Read more: “Greece in crisis: Saving a nation“
Healthcare isn’t the only pressing need in Greece, as the rise of soup kitchens in Athens shows. With finances tight, which public services should the Greek government prioritise?
“You would obviously focus on health services, but also schools and benefits,” says David Hall, director of the at the University of Greenwich in London. “They are the key underpinning elements for survival. If you don’t sustain them, people will suffer in very obvious ways.”
Advertisement
Hall says support for education is vital to avoid deskilling the workforce, which would prolong the slump by making investment in new industries even less likely.
Providing benefits to the unemployed is also critical, he says. As well as staving off poverty, benefit money gets recycled into the economy as poorer people spend all they have on essentials. In contrast, tax breaks can divert funds elsewhere. Hall points out that in 2008, less than a third of the money given away through tax breaks in the US was put back into the economy – the rest was saved or used to repay debts.
Unfortunately, Greece currently has little welfare system to protect as benefit funds are swallowed up by public sector pensions, leaving extended family networks to look after the unemployed, says , director of the at the London School of Economics. “If you were starting afresh, you would want to prioritise unemployment benefit, and try to shift to some kind of welfare state,” he says.
But achieving this would require doing away with the culture of cronyism and political favours, Featherstone says. “The [Greek] state is hugely dysfunctional, with poor coordination between ministries and poor recording and exchange of information on which to prioritise decisions.”
The government that assumes power in Greece after elections on 17 June will have the opportunity to chart the way forward, but perhaps they should start by looking back. After Argentina’s economy crashed in 2001, its government defaulted on debts and devalued its currency, before from 14 per cent of GDP in 2003 to 25 per cent in 2010. Funds went to building new homes, modernising public transport and investing in minimum wage, pensions and child benefits. In that period the economy grew 6 per cent per year, and by 2011 it was up to 8 per cent.
After its 2008 economic crash, Iceland cut public spending by 12 per cent, but prioritised and expanded funding for pensions, welfare and child benefits. By 2011, unemployment was down, and the economy had begun a .
In times of crisis, loosening the purse strings to spend on welfare can be daunting – and politically unpopular. But as history shows, it may lay the surest foundations for economic growth.