News outlets in Greece are reporting on a major new study from the London School of Economics that identifies a fundamental change in the Greek economy, over the past decade or so – a so-called new “Era of the Café Economy” based on hospitality, accommodation and low-cost services. Indeed, more than half of the 523 new businesses created in Messinia in the past year (a record in itself) are in the hospitality sector – reinforcing the findings of the study. 

Below is an excellent viewpoint article, translated from Tharros that examines the issue in Messinia.

Greece of the of the last fifteen years seems to be living a paradox: while the numbers of the tourism are breaking records, productivity remains stagnant and real wages are sinking. This phenomenon is not accidental nor conjunctural, is the result of a profound structural transformation of the Greek economy, which gradually turned into what researchers at the London School of Economics (LSE) call it a “café economy”: an economy based on catering, accommodation and low-cost services Productivity.

This model, as it turns out, offers easy solutions in the short term, but traps the country – and the local communities – in a vicious circle of cheap seasonality and inequalities.

The conclusions: an economy that works, but does not progress
According to the study “The café economy: Structural transformation in Greece in the wake of austerity and reforms”, prepared by the Greek Observatory of the LSE a few days ago, Greece after 2009 was radically rearranged. Most of the employment was transferred to the Accommodation and Food Service Activities (AFSA) sector, i.e. catering, cafes, rentals and tourism.

Only this sector absorbed almost a third of the overall decline in productivity of the country, while at the same time the real wages of its employees decreased by 60%. From 2009 to 2023, total productivity in the Greece fell by 16%, and real wages in the economy as a whole by 35%.

The research shows that the cause was not only harsh austerity policies, but also the The False Assumption of “Structural Reforms”: Changes in the Markets and products, instead of enhancing innovation and innovation efficiency, led to deregulation, cheap labour and concentration of activity in low value-added sectors.

With a few Words: We work more, but we produce less. And the worst, We are paid even less.

The Greece of the “café economy” and the Messinia of tourism
Those of us who live in Messinia easily recognize the picture. The growth of recent years has been based almost exclusively on tourism, restaurants, Airbnb and seasonal accommodation. Pylos, Kalamata and Mani live intensely during the summer months, but in winter economic activity freezes. Perhaps we could exclude Kalamata because of the students.

The study warns that this model only increases employment seemingly, as most of the work is part-time, low-cost skilled and often uninsured. In practice, reliance on catering and tourism does not create wealth that is diffused in the local community, nor does it sustainable development.

In Kalamata we are already seeing the effects:

•young people and educated workers work in positions that do not meet the needs of the their qualifications

• rents have increased dramatically due to short-term rental

•the processing and high-quality agricultural production remain stagnant

•and the The local market operates mainly seasonally.

The “economy” of the cafés”, well, it is not a metaphor, it is an everyday reality, and Messinia is at its center.

What the data shows: productivity, wages and inequalities
According to Eurostat data, the catering and hospitality sectors are the least productive in Europe, but in Greece the situation is even more acute. Their productivity fell by 40% in 15 years, more than any other industry.

The even more Worryingly, the decline in wages has outpaced the decline in the productivity, which means that the share of workers in the national income shrank in favor of business profits or taxation.

According the Panel-VAR econometric model, the fall in demand and wages acts as a “twin cutter” of productivity: when businesses see cheap labour and limited consumption, have no incentive to invest in innovation or technology.

Also A productivity analysis is carried out with profits and losses by sector of activity. As it turns out, most sectors experienced productivity losses. In particular, the AFSA sector, i.e. the ‘accommodation and accommodation activities’ food service sectors”, showed the largest productivity losses since everyone else.

The local dimension: Messinia’s
bet Messinia has all the characteristics of an area that can escape the trap of the “café economy”, but only if it decides to do so.

The primary sector has products of international renown (olive oil, raisins, figs, wine), the Kalamata has developing university departments and the entire region has gain a place on the world tourism map.

The aim It is not to reject tourism, but to integrate it into a wider and a balanced development model.

Namely:

•to support agri-food innovation

•to strengthen the processing of local products

•to make use of the research and technology produced in universities

•and to cultivate skills that create added value, not just temporary positions Work.

Need an “economy of creation”, not of consumption, a Messinia that will produce, export and innovate, without losing its identity.

A lesson from the crisis
The “café economy” is not just an economic term, it is a social symptom. It is the result of policies that underestimated the importance of production and knowledge, and believed that cheap labor is the path to competitiveness. Greece’s experience has proven the opposite: when you reduce wages and public investment, you shrink the basis on which growth is built.

Messinia, like the rest of Greece, is called upon to plan its next step. The research of the LSE is not just a statistical analysis, it is a warning. If continue to invest only in coffee and tourism, we will drink coffee of consolation for missed opportunities. But if we invest in knowledge, in cooperation and local production, we can become an example of another Greece, the one that is not afraid to produce value, not just to serve.

By Dr. Panayiotis E. Tzavaras
Professor at European University Cyprus, School of Business Administration, Department of Management and Marketing