the establishment of social justice.

The results of the study show that Greece was already performing poorly in terms of social justice when the financial and state debt crisis began: at 28th place of a total of 31, the country is not only at the bottom of the scale in a European comparison, but also when measured against the rest of the OECD world.

The question now is: Will the European Union’s austerity measures aid social justice? Or, is the country more likely to save itself further into trouble, further widening the divide between rich and poor? No, says Dimitri Sotiropoulos: “Many EU-imposed measures promote social justice because they are targeted towards addressing the huge problem of tax evasion in Greece.”

“In 2010, about two thirds of all self-employed Greeks declared that their income was below the then taxable threshold of 12,000 Euros per year, and as a result they were not taxed at all. Since then, the government has substantially lowered this threshold,” Sotiropoulos goes on to say. “Also, about 70 per cent of all tax revenue comes from indirect taxes, which are regressive.” Direct taxes are about 30 per cent of all tax revenue, he says. “Reversing this ratio between indirect and direct taxes and enlarging the tax base would mean tremendous progress with regard to social justice in Greece.”

For the time being the new government of conservative Prime Minister Antonis Samaras, elected in June, is asking the EU for more time to meet the austerity requirements. Samaras told the Süddeutsche Zeitung on 9 July 2012 that he wants to abide by the austerity package, having just won a vote of confidence in the parliament. “We don’t want to change the targets. We want to change the means.“ The only means with which to avoid the country’s insolvency, and an exit from the Euro zone, are growth and investment. According to the Süddeutsche Zeitung, Samaras signalled that the privatisation of state-owned infrastructure enterprises and the sale of state-owned assets were on their way.

The political scientist Dimitri Sotiropoulos is skeptical about the postponement of the austerity package. “It should be accompanied by a very detailed plan spelling out precisely who among Greek authorities should do what, how and by what deadline.”

Sotiropoulos continues: “In addition to major structural reforms, which includes privatizations, there is urgent need for reforms in the labor market, starting with the liberalization of access to many occupations, all the way from taxi drivers to pharmacists, and a change in the welfare state from a patronage-based, occupational privilege-oriented system to a universalistic system of social protection offering minimal, albeit comprehensive coverage to all.”

To date, nothing has happened. “If implemented, the suggested reforms would mean a gradual shift to a different model of economic development,” Sotiropoulos says. “The new model would grant a steering rather an all powerful, all pervasive role to the Greek State in the economy." That is precisely the role of the state in a stable democracy, in accordance to the concept of social justice described in the SGI study.