Monday, 5 July 2010

A glimmer of hope during this long hot summer in Greece

It could be a long hot summer in Greece this year (Photograph: Patrick Comerford)

Patrick Comerford

It could be a long hot summer in Greece this year. One observer says no-one strikes in Greece from June to August. It’s too hot and people are on holidays, he says. But the streets could still see new protests and strikes by September. Street protests, demonstrations and lighting strikes could still cause disruption for tourists and visitors during these summer months.

In recent weeks, tens of thousands of striking trade unionists have brought Greece to a standstill on many days as they took to the streets to protest against planned pension cuts, and there are fears the public displays of anger are going to become more widespread.

A quiet corner in the Plaka … away from the protests in Athens (Photograph: Patrick Comerford)

Marches on the streets of Athens in May were followed by rioting and violence. Windows were smashed and one small group lobbed petrol bombs into a city centre branch of the Marfin Egnatia Bank. The horrific consequences unfolded as the building caught fire and three bank employees were burned to death – including a young pregnant woman, Angeliki Papathanasopoulou, who was married only last September and who was expecting her first child.

One banner on an Athens protest, referring to the crises facing the economies of Portugal, Ireland, Greece and Spain, proclaimed: “The PIGS strike back.” Jewellers’ shop fronts have been smashed. Bank shutters have been daubed with graffiti saying: “Traitors! Thieves!” and “You have robbed this country.” Outside Parliament in Syntagma Square, demonstrators have chanted: “Thieves come out.”

Tourist sites such as the Acropolis have been closed by recent protests (Photograph: Patrick Comerford)

Schools and offices have been shut, hospitals have operated on skeleton staffs, tourist sites such as the Acropolis have been closed, ships have been kept in port or prevented from docking, and domestic flights have been disrupted. If tourists are frightened off by the protests and strikes, the Greek economy will be dealt another blow: tourism accounts for 16% of GDP (Gross Domestic Product) and one-in-five jobs in Greece.

Tourism accounts for one-in-five jobs in Greece (Photograph: Patrick Comerford)

Bailout with strings attached

The European Union and the International Monetary Fund have agreed to bail out Greece in the biggest scheme of its kind in financial history. Together, the EU and the IMF are lending €110 billion to Greece over three years to prevent Athens from defaulting on its debt, estimated at over €310 billion.

Ireland is one of the biggest per capita donors in the Greek bailout. This has sparked angry outbursts in the Dáil, with claims that Irish households face an unfair burden compared with other Eurozone member states. According to EU figures, Ireland – at €280 per person – is the second largest donor to Greece after Luxembourg, where each person is lending €420, but ahead of the Germans at €272 each.

Statistics show that the Greek economy is one of the largest in the world, Greek living standards are among the highest and Greek workers are among the hardest-working (Photograph: Patrick Comerford)

Despite the impression created by some commentators, Greece is not a marginal economy. IMF statistics show that the Greek economy in the 27th largest in the world when measured by GDP and 33rd when measured by purchasing power parity. Until recently, Greece had the 22nd highest standard of living in the world. Greek workers are hard-working – OECD figures show only South Koreans work longer hours. Yet Greek economists estimate that between 30% and 40% of the national income comes from the black economy.

The causes of a crisis

A statue of Pythagoras on the island of Samos … Greece gave us Hippocratic medicine and Pythagorean and Euclidean mathematics (Photograph: Patrick Comerford)

So what caused the Greek crisis?

Many Greeks believe in a conspiracy theory that their problems were planned in order to destabilise the Euro. At an early stage, the Prime Minister, George Papandreou, blamed the economic meltdown on “an attack on the Eurozone by certain other interests, political or financial.”

But for years Greece amassed a huge pile of debt because of a culture of statistical fraud in the public sector. The Greek debt crisis may have been exposed because of the broader global economic crisis, but for too many decades successive Greek governments have been hiding the true depth of the public debt crisis. Papandreou and his new PASOK (Socialist) government discovered this when they were elected last October, defeating the conservative government of Kostas Karamanlis and his New Democracy.

There was too much spending and too much borrowing for too many years. While Greek governments were hiding those debts they were giving particularly generous tax cuts to the rich – cutting taxes on corporate incomes, capital and dividends. The plight of the Greek economy only became a crisis when it was realised that around €54 billion was due to be repaid this year.

The poet Shelley once wrote: ‘We are all Greeks. Our laws, our literature, our religion, our arts, have their root in Greece’ (Photograph: Patrick Comerford)

‘We are all Greeks now’

Germany in particular is asking: is Greece worth it?

Yet Germany had no problem paying for the incorporation of the former East Germany 20 years ago, and expected the rest of Europe to share that burden.

We think the way we think because of Plato, Aristotle and Socrates (Photograph: Patrick Comerford)

Greece is the cradle of European democracy. We think the way we think because of Plato, Aristotle and Socrates. Classical Greece delineated the lines of architecture, and gave us Hippocratic medicine and Pythagorean and Euclidean mathematics. Greek philosophers set our standards for education, the New Testament is written in Greek, Greece set the foundations for our drama, poetry, comedy, story-telling, literature and even modern psychotherapy.

The Exam Theatre in TCD … an example of how Classical Greece delineated the lines of our public architecture (Photograph: Patrick Comerford)

Without Greece, there would be no European civilisation, no concept of a Europe. As the English Romantic poet Percy Bysshe Shelley (1792-1822) said in 1821 in his preface to Hellas: “We are all Greeks. Our laws, our literature, our religion, our arts, have their root in Greece.”

