The Collapse in Greek Living Standards, and a Question about Internal EU Welfare Migration (Updated)

The Collapse in Greek Living Standards, and a Question about Internal EU Welfare Migration (Updated)

The New York Times Magazine has a story that is oddly depressing, on the one hand, and counter-intuitively optimistic, on the other – a report by Russell Shorto called simply, The Way Greeks Live Now (February 13, 2012).  At the macro-level, things look unremittingly bleak; even if the latest deal reached last night holds, I don’t think anyone believes it does more than kick more cans down the road in the Eurozone.  At the micro-reportorial level, the situation is complex, as Shorto explores in his interviews.

Vafiadis is 56 and has spent his life in construction. For the last 10 years, he has been a site supervisor for a company called Archi-Tek, overseeing the building of big, mostly government-sponsored projects like schools and museums. At its height, the company had 50 people on staff and employed about 900 contract workers. Today it has two employees: engineers who are basically putting finishing touches on completed projects. All work in the Thessaly region, where the company is based, has dried up. Vafiadis was laid off in September, two years short of retirement. He took a drag on his cigarette and said, in a mud-thick smoker’s voice, “There’s no brightening in the future.” He was referring to both the Greek situation and his own. “I think things will only get worse.” ….

They have no savings, they told me, because when they bought their home in 2000, they used their life savings as a down payment. Plus they have two sons in their early 20s, both of whom they put through college. One son, Traianos, who studied electrical engineering, sat with us as we talked, and when the subject of fallback financial reserves came up, there was a sudden flurry of back-and-forth banter in Greek, tinged with tension and dark laughter. Eventually Traianos explained to me that his father’s sister died some years ago and left her savings to her two nephews: Traianos and his brother. “So now our children can start giving to us, for a change,” Petros Vafiadis said with a laugh. To which his son replied, with an edgy chuckle, “If things get harder, then we’ll give.”

The discussion turns to a traditional solution to economic crisis at the individual level – migration in search of work.  There is little question that a wave of educated, younger Greeks are looking to migrate and, as the article notes, perhaps repeating the out-migration of the 1940s.  But there are two differences, one being the out-migration of the most educated and younger workers:

As the economy implodes, young people are leaving Giannitsa. Traianos Vafiadis, who is 24, told me that of the group of six friends he has had since childhood, he is the only one with a job, and the others have all emigrated or are looking for work abroad. I heard over and over from young Greeks that they are painfully aware of repeating the cycle that most recently occurred in the late 1940s, when a great diaspora of young Greeks left the country for work. The crucial difference is that now well-educated young people — future doctors, teachers and engineers — are leaving, suggesting that what is taking place is the hollowing-out not only of an economy but also of a whole social system.

The second difference is demographic.  Even before emigration (which might, after all, furnish Greece with remittance payments), Greece had reached the point where 100 grandparents – today’s retirees – have roughly only 42 grandchildren.  The levels of productivity required of an economy to support that ratio of retirees to workers … well, the only country where it might work, I suppose, is Japan, provided they roboticize everything. So even after the bailouts, haircuts for creditors, and all else, the Greek economy would at best have a level of indebtedness that would tax an economy with a sizable, educated next generation, and functional public institutions.  And yet Shorto’s other interviews in the article – with the owner of a factory, and with the owner of a winery – exhibit much more optimism than one might have thought given the macro-problems, the riots and scenes of Athens burning.  I have doubts that the optimism is justified, partly from talking with several of my Greek LLM students, who are all looking to emigrate, but I’m sure Shorto is right in pointing to the immense variety of individually calibrated responses on the ground in Greece.

The response from the solvent part of the Eurozone at this point is mostly a shrug, based on a bet that Greece can be financially ring-fenced and that in any case, this is just throwing good money after bad.  Better that Greece leave the EZ, default, return to drachmas, whatever – the feeling at this moment, anyway, is that it won’t ripple onwards to the two key economies, Italy and Spain.  But I have questions about how easy it is within the EU actually to ring-fence Greece and its problems at the most human level.  After all, a large part of the EU’s point was to permit free movement within the EU, so to liberalize labor markets.  That’s one question – where are the emigrants from Greece planning to go to seek work?  Internal to the EU or beyond, Australia or the US or Canada?

A much bigger question, I suspect – I have not seen much written about this, but am pretty certain it is the subject of important private discussions within governments – is welfare migration internal to the EU.  Shorto’s reporting is focused on economic activity that is mostly within Greece – a exporting manufacturer whose basic raw material is Greek oak trees, and a small winery engaged in the export trade.  But there are many, many crucial things that have to come from outside of Greece, and they have to be paid for – presumably priced in euros or dollars.  When I shift away from the kind of activities that Shorto focuses on, and look instead at reporting on supplies in the Greek health system and state hospitals, it is easy to imagine the development of serious shortages of medicines and supplies, driven by a simple inability to pay for them.  At what point does it become a better idea for a retiree with health issues to move to a richer EU country?

I don’t know – as I often remark in these posts, I am not an expert in EU law, but think we need to talk more about the issues here.  So I would welcome informed or expert comments on the current condition of eligibility for welfare or social benefits, including medical care, internal to the EU at this point.  I’ve tried looking at some of this, but don’t count myself as expert, so I would welcome expert commentary.  And then this further question: suppose that welfare or medical migration is a serious possibility.  At what point does it become enough of a concern to Germany and other wealthy EU states to engage in Coasean bargaining and figure that it’s cheaper to pay Greeks to stay home? What is the current state of EU law on internal migration for work, on the one hand, and social benefits, on the other?  Is there any reason to believe that either of these two motives for internal migration could become sufficiently general to raise issues for the wealthier EU countries?

Update:  Thanks to Martin and EU Law Student in the comments for pointing us non-EU-law-experts to, first, the 2004 Free Movement Directive and, second, an article from 2006 by Kay Hailbronner on what development of the law of free movement and social benefits means in the EU.  To that let me add one additional resource – a new post, linking to useful documents in pdf, at EUtopia law blog, by Dr. Iyiola Solanke, on third country nationals, stationary Union citizens, and residency rights, including discussion of social benefits.  Again, I welcome informed comment on what this means in legal and practical terms for internal migration in time of economic crisis. And my thanks to Martin and others who  have commented.

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Martin Holterman

It’s all here, in the Free Movement Directive.

Benjamin Davis
Benjamin Davis

I saw internal migration – for example, Irish persons being hired for the English speaking jobs that many Americans had held in Paris in previous generations.  It remains amazing to me to have seen the mix of Europeans in the European space working in the same organization.  Hang in there Greeks!

EU law student Sorbonne
EU law student Sorbonne

The ECJ has been very supportive from the beginning of an expansive policy regarding this issue. To reach this purpose it has used extensively the concept of eu citizen and the non-discrimination principle among eu citizens.

One of the main condition to benefit from welafre benefits has long been to be economically active ( being a worker) but then the benefits has been extended to students and retired people in the 90’s. But now it may apply to all eu citizens under some circumstances.