The Neoliberal Restructuring of Agriculture and Food in Greece

Abstract

While public debt has become the focal point of discussions of the Greek crisis, the Greek crisis has been used as an opportunity to extend a series of neoliberal reforms. I examine the agricultural and food sector of Greece since 1981 and I show how Greece’s integration into the European market, following Greece’s entry in the European Economic Community led to (a) the dismantling of agricultural and food production in Greece and (b) the increased power of middlemen in the Greek food system. The three structural adjustment programs that were implemented in Greece after 2010 increased the liberalization of Greek agriculture and the centralization of the food sector. These changes had adverse implications for both farmers and consumers: farmers faced liberalization and increased costs of production, while consumers saw increased food prices despite internal devaluation.

Keywords

food agriculture Greece political economy European Union neoliberalism

1. Introduction

In 2015 Greece was in the seventh year of the sharpest and most prolonged economic crisis in its modern history—and the deepest crisis in the history of the European Union: output has fallen by approximately 25 percent from its pre-crisis level, and the unemployment rate increased from 7 percent in 2008 to 25 percent in 2015.¹ The economic crisis has also triggered a “humanitarian crisis”: poverty and homelessness have been on the rise while health and environmental conditions have deteriorated for significant parts of the Greek population (Konstantinidis and Vlachou 2016). Moreover, Greece has experienced a rapid increase in hunger and food insecurity. By 2012, more than one in two households below the poverty line were considered food insecure; organizations working on hunger prevention estimate the prevalence of food insecurity among schoolchildren in certain districts at 60 percent and the prevalence of hunger at as high as 25 percent (Deloitte 2014).

Although the Greek recession started in the last quarter of 2008, it entered a new phase in May 2010, when Greece and the “Troika” of lenders (European Central Bank, European Commission, and the International Monetary Fund) agreed to the first of three structural adjustment packages (dubbed “Memoranda” in Greece).² The “Memoranda” offered loans that would enable Greece to meet public debt obligations in exchange for a series of neoliberal “reforms”: public sector and government spending reductions (austerity), wage decreases, the introduction of new flexible forms of labor, and privatizations. Furthermore, by promoting the creation of a “business-friendly environment,” as well as service and product market liberalization, the Memoranda acted as levers for extending capital’s scope of operations in Greece and the completion of the European market. The stated goal of these reforms was to increase the competitiveness of the Greek economy through a strategy of internal devaluation, thereby restoring growth and the sustainability of public debt (European Commission 2010).

In this paper I examine the transformation of the agricultural and food landscape in Greece to illustrate how the crisis and the Memoranda acted to accelerate the productive dismantling of Greek agriculture and the centralization of the food sector—two phenomena which started after Greece’s accession into the European Economic Community (EEC) in 1981. The paper is structured as follows: In Section 2, I argue that Greece’s integration into the European market, and particularly the implementation of the European Union’s Common Agricultural Policy (CAP), drove the dismantling of agricultural capacity in Greece. This is illustrated by declining food production, increasing agricultural and food deficits, and stagnant agricultural labor productivity, even before the onset of the crisis in 2008. In Section 3, I present the evolution of the food sector in Greece before the crisis and highlight the role of intermediate actors in the distribution of food from farmers to consumers. In Section 4, I show how the crisis and the Memoranda placed additional strain on farmers and agricultural production through liberalization and increased taxation. Moreover, the crisis accelerated the centralization of retail, posing significant challenges for people’s meeting one of their most basic needs: food. I offer concluding remarks in Section 5.

2. Greek Agriculture After 1981

The year 1981 marked Greece’s entry into the European Economic Community (EEC) and the rise of the center-left Panhellenic Socialist Movement (PASOK) to power. At the time, Greece was primarily an agricultural country, with agriculture providing 31 percent of total employment (World Bank 2015). Greek agriculture was characterized by small size and fragmentation: based on the 1983 Farm Structure Survey, the earliest year for which data is available, 883,000 out of 958,700 agricultural holdings in Greece were smaller than ten hectares, and average farm size was 4.1 hectares (Eurostat 2000: 23-24). Furthermore, while for the first few years after 1981, Greece ran a small deficit in net agricultural exports, net food exports were positive.