Making essential changes

Following in the footsteps of Saint Paul at the Areopagos in Athens … the New Testament is written in Greek (Photograph: Patrick Comerford)

Rather than asking whether Greece is worth it, it might be more appropriate to ask: can Greece recover?

Change is essential if the Greek government is going to consolidate the public finances. The bailout has strings attached, and Greece faces a significant drop in living standards. In response to the deal with the EU and the IMF, Greece has agreed to narrow its budget shortfall from 13.6% of GDP in 2009, to 8.1% this year, 7.6% next year and 2.6% in 2014.

9, The theatre in Epidavros ... Greece set the foundations for our drama, poetry, comedy, story-telling, literature (Photograph: Patrick Comerford)

The government has introduced a 12% pay cut for civil servants, has cut pensions, and job losses are looming in the public sector. The new austerity measures include a public sector pay freeze until 2014. Civil servants’ traditional bonuses at Easter, summer and Christmas – known as the 13th and 14th monthly salaries – have been abolished for those on more than €3,000 a month and capped at €1,000 for those earning less. Pensions have been frozen for this year, next year and the year after.

The excise taxes on fuel, cigarettes and alcohol have been raised by a further 10% (Photograph: Patrick Comerford)

The main VAT rate has been raised to 23%, excise taxes on fuel, cigarettes and alcohol have been raised by a further 10%, a one-off tax has been imposed on highly profitable companies, and more revenue is being sought through new gambling and gaming licences and further property taxes.

Public servants are being told they can no longer retire at 55. The pension bill brought before parliament in June raises the statutory retirement age for women by five years to 65 to match that of men. The social security system, which is one of the biggest drains on the economy, faces a far-reaching overhaul.

The Drachma was the world’s oldest currency … but there can be no going back to a separate Greek currency

The Drachma was the world’s oldest currency. It was saved a century ago through sweeping economic reforms introduced by an Irishman who became a Greek civil servant, Sir Edward Law. But the Drachma was phased out when Greece joined the Eurozone, and there can be no going back to the Drachma and a separate Greek currency. Despite public anger, opinion polls show most Greeks agree reform is necessary: over 55% accept the proposed economic and structural reforms, over 56% prefer wage cuts to national bankruptcy, and more than 70% want the political parties to end their bickering and to co-operate.

Yet most ordinary people feel they are being made to pay while the rich continue to evade their share of the tax burden. “There is a sense that [corrupt] people have got away with it and that has deepened the fury,” says Professor Fotini Tsalikoglou of Athens University. “What we are seeing in Greece is sorrow and anger, and it is an explosive mix.”

Estimates say the government is losing about €20 billion a year through tax evasion. The tax threshold in Greece is €12,000, but one study shows that more than half of Greek families (54%) declared revenue less than that in 2007. Many people are used to giving fakelakia (small envelopes) to public and private officials for every service, from doctors’ appointments to building permits. Everyone knows the widespread practice of declaring one price with a receipt and paying another without it.

Until recently, only 300 residents in Athens dared to declare they had swimming pools for fear of paying more taxes. But tax investigators using satellite imagery found 16,900 swimming pools in houses and villas in the suburbs.

Young Greeks on the move

Now, the efforts to overhaul the public service and the social security system have been hit by two new blows: young Greeks have started to leave in noticeable numbers, and older Greeks are trying to retire before the old rules change.

Within a month of Papandreou announcing that the basic retirement pension will be cut to €360 a month by 2020, there was a deluge, with 150,000 of the 800,000 state employees applying for early retirement. The economy is also dealing with an equally unexpected flight of labour. In recent weeks, thousands of mostly young, educated Greeks have applied to emigrate to Britain, the United States, Canada and Australia, so that Greece faces a daunting brain drain.

“It’s a new trend but one that we believe will worsen,” says Dr Ioanna Tsiganou of the National Centre for Social Research. “Greece already has a huge demographic problem because of its ageing population, and the question now is will the national security system be able to cope if the young are leaving?”

There are few jobs for Irish students in resorts this summer … another tradition has come to an end (Photograph: Patrick Comerford)

This brain drain has been spurred by rising poverty and record-breaking unemployment. Almost one in four people in Greece lives beneath the poverty line. Unemployment is over 12% and rising, and figures show the majority of the 650,000 people out of work are graduates aged from 25 to 34. The statistics hide the number of foreign workers who have become unemployed and left, including a large number of Polish workers. There are few jobs for Irish students in Greek bars and resorts this summer. Another tradition has come to an end.

A joint cabinet meeting between Greeks and Turks is a hopeful sign that the cold war between these Aegean neighbours is ending (Photograph: Patrick Comerford)

But there has been one sign of hope already this summer. The Turkish Prime Minister, Recep Tayyip Erdogan, and ten of his cabinet ministers paid a two-day visit to Athens. A joint cabinet meeting was a clear sign that the cold war between these Aegean neighbours is ending. Greece is the fourth largest importer of weapons, with most of them aimed at Turkey. Arms spending accounts for up to 5% of the budget, and the arms race has played a substantial role in Greece’s €310 billion debt.

The past can be laid aside, and peace can pay dividends.

Canon Patrick Comerford is Director of Spiritual Formation, the Church of Ireland Theological Institute. This essay was first published in the July 2010 editions of the Church Review (Dublin and Glendalough) and the Diocesan Magazine (Cashel and Ossory).