The political economy of inflation management: the case of Greece

This article explores how the impact of the 2022–2023 inflationary episode was managed in Greece, and explains how labour market governance framed public policy responses. Greece resembles other southern European countries in the chronic weakness of its institutional preconditions for managing emerging inflationary pressures in a coordinated manner. Greece is also different, however, in that the previous two economic shocks had left a legacy of drastically diminished collective bargaining, financially vulnerable households and a public debt-to-GDP ratio close to 200 per cent. We show that, in a context of weakened trade unions and collective bargaining institutions, the response of wages to inflation was anaemic, while profits grew strongly, especially in oligopolistic product markets. We also discuss how, in order to ease the cost-of-living crisis, the government resorted mainly to untargeted support measures with a regressive distributional impact. We conclude by reflecting on what our findings imply for Greece’s quest for a more sustainable and more inclusive growth model.