The integration of Greece in the EEC prompted significant changes to the Greek economy. The Common Agricultural Policy (CAP), in particular, structured around the principles of market unity and community preference to create a European-wide market for agricultural goods, accelerated the opening of the Greek agricultural and food market to imports from other European countries with more developed agricultural sectors. The third guiding principle of the CAP, financial solidarity, provided Greek farmers with access to European farm subsidies. These subsidies originally took the form of traditional productivist instruments, such as price supports. Starting with the 1992 CAP reform, however, an increasing share of subsidies targeted rural development and environmental objectives, rewarding inter alia organic methods and setting-aside land. Moreover, the 2003 CAP reform introduced the “decoupling” of direct aid from production: previous production-based payments were converted into payment entitlements, as long as farmers operated and maintained their land in good agricultural and environmental condition (Garzon 2006). This reform, which strengthened the EU position in WTO negotiations at the time, was in line with the neoliberal spirit of reducing distortionary policy features (Galko and Jayet 2011); moreover, by making farmers more attuned to market signals and effectively preparing them for future reductions in state support, it also satisfied European fiscal conservatives.

The Common Agricultural Policy transformed Greek agriculture. PASOK, despite initial anti-EEC rhetoric, used CAP funds to consolidate its power in rural areas in the 1980s through agricultural cooperative-administered transfers. Hence, the ratio of subsidies to Greek agricultural value-added increased from 6.7 percent in 1980 to 44.7 percent in 1990 (Liodakis 1994: 270). However, the development of clientelistic relations and lack of oversight over spending allowed funds to be channeled towards consumption rather than towards productivity-enhancing investment (Louloudis and Maraveyas 1997).

The post-1992 CAP reforms further contributed to perverse outcomes and productive stagnation in Greek agriculture. Payments supporting organic methods—without specific production targets—led, for example, to a rapid increase in the number of certified organic producers—from 1,460 in 2000 to 27,700 in 2007. The number of registered organic farmers increased after the announcement of each new round of subsidies; however, organic food production increased little in the same period (Kathimerini 2011; Konstantinidis 2012).

Furthermore, while the 2003 CAP reform allowed member states the option of maintaining some production-linked payments (i.e., to choose between full and partial decoupling), the Greek government immediately opted for full “decoupling” of agricultural subsidies from production, in contrast to other European countries, like Spain and France, which maintained a significant share of subsidies coupled to production targets (Garzon 2006; Galko and Jayet 2011). The Greek government argued full decoupling would allow maximum absorption of EU funds, sidestepping the concerns of leftist parties (Communist Party and Syriza) over the potential ramifications of decoupling on production. Full decoupling was also supported by the country’s largest agricultural co-operative organization (PASEGES), as it effectively provided an attractive early retirement option for the aging farmer population (Tolios 2009).

Following these developments, the competitive position of Greek agriculture deteriorated steadily in the post-1981 period. Growth in food production, which was rapid in the 1960s and 1970s, slowed down in the 1980s and 1990s. In the 2000s, with Greece’s entry in the European Monetary Union, food production fell at an average annual rate of 1.4 percent between 2000 and the onset of the crisis in 2008, with a particularly marked decline after the decoupling of subsidies from production in 2005 (World Bank 2015).

As figure 1 shows³, Greece was a net exporter of food at the time of its entry into the EEC in 1981. Starting in 1985, however, Greece developed a food deficit. Greece’s food and agricultural production deficit widened as a percentage of GDP, despite a series of devaluations to the drachma in 1983, 1985 and in 1998. The worsening of both the food and the overall agricultural deficit reversed only after the beginning of the crisis in 2008. However, while both the agricultural and the food deficit decreased after 2008, this happened largely due to falling imports (which accounted for 72.4 percent and 74.5 percent of the decrease in the agricultural and food deficit between 2008 and 2014 respectively) rather than increased Greek exports.⁴

Figure 1.

Food and agriculture balance of trade, Greece.

Figure 2 compares the development of agricultural labor productivity (output per agricultural worker) in Greece with a series of other European countries. Output per worker in Greece has been stagnant since 1995. This stagnation is particularly striking given that output per worker in other European countries (e.g. France, Italy, Germany, Spain) doubled over the same period.⁵ Moreover, the stagnation of Greek agricultural productivity after 1995 occurred despite otherwise favorable conditions: the Greek economy at the time was experiencing rapid growth rates and (non-agricultural) labor productivity gains that were significantly exceeding EU and Eurozone averages (Laskos and Tsakalotos 2013; Konstantinidis and Vlachou 2016). Additionally, immigrant flows, initially mainly from Balkan countries (Albania, Bulgaria and Romania) and subsequently from South Asia (Pakistan, Bangladesh) provided cheap labor power in rural areas (Kasimis et al. 2003; Tolios 2009).

Figure 2.

Output per agricultural worker in various countries, 1980-2014.

In other words, the greater integration of Greece into the European market since the 1980s and the liberalization of trade and agriculture did not promote productivity-enhancing capital investments in agriculture, but extended Greek import dependence to meet domestic demand, as well as the reliance of agricultural income on subsidies (Liodakis 2011; Tolios 2009; Nikolaidis 2011). Furthermore, as can be seen in Figure 2, mild gains to agricultural productivity evaporated between 2005 and 2007, concurrent with the decoupling of subsidies from production prior to the crisis.

