Home > Financial Flows > Economic Shock Therapy in the Eurozone: The Greek case

Economic Shock Therapy in the Eurozone: The Greek case

Lois Woestman writing in May 2012 examines how, over the past two years, Greece has been undergoing economic shock therapy not unlike that undertaken by many countries in the Global South/Arab world. She argues that in the Greek case the EC institutions have been even more austere than the IMF. The impacts are similar to those in other adjusting countries: widening class, gender, non-citizen/citizen gaps; growing poverty and hopelessness – as well as protest. Greeks have been relying on older survival strategies, but also new ‘alternative’ economic activities intertwined with new notions of citizenship. She suggests that Greece – Europe – stands before a choice between the continued mono-focus on austerity, which will bring down the Euro and Europe, or a return to more equally distributed, growth and social solidarity.

Economic shock therapy

For the past two years, Greece has been undergoing a combination of what Naomi Klein calls shock doctrine (Klein and Wiltsie, 2007) and David Harvey calls accumulation by dispossession (Harvey, 2005).

Klein has argued that shocks (e.g., environmental, security) are moments when populations become vulnerable to heretofore unimaginable changes – including the introduction of structural adjustment programmes. Klein’s work analysed adjustment in areas of what can be called the Global South and the Arab world. The Greek case is novel in that it constitutes one of the first times International Monetary Fund (IMF) economic shock therapy has been applied within the Eurozone.

Greece’s first shock came in Spring 2010. Shortly after his election, Socialist Prime Minister George Papandreou announced that Greece had not only the highest public debt in the Eurozone, but a total that far surpassed previous official statistics. In response, speculators attempted to weaken the Euro and drive up the price of Greek public debt by betting that Greece would go bankrupt – which made it more likely that it would. Greek and European governments’ tentative responses made matters worse.

In order to avoid bankruptcy, Greece has accepted two structural adjustment programmes jointly sponsored by the European Commission (EC), European Central Bank (ECB) and IMF, known as ‘the Troika’.



The Troika has attached to these monies many of the conditionalities typically associated with IMF structural adjustment programmes: large cuts in public sector spending (services, jobs, pensions) and large-scale privatizations. Taxes (including VAT and income), and with them the prices of goods and services, have risen – impacting disproportionately the country’s easier-to-tax lower and middle-income residents. As a Eurozone member, Greece has not been able to devalue its currency to lower the prices of goods. Instead, wages have been cut to drive down prices, in order, it is claimed, to make Greece more competitive, and hence eventually see some economic growth.


The impacts have been growing unemployment, widening gender and generational employment gaps. In May 2012, nearly one of four Greeks is unemployed. When the economic crisis of 2008 initially spread to Greece from across the Atlantic, more men than women lost their jobs (Woestman, 2010). After the public sector cuts kicked in, more women than men have been losing theirs. Adjustment, in other words, has reversed the growing participation of women in the Greek labour market – participation that, even when growing, was still low by European standards.

Youth unemployment has surpassed 50 percent, and many employed youth work only part-time. When they do find work, youth wages are around 500. Today’s young Greeks joke about being the ‘501’ generation. This is a reference not only to the amount of money they are paid, but also to their parents’ and grandparents’ generations, when 501 jeans were an import luxury few could afford.

More young women than young men are unemployed. A number of young women sense that the dream of a professional career is beyond their grasp and say they are ‘choosing’ instead to be nikokires, ‘housewives’. This at least is a meaningful role, they say, because being the sole caregiver for one’s family and doing all the unpaid dependent and house work remains highly valued in traditional Greek society.


Income and time poverty

For those lucky enough to have retained their jobs to date, wages have decreased by an average of 40–50 percent. Private sector minimum wages have been reduced to around 700 per month, and public sector wages have been brought close to this par. Payment delays have also become extremely commonplace. Altogether, the average Greek family’s income is increasingly unsustainable. At the same time, prices are high, and rising. The cost of living in Athens was higher than in Amsterdam or Berlin before the adjustment-related tax hikes. Petrol costs in Greece are among the continent’s highest.

