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EDITED BY
DIMITRIS KATSIKAS,
DIMITRI A. SOTIROPOULOS
AND MARIA ZAFIROPOULOU
SOCIOECONOMIC FRAGMENTATION
AND EXCLUSION IN GREECE
UNDER THE CRISIS
New Perspectives on South-East Europe
Series Editors
Kevin Featherstone
London School of Economics
European Institute
London, UK
Spyros Economides
London School of Economics
European Institute
London, UK
Vassilis Monastiriotis
London School of Economics
European Institute
London, UK
South-East Europe presents a compelling agenda: a region that has chal-
lenged European identities, values and interests like no other at formative
periods of modern history, and is now undergoing a set a complex transi-
tions. It is a region made up of new and old European Union member
states, as well as aspiring ones; early ‘democratising’ states and new post-
communist regimes; states undergoing liberalising economic reforms, par-
tially inspired by external forces, whilst coping with their own embedded
nationalisms; and states obliged to respond to new and recurring issues of
security, identity, well-being, social integration, faith and secularisation.
This series examines issues of inheritance and adaptation. The disciplinary
reach incorporates politics and international relations, modern history,
economics and political economy and sociology. It links the study of South
East-Europe across a number of social sciences to European issues of
democratisation and economic reform in the post-transition age. It
addresses ideas as well as institutions; policies as well as processes. It will
include studies of the domestic and foreign policies of single states, rela-
tions between states and peoples in the region, and between the region
and beyond. The EU is an obvious reference point for current research on
South-East Europe, but this series also highlights the importance of
South-East Europe in its eastern context; the Caucuses; the Black Sea and
the Middle East.
Socioeconomic
Fragmentation and
Exclusion in Greece
under the Crisis
Editors
Dimitris Katsikas Dimitri A. Sotiropoulos
National and Kapodistrian University National and Kapodistrian University
of Athens of Athens
Athens, Greece Athens, Greece
Maria Zafiropoulou
Hellenic Open University
Patras, Greece
This book is largely based on the analytical ideas, data and findings pro-
duced in the context of the research programme Fragmentation and
Exclusion: Understanding and Overcoming the Multiple Impacts of the
Crisis—‘Fragmex’ (http://www.fragmex.eu/). The programme was
funded by the Greek General Secretariat of Research and Technology and
the German Ministry of Education during 2013–2015. The Greek part of
the programme was implemented by the Crisis Observatory of the Hellenic
Foundation for European and Foreign Policy (ELIAMEP) and the
Hellenic Open University (HOU). We would like to thank the manage-
ment and the administrative officers of ELIAMEP as well as the team of
HOU and its coordinator, associate professor Achilleas Kameas; their sup-
port during the course of the project was indispensable.
The basic idea that inspired the project was that economic crises pro-
duce both a deterioration of living conditions, which lead parts of the
population to socio-economic exclusion, and a cognitive or discursive
fragmentation, which can also produce new kinds of exclusion. The aim of
the project was to test this idea for the case of Greece and uncover empiri-
cal evidence for these parallel processes. Greece constituted an ideal case
study because of the depth and duration of the crisis it experienced but
also because of its already deeply fragmented political economy and soci-
ety. This analytical framework called for a combination of different theo-
retical and methodological approaches, which we feel contributed to a
richer set of findings and interpretations.
During the transition from the research programme to the book, the
material was re-organized, expanded and updated, while other researchers
v
vi PREFACE
who had not participated in the programme were invited to join. Professor
Tsakloglou, one of Greece’s foremost experts in the economic analysis of
phenomena of poverty, social exclusion and inequality, and his long-time
research collaborator, Eirini Andriopoulou, who is an established
researcher on these issues and who works at the Council of Economic
Advisors of the Greek Ministry of Finance, agreed to contribute a chapter
on poverty and inequality. Alejandro Pérez, PhD fellow, also joined the
team and contributed greatly in the analysis of civil society organizations’
discourse on poverty and social exclusion. We would like to thank them
for accepting our invitation to participate in this book. We would also like
to thank the rest of the authors, who were in this endeavor from the begin-
ning, and Pery Bazoti for her excellent research assistance and her help in
getting the final manuscript together.
Hopefully, the end result is a useful contribution to the study of the
socio-economic crisis in Greece but also more broadly to the study of
processes of fragmentation and exclusion in modern societies during crisis
as well as in times of prosperity.
1 Introduction 1
Dimitris Katsikas
vii
viii CONTENTS
Index 253
List of Contributors
ix
x LIST OF CONTRIBUTORS
xi
List of Tables
xiii
CHAPTER 1
Introduction
Dimitris Katsikas
D. Katsikas (*)
National and Kapodistrian University of Athens, Athens, Greece
of the Eurozone and the financial markets) structural problems came to the
fore, and its already weak credibility quickly deteriorated. In an unfavourable
international economic environment, in the aftermath of the global finan-
cial crisis, when investors shunned risky assets, Greek government bonds
could find no buyers. With the conduits of market credit closed off, the
heavily indebted Greek state teetered on the brink of bankruptcy.
