Greece’s Other Deficit

OAKLAND – For the past decade, much attention has been paid to Greece’s public finances. And when, in November, the country faced the first review of its reform progress under its latest agreement with its creditors – an exercise required to obtain a new infusion of bailout funds – its budget deficit was put under the microscope once again.

But Greeks would do well to consider another type of deficit – one that has received far less public scrutiny, but could have economic consequences that are just as serious. Like the rest of the Mediterranean region (and indeed the entire world), Greece is not just running a fiscal deficit; it is also running an ecological one.

According to our analysis, Mediterranean countries currently use 2.5 times more ecological resources and services than their ecosystems can renew. Greece, for example, would need the total ecological resources and services of three Greeces in order to meet its citizens’ demand on nature for food, fiber, timber, housing, urban infrastructure, and carbon sequestration. Athens alone demands 22% more from nature than the entire country’s ecosystems can provide. And, after years of recession during which pressure on Greece’s natural resources declined, demand has begun to rise again, as GDP growth has shown some improvement.

To enable lasting economic progress, we need to break this link between GDP growth and overuse of the environment. Ecological deficits can jeopardize energy sources and threaten food security, with direct social and economic consequences. If Greece and other countries are to ensure the health and prosperity of their citizens in the decades to come, they will have to find a way to prevent current economic activity from increasing an already unsustainable burden of environmental debt.

For that to happen, ecological resources must come to be viewed as valuable endowments to be managed wisely. The Mediterranean region’s unique, breathtaking natural capital is one of its greatest assets – the reason why more than 200 million tourists flock to the region each year, feeding the region’s economy. Overusing resources, or even failing to manage them carefully, inevitably saps the region’s economic strength.

Of course, countries with ecological deficits can often fill part of the gap through global trade – if they can pay for the necessary imports. But, as Greece has recently learned, countries dependent on external natural resources can experience economic shocks when commodity prices increase or their ability to pay otherwise declines. According to our calculations, a mere 10% increase in commodity prices would result in a $7.6 billion hit to Greece’s trade balance – equivalent to 0.3% of its GDP.

In any case, reliance on global trade is not an adequate solution to the problem. Some ecosystem services – including clean air and water, mitigation of extreme climate events such as floods or droughts, and recreational uses of nature – simply cannot be imported.

More important, if a country is importing natural resources, another country must be exporting them. And just as governments cannot run huge financial deficits indefinitely, countries cannot continue to run large annual ecological imbalances without depleting their natural capital – and thus weakening their economic health.

Fortunately, countries like Greece are not powerless to act. Cities offer particularly promising opportunities for improvement, especially in areas like transportation and housing. Athens, for example, is an obvious target for policy changes. The average ecological footprint of an Athenian is higher than the national average (and higher than the average footprint of residents in other Mediterranean cities such as Barcelona, Izmir, Palermo, and Valencia). Transportation is the biggest source of this disparity, which means that policy interventions favoring public transport or walkability can reduce Athens’ ecological deficit.

Another area in which Greece should consider taking action is food. The world-famous Mediterranean diet – heavy in vegetables, fruits, and olive oil – is not only healthy; it is less taxing on the environment. As consumption of meat and processed foods rises around the Mediterranean, a renewed focus on the region’s culinary heritage could help lighten the load on the world’s natural resources – and boost people’s health.

As Greece’s government works to revive an economy flattened by fiscal disaster and improve the wellbeing of all, the path it forges toward long-term prosperity must not lead to further environmental degradation. Greece cannot afford to address one of its deficits at the expense of the other.