Due to the widening gap between incomes and the cost of living, a third of Greeks now live in poverty, with more on the brink. As one hospital employee put it, ‘We are not talking any more about which face cream to buy. We are talking about having enough money to buy cream to feed my baby’.

‘Time poverty’ (Antopoulos, 2010) is also on the rise. Prior to the crisis, Greeks were already working longer hours than most other Europeans.1 Because wages are now so low, many who can are working more jobs and hours than ever. This is especially true for men, who are trying to fulfil the traditionally expected breadwinner role. Unpaid work is also increasing to make up for cuts in state services and to avoid the cost of paying others to help with work at home. As men do not yet appear to be stepping in to help with this domestic burden, women are taking on more unpaid work – often alongside full-time work they are trying hard to hang onto.


Traditional values

There are also other push factors for (young) women to be ‘just housewives’. As jobs dry up, some – especially older – men are accusing women of taking men’s jobs and neglecting their proper nikokira role. As a retired policeman told me: ‘The problems started when women left the homes to work. They took men’s jobs, first of all. And second, families had to spend money to cover the work in the houses, and in hospitals, etc, that they could not do, because they were out doing other things. If they went back home where they belong, this would solve the problem’. Younger men, on the other hand, however, have commented to me: ‘You know, there aren’t any jobs for us youth, so how can young women be taking them from us?’


Hunger, homelessness, despair

Hunger and homelessness, rare during the past two generations in Greece, are increasing. The Greek public health care system is in decline. Quotidian life is made more difficult by strikes. Greece is also suffering from brain drain, as many, young and older, pursue opportunities abroad. As evidenced by the very public suicide of a pensioner in front of the Greek Parliament, depression and suicide – until recently also rare phenomena in this land of blazing sun and ‘Zorba the Greek’ spirits – are also rising.


Xenophobia, too, has been on the upswing. Foreigners are blamed for disappearing jobs, increased crime and the dissolution of Greek tradition and identity. Members of Golden Dawn, a right-wing party that mimics Nazi rituals, have built a political base by establishing vigilante ‘policing’ of Athens’s poorer, immigrant-filled neighbourhoods. For many Greeks living in these neighbourhoods, Golden Dawn’s efforts underscore the failure of the government and state police to address illegal immigration and attendant social challenges. The party’s motto is: ‘So we can rid the land of filth’. Indeed, foreigners accused of robbery and menacing behaviour have been beaten, and hate crime is on the rise.2


Free fall economy

A few months back, the Greek economy minister acknowledged that there was no gain for all this pain; the adjustment programme was not working. Greece’s economic system was admittedly in ‘free fall’. The economy has been shrinking for five consecutive years – a record matched by no other European country during peace time. Tax hikes and budget cuts notwithstanding, dropping state tax revenues (due at least as much to reduced taxes due to lost incomes as uncollected taxes) have been causing the budget deficit to widen. The debt burden has risen as a result of continued borrowing at higher interest rates higher than the IMF recommended but demanded by the EC and ECB. Instead of shrinking, the debt/GDP ratio has ballooned to 170 percent.

Despite this clear failure, the economy minister announced that Greece would have to undertake harsher adjustment in the years to come. In Spring 2012, the Greek government and the Troika agreed to a second adjustment programme in the amount of 170 billion, with monies and more adjustment measures to be meted out over the coming years. The effects of this second programme are just beginning to be felt. One of the main aims of the second programme is to return Greece’s debt/GDP ratio to 120 percent – where it was before the first adjustment programme began.


Political sovereignty, democracy

As a result of the adjustment process, Greece has lost considerable political sovereignty. Foreign advisors have been posted in economic ministries, state enterprises are required to privatize, and public spending is essentially frozen. Greece’s control over the fiscal matters essentially disappeared with the second adjustment programme, which stipulates that Greece create a separate account for loan repayments. Adjustment monies are to first cover loan payments; what is left, if anything, can be used by the state.

