Tuesday, January 27, 2015

On why demographics mean a near-term recovery in Greece is unlikely

Yesterday's Greek legislative election which placed a SYRIZA-dominated government in charge of the country got quite a lot of attention for a lot of things in the blogosphere. Some, like blogger Charlie Stross, wondered if SYRIZA's election might lead to a global economic shift. Others have noted ways in which the new prime minister, Alexis Tsipras, is breaking from the past, rejecting a religious oath of office as befits his atheism. Common to almost everyone, however, has been concern as to how the election of SYRIZA might change Greece's relationship with the rest of the Eurozone and the European Union. Could Greece get a better deal? Might Greece end up breaking from the bloc altogether?

I'm not at all sure that SYRIZA will be capable of this change, if only for demographic reasons. Helena Smith's recent article in The Guardian, "Young, gifted and Greek: Generation G – the world’s biggest brain drain", provides an idea as to the scale of Greece's demographic issues.

Call them Generation G: young, talented, Greek – and part of the biggest brain drain in an advanced western economy in modern times. As the country lurches towards critical elections this weekend, more than 200,000 Greeks who have left since the crisis bit five years ago will watch from overseas.

Doctors in Germany, academics in the UK, shopkeepers in America – the decimation of Greece’s population has perhaps been the most pernicious byproduct of the economic collapse which has beggared the country since its brush with bankruptcy.

“Greece is where I should be,” says Maritina Roppa, 28, a trainee doctor who left Greece three years ago for Minden, north-west Germany. “It’s such a pity that people like me, in their 20s, have had to go.”

Of the 2% of the population who have left, more than half have gone to Germany and the UK. Migration outflows have risen 300% on pre-crisis levels, as youth unemployment soars to more than 50%. Around 55% of those affected by record rates of unemployment are under 35, according to Endeavour, the international nonprofit group that supports entrepreneurship.

“It is a huge loss of human capital whose affects will only begin to be felt in the next decade,” said Aliki Mouri a sociologist at the National Centre for Social Research. “People who have been educated at great cost, both to their families and the public purse, are now working in wealthier countries which have not invested in them at all,” she added, acknowledging that even in good times Greece had difficulty absorbing the surplus of professionals its universities produced.

[. . .]

Despite the first signs of economic recovery – in November figures showed that Greece returned to growth for the first time in six years, its worst recession in postwar history – the exodus is not abating. Increasing numbers want to join the already record 50,000 Greeks estimated by the OECD to be studying abroad. Schools are being inundated with requests by students to be enrolled on courses for international exams that could prepare them for foreign fields.

“Greece doesn’t allow you to progress,” said Carmella Kontou, an aesthetician considering moving to the US. “You can’t even begin to think of having a family or achieving things that elsewhere in Europe would be considered totally natural.”

One major trend that Greece shares with much of the rest of Europe is rapidly-aging population with fertility that has been well below replacement levels since the mid-1980s. Domestically-produced human capital was already quite scarce. Immigration to Greece, meanwhile, as noted in Charalambos Kasimis' March 2012 profile "Greece: Illegal Immigration in the Midst of Crisis" has become increasingly problematic. Many immigrants who came to Greece when the country was prosperous have returned to their homelands. The plight of illegal migrants, entering Greece from across the Aegean from the Middle East and elsewhere, has meanwhile become legendary. It's worth noting IRIN News' Preethi Nallu and Bloomberg's Jonathan Stearns have noted that, while these migrants welcome SYRIZA's victory, they do so largely because they think that a SYRIZA government will help them leave for other, more prosperous, European countries.

Rokan Mondal, who says he spent six months walking from his native Bangladesh to Greece in 2008, believes Alexis Tspiras will ensure that he doesn’t have to go back.

Mondal, 23, was among a crowd of hundreds who turned out to cheer Tsipras as he arrived at Syriza party headquarters in Athens late Sunday after his election victory. He said he hopes a Tsipras-led government will make it easier for him to acquire Greek citizenship. At the moment, he has a card that lets him reside in Greece only and not elsewhere in the European Union.

“I believe I’ll get the passport,” Mondal said as he mingled with a handful of other Bangladeshis who rushed forward as Tsipras appeared. “Then I can think about Italy, Germany, Spain.”

Mondal encapsulates some of the expectation both at home and abroad that falls on Tsipras. His party, also known as the Coalition of the Radical Left, ousted the government implementing austerity, while the anti-immigrant far right party Golden Dawn placed third.

If the Greek population is set to start shrinking, with many of its most talented young people leaving their country to find work and with few people moving to replace them, I'm hard-pressed to imagine how the Greek economy can recover to pre-2008 levels of output. Where will the workforce come from? The scale of investment required to finance economic growth in Greece given the shrinking workforce does not strike me as likely to be realized. Who will provide the funds? Even if SYRIZA manages to achieve the debt renegotiation its thinkers and leaders have hoped, can it be enough?

1 comment:

Colin said...

There's still a lot of unemployed Greeks in Greece, so in the short term, much will depend on what skills they have and whether they can be productively (re-)employed. In certain sectors such as healthcare though, it's quite possible for a country to inflict terrible damage on its future prospects in just a few years of austerity, as the skills lost to emigration take many years to replace and the extra illnesses resulting from a breakdown in services are a far greater burden on the economy than the cost would have been of preventing/treating them at an earlier stage. There are some worrying symptoms already of the degradation of health in Greece as a result of budget cuts, e.g.: http://www.nytimes.com/2013/05/13/opinion/how-austerity-kills.html?pagewanted=all