Is the current financial crisis in Greece that has brought that country to the brink of default a preview of coming attractions in Europe? And can the country survive the crippling austerity that has been unleashed by the crisis?
These questions were taken up by Maria Margaronis, who covers Europe with her husband, D.D. Guttenplan, for The Nation. She talked about what she saw in Greece this spring as the crisis came to a head during a presentation on July 22 at the Kopkind Colony in Guilford, the place she has spent her summers for nearly two decades.
As the child of Greek parents who emigrated to Britain, this story was a personal one for Margaronis. She has been going to Greece annually for years, and her love for the country is tempered with sadness over the upheaval of the past two years, and the hope that something good might come of it.
She spoke honestly about the economic rot in Greece — the “gray economy” of family and social networks and nepotism, backroom deals, and bribery, bartering, and tax dodging that has dominated Greek life no matter which party has been in charge.
Immigration is another huge issue. With its porous borders, she said, Greece is the first stop for migrants from North Africa, the Middle East, and South Asia seeking work in Europe. Nearly 150,000 arrived in Greece last year, she said, and more keep coming.
“Greece has always been on a fault line between east and west, and has always had a mixed identity,” she said. “Since the beginning, there has been the myth of Greece as a homogenous nation, but the reality is Greece is a nation of immigrants. The problem is that so many people are coming so quickly, and the government has been so ineffective, it has created a crisis.”
Add to the mix of a dysfunctional economy, and a surge of refugees, a bloated and corrupt public sector.
Margaronis said that Greek leaders have used patronage as leverage to stay in office ever since parliamentary democracy was reestablished in 1974 after eight years of military dictatorship. In a Greek version of the old Tammany Hall system in New York City, civil service jobs were an handed out in exchange for total loyalty at the ballot box.
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With so much of the Greek economy done under the table, any numbers that the government comes up with are bound to be bogus. It’s difficult to run a modern economy if the government has no idea how much money it is taking in or how much money is being spent.
When it was discovered in late 2009 that the Greek government had lied about the extent of its budget deficit for years, the bond markets and credit rating agencies panicked, and the result is the severe austerity that the Greek people are now facing to pay off the debts incurred by decades of living off borrowed money.
In the old days, the government would have devalued the Greek currency, the drachma. But now that it has been a member of the European Union for three decades and uses the Euro as its currency, it can’t do that anymore. Where Greece used to borrow money at 4 percent interest, it is now being charged 26 percent interest, Margaronis said.
The Greek people are justifiably angry, she said, but for all the anger directed at what the Greeks call the “troika” of the European Central Bank, the International Monetary Fund, and the European Commission, they are not totally to blame.
As Prime Minister George Papandreou has said, “Greece’s problems won’t be solved by restructuring its debt, but by restructuring the country.”
That’s why many economic observers say an EU-brokered bailout of $156 billion in 2010 did little good, and why a second bailout plan that’s in the works will be just as ineffective until there is a total restructuring of the country.
While Margaronis said that in hindsight, Greece might have been better off if it never joined the EU, it probably would have run into the same problems even if it didn’t join.
The stereotype in the U.S. media that that Greeks are lazy, indolent workers is not true, Margaronis said. Greeks work more hours annually than most Europeans — about 35 percent more than Germans and as many hours as Americans — while earning among the lowest wages in the EU.
However, Greece has little to export and has a huge trade deficit. Despite all of the positives the nation has — a strong shipping industry, a prosperous tourism industry, and robust public infrastructure among them — Margaronis said the nation will be forced to sell off many of its public assets to pay off its debts.
“There’s a fire sale going on in Greece right now,” she said, “because if the country doesn’t meet its financial targets, the deal is off.”
The hope is that with a smaller and less corrupt public sector, a more competitive private sector, and a broader and more reliable tax base, Greece can ultimately become prosperous.
But meeting the financial targets set by the lenders will be nearly impossible. By next year, Greek public debt will be 160 percent of the nation’s gross domestic product.
In the short term, Margaronis said the changes are wrenching and the human toll of austerity is high. Wage earners and pensioners have their incomes cut by more than 30 percent in the past year, and the worst is get to come.
“Real poverty has hit Athens, and it is widespread,” she said. “It feels like the whole fabric of society is coming apart. Greeks are normally pretty cheerful people, but I never saw the kind of despair that I saw this spring.”
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The protests in Greece this spring saw people of all ages participate, but it is the younger Greeks who have occupied a portion of Syntagma Square in Athens since the end of May that have been the most involved, Margaronis said.
Like their counterparts in Tunisia and Egypt, Greek citizens of this generation are fed up with high unemployment and a stunted standard of living. With the unemployment rate for workers under age 30 at 42 percent, they feel they have nothing to lose by taking to the streets and demanding a chance at a better future.
Unlike Tunisia and Egypt, “there isn’t a dictator to overthrow,” she said. “But something is beginning to happen. There seems to be a real push to reclaim their nation from the bankers.”
While the riots have gotten most of media attention, she said that the bulk of the protests have be overwhelmingly nonviolent and not tied to any particular political movement or party.
Margaronis said that the idea of direct democracy and doing things as a community rather waiting for the government to do it is a “very new for the Greeks. There’s a new hope emerging, but many years are going to pass before things will change for the better.”
The whole experience of the past few years for Greece, and of the rest of the world that is still feeling the effects of the 2007-08 financial meltdown, has given her a new perspective.
“I was one of those people who never read the financial pages and found them unbelievably boring,” she said. “But over the past few years, I have come to see that the financial markets have encroached on our politics. It’s hard to fight for change when your country has been taken over by the banks, and the credit rating agencies have immense power over your economy.”
Margaronis said it has been easy for northern Europe to dismiss the Greek mess as something that is unique to Greece, except that other countries in the Euro zone such as Spain, Portugal, Italy, and Ireland are not far away from Greece’s predicament.
The problem, she said, was that the European Union constructed itself in a way where it never put in place a mechanism for a nation to default on its debts and leave the EU. That is why the fear of the Greek crisis spreading to other EU nations and triggering a financial collapse is so high.
“The imbalances between countries [in the Euro zone] is so great, the choice is either to integrate everything more tightly, or have everything fly apart,” she said.