Introduction

One of the most surprising features of the social situation in Greece over the past few years has been the almost complete failure of the social safety net to cope with the fallout from the recession, the most severe in the euro area. Indeed, it would be no exaggeration to say that the ‘supply’ of social protection in the country fell just as the ‘demand’ – that is, the need – for it increased dramatically.

During 2007–13, the Greek economy contracted by 26.5% in real terms. The loss in output was far greater than in other Southern European economies (Portugal: –7.6%; Spain: –7.5%; and Italy: –8.7%; or Ireland: –7.0%) over the same period. To find another example of such a harsh and drawn-out recession in the peacetime economic history of advanced economies, one would have to go back to the US Great Depression (–30% of gross domestic product [GDP] during 1929–32).

The steep rise in joblessness is no doubt the most characteristic feature of the Great Recession in Greece. Before the crisis, in May 2008, unemployment had reached its lowest level for over a decade (6.7% of the labour force). Thereafter, it started to rise again, gathering pace as the recession deepened.

The unemployment rate peaked at 28.7% in November 2013, and remained as high as 21.4% in April 2017. The decrease in employment was greater than the increase in unemployment: during 2008–13, the number of employed workers declined by 1,064,000, while the number of unemployed ones rose by 942,000. The total employment rate stood at 52.0% in 2016, having fallen to as low as 48.8% in 2013. In 2008, it had been 61.4%.

Since the Greek crisis has been protracted as well as deep, it is hardly surprising that the stock of unemployed workers out of work for over 12 months has risen so much. The long-term unemployment rate peaked at 19.5% in 2014, and was still as high as 17.0% in 2016, relative to 3.7% in 2008.

Policy responses to increased unemployment in all countries and at all times are constrained by fiscal considerations. However, in Greece during the Great Recession, these constraints have been much tighter than is usually the case as the government has operated under conditions of extreme ‘austerity’.