Within Greece, about 93 percent of the population is from Greece (Kwintessential). This country is very family oriented so it is normal for them to stay around the same area they grew up in, these areas are referred to as villages. In the United States we normally celebrate birthdays, but in Greece, they celebrate name days. These name days are much more important to Greeks than their birthdays, although it is very similar how both are celebrated. Normally guest will bring gifts and wishes while the host will provide their guest with sweets and food. I can relate to Greece in this way because all of my family lives in the Tulsa area, and I am not willing to relocate. The economy of Greece hit a bad downfall in 2009 and is still being repaired today. As Greece is becoming more of a popular vacation destination, it has aided the economy. With tourism at an all-time high, this is bringing more money into their economy. More tourist requires more restaurants and things to do which will require employees to work. The unemployment rate has dropped since 2013 to about 28 percent and by 2018 it is down to 20.8 percent (“Greece Unemployment Rate”). While in Mykonos I spoke with a taxi driver, he claimed it was only his second day on the island. I was a bit confused. He explained that he was from the northern part of Greece but for the summer months he will be staying and working in Mykonos to provide for his family. Mykonos is a tourist island and there is a lot of money to be made as a driver. This is just one example of how the tourism in summer months is helping create jobs.
Even though jobs are being created that are requiring people to move into a different area of the country, it is common that many people are leaving the country. The “brain drain” issue is becoming more prominent in Greece. People are not wanting to stay in their country because wages are too low for the educated. A survey showed that 88 percent of the people that left held a degree from a university and 60 percent also have master’s degrees (Ismailidou 2015). The pie chart below shows a variety of why people left Greece. I think for young people it is important to get a degree and to be able to provide a stable life for their family. These young people are finding that stability in places other than their home country. This chart states that 50 percent of the people survey believe that there no future for the country. Many may believe this because of the deep economic crisis they have not escaped in the past ten years.
Advantages/Disadvantages of doing business in Greece:
There is always advantages and disadvantages to doing business in a new country and even your own country. Some of the advantages of doing business in Greece are high tourism, strong entrepreneurial tradition, low labor cost, and skilled/educated labor.
As a tourist in Greece, we participated in the high tourism part of advantages. Many families have small shops, restaurants, and activities tourist can do. It was pretty noticeable which restaurants were the larger ones compared to a “mom and pop shop”. These family-owned businesses thrive on high tourist because it brings in more business. A strong entrepreneurial tradition comes along with the family-owned shops. While in Mykonos a group from our study aboard trip went snorkeling. This is one of the tourist activities that are available. We had an amazing experience with a snorkeling company called “Go Dive @ Lia Beach”. Another advantage of tourism is word of mouth. If any of my friends were to go to Mykonos, I would definitely recommend this business. The labor cost consists of wages paid to employees, benefits, and taxes. While labor cost stays on the low end of the spectrum, this also feeds into a disadvantage of unemployment.
While there is an upside to doing business in Greece the disadvantages can include the unemployment rate, issues with the debt crisis, and the bureaucracy system. The unemployment rate is currently at 20.8 percent this is down significantly from the highest it ever was at 27.9 percent (Greece Unemployment Rate). Their lowest unemployment rate was 7.3 percent in 2008. This graph below shows the unemployment rate from approximately 2002 – 2018. Over the years it is clear when the unemployment started to become an issue and this is around the same time that Greece became very aware of the economic crisis.
Starting a business in Greece during the worse times of the debt crisis could seem almost pointless. The harsh terms that come with the debt crisis keep new businesses from succeeding. The terms can include high tax rates and lowering of wages. Majority of these decisions are made by the state officials and not elected officials. This is a system called bureaucracy. This can get out of hand when they have so much power that officials can essentially make or break any business trying to start in Greece.
History of the banking system:
Long before any currency was made, there was a way to exchange goods and services. This was called bartering; this was the “exchange of surplus material goods”. In this trading system, people would have a good and exchange it for a neighbor’s good. Many countries, such as France, China, and Portugal, were still using shells to make transactions with Africa at the end of the 17th century. Following this, the first form of currency was metal in the shape of ox skin. Soon people realized it was too much work to carry that heavy metal. Next, the exchange was done with meat roasting rods, it was considered the norm to be able to hold 6 rods at a time. The Greek word “drachma” which means “what I can carry”, this eventually turned into the Greek Drachma currency. These first Greek coins have been found all over the world because in ancient times it always carried value. In the beginning, these coins were made with precious metals such as gold, silver, and platinum. These coins quickly began to outgrow their value. After a while, it was agreed that coins would not be made out of these precious metals, but instead a durable material and would have a set value that would be comparable across nations. This led to representative money, or money that represents something it is not, for example, if you melt a quarter you do not end up with the ¢25 worth of metal. This eventually shifted into paper money or “bank notes”, in the west paper bills were distributed in Scandinavia, Britain, and America in the later 17th century. Banknotes became a way to show the rest of the world what a country was proud of, this is why the United States Dollar has past presidents, eagles, and some have the name of states on them. The Chinese banknote (pictured to the left) was issued in 1287, the bottom of the banknote states that counterfeiters would be sentenced to death (Museum of the Bank of Greece, Info Guide). In recent years’ money through the growth in popularity of credit cards and the ability to pay with smartphones, money has become more of an illusion. With the evolution of money, the banking system has shifted as well. The National Bank of Greece was founded in 1841 as a note-issuing commercial bank. This helped unite the drachma’s position. This bank was used gradual alterations of the banknotes, which gained more citizen confidence. In 1868, the government revoked the privilege of issuing money from the National Bank of Greece. They involuntary had to stop the exchange of banknotes because they refused to give up the metal currency. In the following years the Greek economy saw growth rates due to projects put in place, but soon an overworked economy was declared bankrupt. During the wars in the late 1800 and early 1900, it really deflated the value of the drachma. During June of 1917, Greece enters the war and the extreme costs of military needs caused tension on the government’s budget. In 2000 Greece changed their currency to the euro. The ability to exchange the drachma was in place until 2012.