3. Food Systems in Greece

Beyond affecting production, the post-1981 changes to the Greek economy restructured the channels of food distribution to consumers. As in other countries, the organization of the Greek food system resembles an hourglass, with a small number of players (suppliers, merchants, food processors, and supermarkets) intervening between a large number of farmers and consumers (Patel 2007). In the Greek case, these intermediate players exert significant power over farmers and consumers for three reasons. First, given the small size of Greek landholdings, farmers generally produce a small volume of output, making it difficult to bypass middlemen and establish direct relations with outlets. Second, the discrediting of agricultural cooperatives, due to 1980s mismanagement and indebtedness (Louloudis and Maraveyas 1997; Tolios 2009), stripped farmers of a prime tool for collective action. Third, government policy consolidated the central role of middlemen in the Greek food system. Due to cumbersome and costly licensing procedures, genuine farmers markets (i.e. producers’ markets) are largely nonexistent in Greece, while merchants dominate open-air outlet markets (“people’s markets”).

Another aspect that characterizes distribution of food in Greece is the rapid concentration and centralization of the Greek supermarket sector since the 1990s. Historically, small specialized stores (bakeries, butcher shops, and fruit stores) controlled the majority of food sales in Greece. However, starting in the mid-1980s and spurred by the goals of greater European integration and, later, of reaching the Maastricht criteria for participation in the Economic and Monetary Union (OECD 1994: 7-12), financial and trade liberalization led to increased foreign direct investment from other EEC countries (primarily Germany, France, the UK, and the Netherlands). In the 1990s, Belgian, French and German food retailers (most prominently Delhaize, Carrefour, and Lidl) began operating in Greece, either through acquisitions of domestic supermarket chains or through the setting up of subsidiary operations. This led to a rapid increase in the presence of large supermarket chains in Greece, measured through the number of stores and the volume of sales, as well as their relative share in total sales (Skordili 2013), allowing them to squeeze out smaller competitors and to exercise significant power over consumers and farmers.

4. Agriculture and Food in the Time of the Memoranda

The post-2008 crisis and the three Memoranda accelerated the neoliberal restructuring of the Greek agricultural and food landscape. As the Greek governments resorted to generalized tax hikes⁶ in order to meet its fiscal targets—due to shortfalls in privatization revenue and private investment—large categories of Greek citizens felt the combined pressure of reduced incomes and increased taxation. Greek farmers, in particular, experienced increased pressure after 2010, facing increased property taxes as well as reductions and eliminations of certain tax privileges, including diesel subsidies and VAT refunds (European Commission 2012, 2015). Farmers therefore faced significant increases in costs of non-labor inputs like fuel and electricity.⁷

Moreover, the Memoranda aimed to further deregulate and liberalize agricultural services and product markets, aligning Greek legislation with European Union regulation. Although deregulation and liberalization took a wide variety of forms (such as deregulation of veterinary or slaughterhouse services), a striking instance of liberalization revolves around the creditors’ demand that Greece abolishes national legislation that limited the shelf-life of fresh milk to five days (European Commission 2014, 2015). The goal of this intervention was explicitly to open up the Greek market to foreign competition, allowing cheaper import of milk from other EU countries, which the five-day period effectively excluded, in line with OECD recommendations (OECD 2014). While the OECD recommended opening the Greek dairy sector, it also suggested that this change would increase competitive pressure on Greek farmers, making it hard for “inefficient small local farms” to operate unless they increase their productivity (OECD 2014: 55). In line with these recommendations, the Greek government increased the maximum shelf-life of fresh milk to seven days in 2014 (European Commission 2014), without however reducing consumer milk prices. This result is not surprising: producer prices make up only 35 percent of consumer prices in Greece (OECD 2014: 50) while the difference between consumer and producer prices in Greece is 35 percent higher than the EU average, suggesting the presence of high markups in the intermediate stages of processing and retail (OECD 2014: 51).