The Greek government sought official funding, which came in the
form of a bailout agreement in May 2010. The funding was accompanied
by a Memorandum of Understanding (MoU), or ‘Memorandum’, as it is
now known in Greek common parlance, under the supervision of three
organizations—the European Commission, the European Central Bank
and the International Monetary Fund—the so-called Troika.1 The adjust-
ment programme called for a combination of harsh front-loaded fiscal
adjustment, internal devaluation policies,2 and a wide array of structural
reforms in order to restore fiscal sustainability and international
competitiveness.
Given the extraordinary size of the fiscal deficit (15.2 per cent of gross
domestic product (GDP) in 2009), this meant the implementation of a
fiscal consolidation programme, which has truly been without precedent.3
The aggressiveness of the fiscal adjustment programme, which reduced
wages in the public sector, cut benefits and pensions across the board and
curtailed public investment, in combination with internal devaluation pol-
icies (mainly through labour market reforms), and a pervasive climate of
uncertainty regarding the prospects of the economy and its place in the
Eurozone, which discouraged both domestic and foreign investment, led
to a sharp decline of per-capita income and an explosive increase of unem-
ployment. The ensuing collapse of economic activity undermined the gov-
ernment’s fiscal consolidation efforts since tax revenues and social
insurance contributions plummeted. To make up for the deviations in the
fiscal targets, the government was forced to introduce new austerity mea-
sures, which however deepened the crisis. This vicious cycle plunged the
country into a downward economic spiral. Unsurprisingly, the pro-
gramme’s targets could not be met, the debt dynamics worsened and
eventually the country went on to sign a new bailout agreement in 2012,
accompanied by a debt-restructuring deal.4,5
Despite differences in the fiscal consolidation mix and an increased
emphasis on structural reforms, the second programme effectively followed
the same recipe, resulting in a further deterioration of the economy, before
the latter showed some signs of recovery in 2014. In terms of politics,
INTRODUCTION 3
however, it was too little, too late; following two consecutive elections
shortly after the signing of the second bailout agreement in 2012, popular
anger and frustration with the austerity programme led to a complete sub-
version of a long-established balance in the political system. The political
shifts which upset the status quo created new political players and pushed
to the fore ‘anti-Memorandum’, Eurosceptic parties from both ends of the
political spectrum.
The signs of recovery in 2014 were not enough to change the political
dynamics, and in January 2015, Syriza, a radical-left party, won the elec-
tions on an aggressive, anti-memorandum campaign and went on to form
a coalition government with the nationalist right-wing party of
‘Independent Greeks’, which had also led, though from a different per-
spective, an anti-memorandum, Eurosceptic campaign. After a failed six-
month negotiation, which sought a solution outside the ‘Memorandum
framework’, in July 2015 the new coalition government ended up signing
a third bailout agreement, accompanied by a new Memorandum, which in
terms of policy continued where the previous two had left off,6 promoting
austerity policies, which are now projected to be continued for decades
after the completion of the programme.7
Meanwhile, the implementation of structural reforms progressed slowly
throughout this period. On the one hand, the design of reforms was far
from optimal; in a number of cases, reforms proved at best ineffective and
at worst counter-productive.8 On the front of labour market reforms in
particular, internal devaluation policies (e.g. the reduction of minimum
wage) have contributed to further income reductions, without having the
expected effect on Greece’s international competitiveness, as other equally
crucial reforms (e.g. in the product markets) did not progress fast enough.
On the other hand, the scope and speed of structural reforms stretched
the resources of a state apparatus, already known (even before the crisis)
for its poor record in designing and implementing reforms.9 Public admin-
istration was further constrained by the aggressive fiscal adjustment, which
reduced state services’ budgets and led many public servants to early
retirement, leaving these services seriously understaffed. Political uncer-
tainty and consecutive changes in government did no favours for policy
continuity, while all the governments in the period under examination
exhibited to varying degrees a tendency to avoid politically difficult
reforms.10 To an extent, the procrastination in reforms has been tolerated
by the Troika, as throughout the programmes, the overriding priority has
always been fiscal consolidation (Manasse 2015; Petralias et al. 2018).
4 D. KATSIKAS
All in all, the scope and depth of the problems facing Greece, mistakes
and omissions in the design of the MoU’s policies,11 a record of partial and
often superficial implementation of reforms by the Greek governments
and intense political polarization, which sustained a climate of permanent
political and therefore economic uncertainty, led to the derailment of the
bailout programmes and the gradual collapse of the economy to a degree
which is truly astonishing. During the crisis years, domestic investment
collapsed, while foreign investment stayed away; mean disposable income
decreased by more than 30 per cent, while private consumption declined
by 25 per cent; approximately half of the deposits left the banking system,
while 45 per cent of all loans are in the red; unemployment rose to more
than 27 per cent at its peak in 2013, remaining above 23 per cent in early
2017. All in all, GDP fell by more than 26 per cent during this period.
Despite official projections for a moderate recovery in the medium term,
the economy remains subdued and prospects seem uncertain.