In the past months, in the lead-up to the recently held 6 May elections, Greece had an unelected ‘technocrat’ (former ECB Vice President) Prime Minister and a ‘grand coalition’ government. The 6 May elections amounted to the first national referendum on the adjustment process and the parties that supported it. The results were seismic.

Votes fled from the two centrist parties that have held power since 1974 and were responsible for agreeing to the adjustment programmes. Pasok, the left-centre party in power since the 2009 election, in particular, lost more than 50 percent of the support it had enjoyed three years earlier. The results for New Democracy, the principal opposition but eventually Pasok’s conservative partner in the grand coalition, were similar. Syriza, a heretofore marginal left-wing party, received 17 percent of the vote and emerged as a serious new player on the fast-shifting political landscape. Most unsettling for many Greeks is the fact that New Dawn received almost 7 percent of the vote, enough to seat 21 members of Parliament. Apparently emboldened by their party’s relative success, New Dawn members began openly threatening gay-appearing men, handing them a paper saying ‘you are next’. New Dawn has not yet publicly stated its belief that women should return to home and hearth, but women not fulfilling traditional gender roles may well be ‘next’.

Syriza’s ascendance has brought hope to many that Greece might be able to remain in the Euro, while ceasing payments on the loans until they are renegotiated – Syriza’s campaign platform. Syriza, however, was not able to obtain the agreement of the other parties to form a government. New Democracy, Pasok and the New Left Party, a new entrant into the Parliament, and the President were also unable to broker the formation of a coalition government, triggering the requirement for a second round of elections on 17 June.



To date, adjustment ‘gains’ appear to consist in a few Greeks becoming/remaining significantly richer at the expense of the majority (Harvey’s dispossession by accumulation); Greece continuing to service its debts to foreign banks and weapons industries of the same lender countries, while giving the EC time to establish a ‘firewall’ so that the Euro will be protected should Greece default.

Political resistance

One of the reactions to any shock can be anger, as Klein has noted. As the international press has been reporting, Greeks have been protesting almost constantly over the past two years. Massive demonstrations have filled the streets leading to Parliament again and again. The square in front of Parliament was occupied for months. Many strikes have been carried out over extended periods of time; some continue, and new ones still appear sporadically. Older forms of political protest, such as throwing yoghurt at politicians – a tradition from the junta days, are back in vogue. These protests have occasionally slowed reforms but have not (yet) managed to turn the austerity tide.


Direct democracy

The left parties have not come to an agreement on a common alternative agenda. During the past two years, protesters have lamented the inability of traditional party politics to give them a voice. They are calling for more direct democracy. The occupation movement in Greece is a manifestation of this new type of democracy.

National-level blame games

Political resistance has also been affected by the fact that many Greeks have internalized a sense of blame and responsibility for the crisis that has led to tacit support for the adjustment programmes. Many Greeks have accepted politicians’ claims that they, as well as the politicians, ‘ate’ – cheated – in the ‘good old days’, and hence should pay now. Many others are claiming, however, that, while the ‘small fry’ might well have ‘eaten’ in a system in which otherwise one cannot get work (done), the ‘big fish’ that enriched themselves are bearing little if any of the cost for the ‘feasting’. As mentioned above, others being held responsible include immigrants, women, gay-appearing men, etc. These blame games divide and conquer the majority of Greeks hard hit by adjustment.

In addition, many Greeks have vilified the public sector – in particular, civil servants, many of whom won their jobs through political patronage or nepotism. Clientelism aside, blaming the public sector for Greece’s woes has helped to persuade the populace to accept austerity measures and entitlements cuts, undermining one of the main drivers of the country’s employment and economic growth over the past decades (Antopoulos et al., 2011).


