02 July 2015

Financial Times: At the end of 2014 Greece was turning the corner

(2nd July) The forecast for 2015 was quite good; many analysts concluded that Greece was turning the corner. We do not know what would have happened if the previous government had stayed in power, but many may think it would not have turned out the way it did.

Sir, Martin Wolf, in “How I would vote on Sunday if I were Greek” (July 1), refers to a “huge depression” in Greece. That is, however, only correct if the analysis exclusively looks at what took place after 2007-08. Before the global financial crisis struck, the opposite was the case. A huge increase in Greek national income started after accession to the EU, augmenting national income per head five times from 1980 to 2008, The 10 years prior to the financial crisis delivered an increase of 237 per cent. Since 2008 income per head has fallen, warranting the words “huge depression” but only to the level in 2004, which still is 365 per cent above pre-accession.

Greece has been hit, no doubt about that, but statistically the average citizen in 2014 has an income of 72 per cent of the EU average. We should also keep in mind that last year-end growth was picking up at around 2 per cent, the current account and government budget primary balance both showed a surplus. The forecast for 2015 was quite good; many analysts concluded that Greece was turning the corner. We do not know what would have happened if the previous government had stayed in power, but taking the above forecasts at face value it would not have turned out the way it did.

Let me add that the EU has made a tremendous effort to keep Greece afloat, even if much criticism can be voiced and German and French banks were reckless in their lending policies. Nor should it be forgotten that since Greece joined the EU in 1980 investment through EU funds has amounted to about €200bn — more than Greece’s GDP. Many observers take the view that austerity forced on Greece by the eurozone and the IMF has plunged Greece and the Greek people into unbearable sufferings. The figures mentioned above should help to take a more balanced view.

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