Rather than taking measures to curtail high markups, the Memoranda spearheaded a series of changes strengthening the position of large players in the food retail sector, and leading to more centralization: ironically, a number of these changes occurred in the name of product market competition and of the lifting of barriers to competition. The introduction of Sunday trading in 2014, for example, bolstered the competitive position of supermarkets that were able to absorb additional labor and operating costs more easily than smaller retailers. Moreover, in 2015, the Syriza government committed to undertake the remaining OECD toolkit recommendations, inter alia, allowing supermarkets to sell over-the-counter drugs and bake bread from frozen dough (OECD 2014; European Commission 2014, 2015). While these measures were introduced in the name of competition, they inevitably bolster the competitive position of large supermarkets, which were able to increase their scope of operations. Furthermore, the crisis prompted an ongoing wave of supermarket mergers and acquisitions, leading to a sharp decline in the number of supermarket chains (from 89 in 2010 to 63 in 2014). In this context, the four largest retailers have consolidated their position during the crisis, controlling in 2015 approximately 80 percent of sales (Kathimerini 2015; Rizospastis 2015; Skai 2015).

It is, therefore, unsurprising that food prices have not fallen during the crisis, despite internal devaluation. Figure 3 presents the evolution of food prices and median income in Greece after 2001, compared to the Eurozone average. In the period preceding the crisis, food prices moved in tandem with the Eurozone average. Incomes in Greece on the other hand increased faster than the Eurozone average, reflecting above-average growth. The first Memorandum in 2010 marks the beginning of the strategy of internal devaluation, leading to a fall in median income by approximately 36 percent between 2010 and 2014. However, for a significant part of the crisis (until 2013), food prices in Greece rose faster than in the Eurozone, despite the sharp fall in domestic incomes and labor costs. Thus, increased taxes, heavy dependence on imported food and the role of middlemen (particularly that of supermarkets) are three factors supporting the discrepancy between the changes in income and food prices.

Figure 3.

Food Prices in Greece compared to the Eurozone, 2001-2015.

5. Concluding Remarks

The preceding sections argue that Greece’s integration into the European market since 1981 and the implementation of the Common Agricultural Policy led to the dismantling of agricultural and food production in Greece, as evidenced by declining food production, widening food and agricultural deficits, and stagnant labor productivity. Furthermore, in the same period, the role and the power of intermediate players in the distribution of food in Greece increased, partly as a result of financial and trade liberalization. The crisis and the structural adjustment programs exacerbated the neoliberal restructuring of the agricultural and food sector of Greece, with adverse implications for farmers, who saw increased costs of production and foreign competition, as well as for consumers, who saw food prices rise in the midst of a deep recession.

What then is to be done? During the crisis, Greek society responded to resist neoliberal practices, seeking to regain control over the production and distribution of food, reconnecting farmers with final consumers, and challenging the effectiveness of the market mechanism for food provisioning. A series of movements (such as the “potato movement” and the “no middlemen” movement) tried to create new linkages between producers and consumers while bypassing middlemen. Genuine farmers’ markets, food banks and soup kitchens were set up in many cities, alongside broader solidarity initiatives. Despite other failures, the Syriza government in March 2015 introduced food stamps in Greece, as part of a bill to face the “humanitarian crisis” that also provided free electricity and introduced installment payment schemes for poor and indebted households. Any progressive strategy to end the Greek crisis needs to embrace and extend responses such as these, which aim to rebuild agricultural production and help people meet their basic needs in a solidaristic way.

Footnotes

Acknowledgements

The author would like to thank Leila Davis, Jennifer Cohen, Esther Jeffries, JW Mason, Özgür Orhangazi, and participants of the URPE session on “Crises and Conflicts in the Global Economy” at the 2016 ASSA Conference for helpful comments.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

1

Eurostat database, series nama_10_gdp (GDP), une_rt_m (unemployment), accessed December 1, 2015.

2

The Papandreou government signed the first Memorandum in 2010, the Papademos government signed the second Memorandum in February 2012, and the Tsipras government signed the third Memorandum in August 2015. For the unfolding of the Greek crisis see Vlachou (2012), Laskos and Tsakalotos (2013), and .

3

World Trade Organization data, Comtext database. accessed December 5, 2015.

4

Author calculations based on .

5

The latter is true not only for “core” countries, such as France, the Netherlands, or Germany, but also for countries that accessed the EEC later, such as Spain.

6

Among other increases, increases in value added tax (VAT) for most commodities in 2010 and 2015, as well as the 450 percent increase to the excise on heating oil in 2012 had severe environmental and social repercussions, with the reappearance of smog in Athens and an acute “heat-or-eat” dilemma for significant parts of the Greek population.

7

Fuel and electricity prices increased in Greece by 102 percent between 2009 and 2013, as opposed to 25 percent for all Eurozone countries, to a large extent due to increased taxation. See Eurostat database, series prc_hicp_midx (consumer prices), accessed December 17, 2015.

Author Biography

Charalampos Konstantinidis is assistant professor of economics at the University of Massachusetts Boston. He works on issues related to the political economy of agriculture and the environment. He holds a PhD in economics from the University of Massachusetts Amherst (2012).

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