Economic resistance and solidarity – and ‘hoarding’

The Greek economy is not likely to turn around soon. Klein argues that in times of shock, people’s first reaction is to help each other – to show solidarity. This has certainly been one of the important ways residents of Greece have reacted to austerity. People are also taking things into their own hands in terms of economic activity, trying to create new ‘alternative’ economic processes that help people survive. Some of these rely on older forms of solidarity and notions of citizenship, others on emergent, more encompassing, ones.

Traditionally, Greeks have relied on what one could call ‘intra-clan’ solidarity. They have long helped their immediate and extended family members and acquaintances. For example, grandparents often give some of their pensions to their children/grand children. However, as pensions are cut, this type of solidarity is dwindling. Increasing, however, are the traditional unpaid exchanges of services/goods within these circles – for example, mothers (in law) providing child care, language lessons for car service, a chicken for dental care, etc.

These types of solidarity were and remain limited in reach, often regarding others outside the ‘clan’ ambit as competitors for scarce resources. In other words, at least traditionally, Greeks’ sense of a common good encompassing the entire country has been limited. Burgeoning fear is causing many people in Greece to shrink in their sphere of those they help, and fight even harder against those outside the sphere for the pieces of the shrinking pie. This fear is heightening the verbal and physical abuse often accompanying blame games.

At the same time, newer forms of solidarity are emerging, as groups are working to create new types of citizens, new ‘civil society’ movements, whose ambit extends beyond these traditional circles (Placas, 2012). Many of these groups have been creating new types of exchanges. Some are exchange currencies such as the GEM, which provide a basis for exchange of goods and services without a means of keeping value. Many other types of such new currencies, as well as of direct exchanges, have emerged, often on a spontaneous basis: ‘Come to the square for an exchange event. Bring what you don’t need, and exchange for what you do’.

With the exception of the GEM (recognized as NGO activity), these solidarity activities, old and new, are taking place outside the formal economy, with its high taxes – making the ‘black economy’ grow instead of shrink. They are understood by many of those doing them as a form of resistance to a state that has become more extractive than supportive. If they maintain momentum, these exchanges have the potential, eventually, to bring down prices across the board, as they cut out middlemen. Such movements are many, but are – at least for the moment – not yet well coordinated with each other. And hence remain, for the moment, more ‘band aids’ than a coherent alternative.

As with traditional party politics, none of these movements is specifically feminist. Taking place outside the paid sphere, relying on unpaid work, it remains to be seen whether these activities will be left mostly to women to carry out, as part of their ‘caring’ work – that is, if they will be different from traditional party politics, in which women’s issues have been sidelined.


Shell shocked

Klein argues that some of the tactics of economic shock therapy have been taken from military shock and awe campaigns, which attempt to confuse and demoralize a populace, so that they acquiesce to the new situation. This is indeed what has been happening in Greece. Many are simply shell shocked, and have lost the will to resist. For months leading up to the 6 May election, it was not uncommon to hear comments such as: ‘I can’t stand it any more. Let them do what they want. I am beyond caring any more’. The recent elections, however, have shown that shell-shocked Greeks can rebound and rebel.

Higher European stakes

Core–periphery model

There is much more at stake here than ‘just’ Greece, of course. The crises in Greece (and Spain, and Ireland, also ‘adjusting’) are signs that the core–periphery model that was at the heart of the Euro is breaking down.

The Euro has experienced a certain stability, a balance of economics powers, if you will, built around a ‘core’ of export-oriented economies (e.g., Germany, the Netherlands, etc.) and a ‘periphery’ of import-oriented one. The latter were using much of their debt, both public and private, to import goods and weapons from the core economies. Much of the public debt accrued by the peripheral economies in the process has been to banks of the core ones.