History of the economy:
Many people know that Greece’s economy is terrible, and has been for a while. What most people do not really understand why. In the past Greece has tried to recover from the economic damage by participating bailouts. Currently, Greece is in their third bailout from 2010 to now. This totals to €310 billion or $360 billion. To put this into perspective, the total amount for all three bailouts are just under what the United States largest bank’s (JPMorgan) market value is. This bank’s market value is right at $366 billion (Nelson 2018). For US citizens, this really puts a familiar name and number with the severity of the economic crisis.
A bailout is when a government offers money to a failing country to prevent the consequences of its downfall (Staff 2018). Bailouts may be accepted in loans, bonds, stocks, or cash, and are usually required to be collected at the end of the agreed term. Greece’s bailout has been provided by the International Monetary Funds and the European Union. The first bailout came in 2010, but it was known in 2008 how bad the crisis was. The bailout in 2010 came with firm conditions. Most of the money from this bailout came from Germany and required spending cuts and tax increases. These spending cuts and tax increases are examples of the reforms that come with the bailout. Although all of the reform requirements have not been met yet, it shows signs of growth.
Understanding the growth that is happening now is essential to understand the economic plan. As the lecturer from the Bank of Greece told us the main recession happened from 2008 – 2013 after that was the stagnation from 2014 – 2016. Although stagnation is not a goal for Greece it is better than a continuing of the recession. Finally, from 2016 – current they are recovering and making improvements to the numbers. While growth rates are modest and on the rise, for now, they don’t want to plunge into high growth rates. A growing economy that grows too fast can backfire and crash faster. In the banking world, there is a gradual recovery of deposits and a quick decline of central bank financing. For the fourth year in a row, the market recovery is still on its path. As the market is improving new jobs are increasing. This adds to the employment sector, but one of the challenges that the economic policy now faces is the public debt. To do so they are implementing reforms that will improve the quality of investments, with an emphasis on the private investments FDI. Private investments are not on the rise, most of the decline was in residential investments. Domestic savings are not sufficient to finance investment needs, result in Greece needing to attract more FDI. In terms of fiscal policy, Greece has the biggest informal sector or share of GDP in the European Union. While the country’s debt is still very great, it can be managed. Overall it seems that the Greek economy is in recovery mode and can still grow.
Plan for economic growth:
Greece’s 5-year plan called “Greece 2021: Fair growth, productive reconstruction” is an economic plan to increase growth and stability within their economy. This plan was presented and put in place by Prime Minister Alexis Tsipras in 2016. Since the beginning of this plan, the GDP has risen a sufficient amount. Recently, for the first time since 2009, the GDP has seen growth for five consecutive quarters. As goals should be set into place for the growth of the GDP in the future, this is a great starting point for the country. Detailed goals for this new plans include reducing unemployment, financing new small loans, promoting public-private partnerships, and managing the non-performing loans. Since the downfall of the economy, Greece has applied a new law that is supposed to speed up the process for businesses to start production sooner, this is called the “fast-track law”. The goal of the fast-track law was to simplify the processes of receiving the licensing needed to open new businesses. This law includes tax incentives, efficiency, and more updated procedures. These plans and new laws are pointing to recovery for their country’s economy but does not provide confidence in the growth.
In conclusion, Greece was a once in a lifetime experience from the cultural experiences to the exquisite food. It was such a beautiful place from what I saw the economy is definitely on the rise. I know that if more people were aware of the gems of Greece they would want to explore this county. Although Greece is not where it needs to be at as far as the economy, it is travel-friendly as far as living expenses needed while being away from home. As the economy improves I think it is possible that the brain drain epidemic will improve. If there is room for improving qualities of the country and debt crisis the brain drain will continue. The government has put plans into action to aid the failing country and this has helped in the recent years. As time goes on, it will be clear to see what is working for their country specifically. If all goes as planned and stays on track, there will be a major improvement by 2021.