Valia Aranitou is Assistant professor at the Department of Political Science, University of Crete and Director of the Institute of commerce and services, National Confederation of Hellenic Commerce. Here are selected parts of her interview with Pavlos Klavdianos for the Epohi weekly newspaper (5.11.2017), on recent signs of economic recovery in Greece and employment growth.
Aranitou analyzes the conditions that need to be met in order to maintain economic recovery in Greece, including job creation, liquidity and use of digital technologies. With reference to specific data concerning economic performance and stabilization of business activity in the country, she also explains the role of active demand, salary growth and labour relations.
Can we say that economic recovery has already begun? Given the qualitative data, can we argue that this recovery won’t be unstable or limited?
Although the revised data from the Hellenic Statistical Authority for 2016 show a marginal decline of -0.2% in GDP, the figures for 2017 are positive. Therefore, we could actually talk about a recovery trend, as shown by the economic indicators so far. For example, private consumption in the first half of 2016 compared to its equivalent of 2017 shows an increase of 2.3%. Industry production indicators are positive, as well as those of exports. At the same time, turnover in retail trade in the first half of 2017 was increased by 1.7%, while in August there was a contraction of the upward trend, mainly due to large discounts, with the volume of sales increasing on an annual basis (1.0%). If we compare the above figures with the change in GDP of the previous years where there were reductions from 2009 to 2013 of 4.3%, 5.5%, 9.1%, 7.3% and 3.2% respectively, the image is totally different and there are indeed signs of recovery. The qualitative data of the observed recovery also reinforce the above estimates. According to the data we have collected in the Institute, concerning the number of opening and closing businesses, there is stabilization, with a possible upward trend in openings. In large blocks in the center of Athens, there is stabilization in the number of closed businesses in the last two years. We see that old places that were closed are re-opening. Of course this is not the case for all economic sectors, since on the one hand there are those who are recovering more, because they need less capital and, on the other hand, there are those with more liquidity needs. There is, therefore, a reduction in closed businesses. This, in conjunction with the increase in private consumption and trade turnover, shows something. Let’s not forget, at the same time, that the old growth model, which relied on demand and increase of private consumption, should not be re-adopted, as it has led to a surge in imports.
It is often argued that GDP growth will be positive in 2017, or 2018, or 2019, but what then? What we see will last? What should be done?
This is very serious, I would say. It is evident from the significant participation in initiatives such as development conferences across Greece. It is attempted in this difficult situation to consolidate a positive productive structure. Because it is important to examine GDP’s qualitative components and its origins. It should derive from factors that stimulate economic activity and can, at the same time, contribute to employment growth. The bet here is triple. First, to maintain this growth and to contribute, over time, to job creation. Secondly, production should count on human resources and be linked to the existing scientific staff and their skills. Thirdly, to deal with the economic suffocation of the market. Businesses should be able to benefit from the useof electronic money and take advantage of all technological capabilities that are relevant to the full range of their business such as recruitment, submission of the necessary documents etc. This saves a lot of time. But the above conditions, even if met, they should be accompanied by the necessary liquidity, in order to actually help businesses.
Liquidity is still very expensive and limited?
Yes, if we want to modernize technologically a range of services so that businesses can electronically manage the bureaucratic procedures quickly and efficiently, funds are needed to make the necessary technological upgrades. So, without further delay, all the available financial tools must be activated. As you know, there is a problem with the liquidity of the banks, as well as with the observed delays in both the establishment of Development Bank and business support programs. All financial tools, from the moment that an increase in the turnover is registered, need to “run” more quickly to boost the real economy. Of course, it should be noted that sales also increase due to tourism of all kinds from cruises to airbnb. Airbnb as new tourism model increases consumption, in comparison with the mass tourism of “wristband”, since its impact on the local market and the local economy is far greater. Tourism has now begun to be more closely linked to trade, production and services, a trend confirmed by the indicators. Tourist season, meanwhile, has been greatly expanded, a fact confirmed by the continuing opening of many new hotels, especially in the center of Athens.
You referred previously on the crucial issue of active demand. Can it, however, increase substantially without rising wages, especially the minimum?
Positive signals from the economy, as a general framework, already exist, since the basic prerequisite which is the increase in business turnover is already a fact. But, it’s true that the tax has increased, a major problem for businesses, while at the same time wages haven’t. We have, therefore, a loss of disposable income. The question is in which income groups do we have this loss? This question has to be answered because there are categories, such as the ones with lower incomes, where any increase in their income is immediately passed on consumption, while on high incomes a different trend is recorded. Now, given the non-wage growth and the simultaneous increase in taxation, the increase in consumption may mean that the world has received the message of economy stabilization, so it is more willing to spend rather than save their income. Secondly, this observation coupled with capital controls, forces some people to take their money out of the closet and spend them, and that is inert cash. Thirdly, we have a significant reduction in unemployment, which reactivates consumers because almost all of their disposable income is transformed into consumer spending. As for salary growth, free collective bargaining, between employers and workers, will soon have to come into force, a development that will lead to gradual growth in salaries.
The issue of labour relations in the post-memorandum period has already been raised, highlighting differences between employers in large and medium-sized enterprises, with the latter interested in increasing active demand and the former demanding further deregulation, i.e. greater margin of exploitation.
The subject emerged at a seminar organized by the Hellenic Federation of Enterprises (SEV) on “The future of work” and requires, in my opinion, a great deal of attention. This issue is of particular importance and it is used as a Trojan horse, as if it were outside the system and what we are experiencing. The “fourth industrial revolution” raises the issue of labour flexibility, wages and salaries and the role of work in the new working environment being shaped. SEV as a “leader” defines the new agenda: flexible jobs, employees continuously available at the employer’s request, as even the workplace is being questioned in the sense that it is not certain in which area you will work, in which city. We thus have total work flexibility which is linked to technological developments. But why isn’t technological advance positive for employees? How will there be social cohesion? This is a key issue for any society that wants to grow and evolve. To recall however what Schumpeter taught us, development and growth are not the same thing. What we want is not growth alone, with GDP going from 3% to 5%. In China, for example, GDP had been improving for many years, but inequalities are huge. The aim is integrated development, which will obviously go hand in hand with the protection and promotion of social rights. It should be noted that this specific SEV agenda comes at a time when there are signs of development along with an indisputable decrease in unemployment. Instead, the issue of collective bargaining should be put in the spotlight in view of end of the adjustment programme. The social conflict following the exit is predicted to be fierce and the government should take it seriously into account.
What measures could at this time help the world of small and medium-sized enterprises? Are any of them being planned?
A positive measure is the extrajudicial mechanism. It was a long-standing demand from the business world, with larger businesses clearly benefitting more, because small and medium-sized ones have more debt which is linked to entrepreneurs themselves. In addition, what will be of great help is the expected settlement of 120 installments, since during the crisis many honest entrepreneurs and good payers were at a dead end and their tax/insurance obligations soared. The third issue, which needs to be resolved, and banks need to promote important regulations, concerns those who owe but at the same time need greater immediate liquidity coming either from credit institutions or, more importantly, through the implementation of new financing tools, such as the Development Bank which must operate immediately, guaranteed aid, small credit, etc. The moment recovery takes place is the most appropriate to implement all of the above and to diffuse the beneficial effects. In addition, it is necessary to re-examine the very high rate of VAT, which is 24%, one of the highest in Europe, which really squeezes businesses, with adverse effects on consumption.