This balance lasted as long as economic growth did; when the crisis hit, it began to break down. The core economies had been ‘adjusting’ slowly over the course of the past decade or so, as they maintained economic growth. With economies in recession, the peripheral countries have been having trouble servicing their debts – hence the adjustment programmes. Core economies’ growth is slowing down, however, as peripheral economies cut their imports. The mono-focus on austerity without growth mechanisms favoured by those calling the shots in the Eurozone during the past two years does not provide a way out of the downward spiral.


Europe-wide ‘blame games’

We have been seeing the fall-out of the falling apart of this Euro model in public divisions – in blame games also at Eurozone level. The German press have been accusing Greeks of being ‘lazy’, and the ‘Portugal, Italy, Ireland, Greece, Spain (PIIGS)’ of southern Europe of being cheaters. In return, the Greek press have been accusing Germans of being fascists.

These are not ‘just’ fall-outs. As the ‘blame games’ in Greece, these blame games divide and conquer the majority of Europeans that are paying the price of adjustment in the Eurozone, making it difficult for the majority who are being dispossessed by the accumulation of the few to be in solidarity with each other, and to resist in cooperation with each other.

Interlinked with these blame games is the blame game vilifying the public sector, being used to cut entitlements – especially in the peripheral economies. Core EC politicians have been consistently portraying public sector/civil servants of the peripheral economies in particular as ‘lazy’, incompetent, corrupt, etc. This tactic has been used to convince especially ‘peripheral’ Europeans to go along with the major cuts in the public sector – to see hard-earned entitlements as no longer affordable luxuries. The ultimate aim of cutting the public sector is not only to budget balances, but to make more space for free markets – shorthand for the few getting rich at the expense of the many, that is, accumulation by dispossession.

Hope on the horizon?

It remains to be seen what the rest of the PIIGS (and France) will do, if Greece leaves the Euro-zone/Europe. ‘There is a building sense that a Greek exit from the euro zone, while undesirable, would not necessarily result in a catastrophic chain reaction. This is partly because Europe is much better preacquiredpared than it was two years ago’ commented the New York Times today (Donadio and Kitsantonis, 2012). Or, as Wolfgang Shauble (German Finance Minister) said yesterday: ‘We have learned much in the past two years (of the debt crisis) and have built defence mechanisms’ (Papasimakopoulos and Mac Con Uladh, 2012). In other words, a firewall is now ready, to ‘defend’ the Euro from a Greek exit.

However, the New York Times article also commented: ‘… the example could spur other at-risk countries to redouble their efforts to avoid the same fate’. Meaning that the example of Greece may continue to be used by the Troika to keep other ‘PIIGS’ in austerity line.

The vote in France was an encouraging news to many Greeks. By dissolving the ‘Merkozy’ collaboration, it awakens at least the hope of a sea change in the Eurozone, in Europe, away from austerity only to at least some counterbalancing growth. If it not only shifts some of the discussion, but also some of the practice, towards growth, Mr Hollande’s election could help Greece and other ‘PIIGS’, as well as France’s, population – and the Euro project more broadly.

Time, though, is not on Greece’s side. Even if growth-fostering measures were introduced in other PIIGS, as in Italy (which is likely receiving ‘special’ treatment because, unlike in the case of Greece, if it were to leave the Euro, the Euro would certainly collapse), it is too late for them to be introduced into already signed and sealed Greek austerity packages. If Greece stays in the Eurozone/Europe, introduced alongside the current memorandum, the small growth-encouraging measures will likely be but ‘band aids’. If Greece secedes, however, it will be free to takes its own potentially growth-oriented course – but on the basis of a devastated economy and demoralized populace.


Europe of the 99 percent

Klein argued that a good, healthy, reaction to shock is to be – intelligently – angry. And that time is of the essence. As many in Europe are now realizing, Greece, Spain and Ireland are but the tip of the iceberg. Economic shock therapy awaits the majority of Europeans, unless something changes. Europeans of the 99 percent may decide to deflect the blame games, and join the growing PIIGS/Eurozone-wide solidarity that has been emerging over the past few months.

