The Economist's data team has put together a great chart collection on Greece that's so packed with data that this eight-charts-in-one mega-chart is only one piece of it. But this particular graphic shows what is, I think, a key point to understanding the policy realities behind the political wrangling that's happening right now:
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Seven of these charts are showing you that the economic situation in Greece is terrible. But the chart in the top right is showing you something else — Greece's unit labor costs, a key measure of competitiveness, have gone down a considerable amount. This is key because reducing unit labor costs is supposed to be the key to Greece's recovery.
On blogs, people talk a lot about "austerity" and whether or not it "works."
But the conversation that European Union officials have is much more about competitiveness. Their view is that the continent as a whole (and especially its wayward members like Greece) need to improve competitiveness by increasing productivity and decreasing wages. The scary message of this chart is that Europe's prescription for Greece is doing something worse than failing — it's succeeding. Wage cuts really are making Greece more competitive. But while wage cuts have managed to reduce incomes and living standards for the employed, they haven't succeeded in creating any jobs for jobless or restoring economic growth.
You can see why Greek voters recently decided to give an alternative approach a try.
