Saturday, May 5, 2012

Greece has a Nazi problem

Here is some disturbing news coming out of Greece:
At Greece's last general election in 2009 Golden Dawn, whose members use the Nazi salute and whose party symbol is an adapted swastika, polled fewer than 20,000 votes nationwide. Now as the country goes to the polls on Sunday, national politics more closely resemble those of the embattled area.
Fascism is on the rise among the Greek youth. And it isn't very surprising. Over half of Greece's youth are unemployed - paving way for nationalist political sects to pin Greece's problems on foreigners.

A fascist Greece, while concerning, would not pose a daunting threat to international security, and they would almost surely be thrown out of the EU. However, if these political trends were to gain more popularity, it would not pose well for investor confidence.

I think the Greek government needs to focus on short-term policies that will give Greek youth some support. Of course, living in the age of austerity, there isn't much room for creative solutions.

One proposal would be lowering the minimum wage. As you can see in the graph below, the minimum wage has risen by about 300 euro over the past decade. (I'm not even going to get into what's going on in Ireland.)        

Greek youth need jobs, even if they don't pay well. It'd help companies hire low-skilled youth if their wages were lowered to market levels. 

There are strong relationships between high unemployment and radical political activity. Will lowering the minimum wage employ all youth? Definitely not. But it's a policy that could help stem off growing Nazi power. If the government isn't prepared to make these changes, they're going to have some tough coworkers in a year or two. 

1 comment:

  1. Frank,

    What would help Greece in the long run is the program of labor market reforms which is happening in Italy under Monti, or what happened in Germany under Gerhard Schroeder. (This is, however, by no means an adequate solution in the short term.) That said, the minimum wage does not strike me as a particularly large problem right now -- at 876 euro/month, my back-of-the-envelope math says that the hourly equivalent is 6 euro an hour, assuming a 35 hour workweek. The literature on the effects of minimum wage are quite complicated, but assuming that the minimum wage works in Greece as would a simple price floor, then I would worry that the employment gains would be minor -- and that the political gains for opposition to the minimum wage cut, if Golden Dawn took such a position, could be substantial. It is not hard to argue to discontented and unemployed young persons that a cut in the minimum wage hurts, rather than helps, them. Labor market reforms lack political popularity.

    - Evan Soltas