Changing tunes

Klein also argued that one can resist by ‘changing the narrative’. Europeans should consider clamouring for continuation of what makes Europe unique: a balance between state and market, solidarity in all its forms. And, taking this argument to its logical conclusion, by arguing for more, not less, Europe. We should be demanding EU-wide minimum wages, health care, education, etc. A pan-European 99 percent – cross-class, cross-generation, cross-citizenship/immigrant, and of course cross-gender – coalition is needed to make this happen.

Empowering economics

We will also need to empower economics – to become something different, something more, than it already is. Feminists have already acquired a great deal of experience thinking through and proposing what such ‘alternatives’ could look like. These need to receive a much greater hearing.

This requires feminists across Europe to collaborate within – and ideally lead – a broader 99 percent movement. One of the challenges European feminists will face in doing so has to do with the differing nature of European states. ‘Core’ states still provide some social protection, some support to gender equality and social solidarity, however diminished. The peripheral states are shifting to becoming essentially ‘extractive’ states, which people no longer see as allies. This opens up the question as to how a united European feminist movement would see ‘the state’, and the strategies proposed for how ‘it’ should change.

The newly launched ‘phoenix’ version of Network Women in Development Europe, (WIDE+), is one of the spaces in Europe in which such collaborative feminist work can be pursued. In Greece and elsewhere, ‘reactive’ work needs to be carried out. Time-use studies are needed to document unpaid as well as paid work, and time poverty. Gender/participatory budget studies are needed to map how the budget changes affect different groups differently. And, at least in Greece, a debt commission is needed, to shed light not only on what public debt was used for, but also by whom, and to whom repayments are being made.

Proactive work that could contribute towards a gender-aware 99 percent movement could include economic literacy, to help build a groundswell of citizens better armed to argue against economic shock therapy and dispossession by accumulation – to turn the blame game back on the 1 percent. Until/alongside yet to emerge ‘hard statistics’, rapid qualitative assessments on the effects of the crisis are needed to assess the immediate and less quantifiable crisis effects.

Crises are moments in which positive as well as negative change can be brought about. Let’s seize the moment.



1 http://stats.oecd.org/Index.aspx?DatasetCode=ANHRS.

2 http://www.hrw.org/news/2011/12/12/greece-rare-hate-crime-trial-opens.


Antopoulos, Rania, Dimitri Papadimitriou and Taun Toay (2011) ‘Direct Job Creation for Turbulent Times in Greece’, Observatory of Economic and Social Developments, Labour Institute, Annandale-on-Hudson, New York: Greek General Confederation of Labour and Levy Economics Institute of Bard College.
Antopoulos, Rania (2010) ‘Time and Poverty from a Developing Country Perspective’, Working Paper No. 600, Annandale-on-Hudson, New York: Levy Economics Institute of Bard College.
Donadio, Rachel and Niki Kitsantonis (2012) ‘Continuing Leadership Deadlock in Greece as Its Lenders Watch and Wait’, New York Times, 9 May, http://www.nytimes.com/2012/05/10/world/europe/new-elections-appear-likely-in-greece.html.
Harvey, David (2005) ‘A Brief History of Neoliberalism’, University of Chicago Center for International Studies Beyond the Headlines Series. 26 October.
Klein, Naomi and Jennifer Wiltsie (2007) The Shock Doctrine: The rise of disaster capitalism, New York: Henry Holt and Company, Inc.
Papasimakopoulos, Makisd and Damian Mac Con Uladh (2012) ‘Elections 2012: Live news blog’, Athens News, 11 May, http://www.athensnews.gr/portal/8/55470.
Placas, Aimee (2012) ‘The Crisis and Social Movements’, College Year in Athens sponsored lecture, 23 April.
Woestman, Lois (2010) ‘The Global Economic Crisis and Gender Relations: The Greek case’, AWID: Association for Women and Development http://awid.org/Media/Files/ICW_2010_GreekCase.


Comments are closed.