Professor Odysseas Katsaitis is the Head of Economics at Deree College – The American College of Greece based in Athens. Prior to joining the faculty at Deree in 1991, Katsaitis taught economic theory and quantitative methods at York University. His current research interests focus on the extent that EU funding has impacted the Greek economy. With extensive professional background experience in both the public and private sectors, Katsaitis addresses the effects of the country’s financial crisis on the nation’s economy, the EU and small businesses.
How does the current state of the economy compare with the early days of the bailout crisis? What does the future look like for Greece?
The recession, because of this massive reduction of spending and increasing taxes, is beyond any statistics in the sense that you are talking about a loss of GDP of 35 percent, which is more than a typical war. The future is rather bleak and dark. With all this instability and governments, without investment, Greece will remain in a state of recession.
For political reasons, the governments since 2009 were not willing to reduce spending. It was much easier to increase taxes because reduced spending would have meant public servants have to go. We had a sequence of events whereby taxes increased and pensions were reduced massively.
At the same time, a number of structural changes that should have taken place to make the economy more competitive never took place because of political reasons. There is an issue here. Greece remains very slow in implementing structural changes. Notice, for example, what is happening with education. Still, there is this division between private and public. Privatizations go very slowly. The only way for the country to go forward is through investment. There are no savings so obviously, you need foreign money.
What effect does Greece’s spiraling economy have on the EU and its member states?
The Greek economy is so small within the EU that the direct impact is minimal. Greek GDP is 2 percent of the European GDP, which makes it irrelevant. What happened with the Greek crisis is that you had uncertainty. All of a sudden, the European structure became obvious that it was shaking. There were weak points. In that sense, yes, it had an impact.
Imagine if Greece had to leave the euro? That would have been a disaster – forget about Greece because that would have been a disaster too – in Europe. Imagine if North Dakota leaves the dollar? It might be a very small part of the U.S. but in terms of the structure, it shakes the whole thing.
What do you think is the likelihood of a “Grexit,” modeled after the “Brexit” of the U.K., happening in Greece?
Greece definitely has no intention of leaving. It would be catastrophic. Whether other countries might get ideas, it is not unthinkable. You have to realize that Europe expanded massively in the last 20 years, expanding in a rather peculiar way. We had all these countries moving in with their own way of thinking without first having a constitution and clarifying this.
But Britain is another story. It was never really part of the EU. Britain is always associated with the U.S. With Brexit, you will have a better Europe. A Europe that believes in Europe. Those guys never believed in that.
It is no surprise that larger corporations had enough capital to survive through the bailout crisis with minimal harm. Smaller businesses, however, were in a much more vulnerable position. How did they respond to the crisis and in the years following?
Hundreds of thousands of them have gone bankrupt. Walk down Stadiou, the main street from Syntagma to Omonoia Square, and 30 percent of the stores are closed. There was so much money going around before the crisis because of the massive amount of money pumped into the economy by the government, that’s how they were making money. They went bankrupt and this year will only have more bankruptcies because taxes are going up and people are not spending a lot of money.
Walking around Athens, there seems to be a café or bakery on every corner. How do these storefronts survive when the competition is just a few doors down?
The only kind of business that is increasing in numbers is absolutely cafés and souvlaki places. The owners are basically people who are unemployed so they put a little bit of money and try to survive. Think about it, you pay three euros. What does that cost? Twenty-five, 50 cents? If they sell 20 coffees, that is 500 euros per month. They marginally survive.
Unstable, uncertain and unorganized, the Greek economy is clearly struggling to stay afloat. What direction is it heading and where will it end up?
Look at the U.S., you have New York, you have Los Angeles and you have South Mississippi. Well, we will be the South Mississippi of Europe. In the U.S., you have poor areas. Well, in Europe, that will be Greece. Greeks will have to survive at a very low level of income and poverty.