Minus cigar and bulldog, Finance Minister Evangelos Venizelos declared on Sunday that, like Winston Churchill, the government had nothing to offer but “blood, sweat and tears.” It was a preface to his government again demanding from the Greek people that they offer all this plus one other vital factor: more of their cash.
When we come back to look at the time line of Greece’s crisis, there is little doubt that Venizelos unveiling a new emergency property tax in a bid to plug a hole in public finances to meet the targets set by the troika will be seen as the moment the silent majority’s grudging tolerance of the austerity program crumbled under the weight of unfairness and grim financial reality.
The property tax, which will lead to a family with a modest two-bedroom apartment in Athens paying at least an extra 500 euros in tax, is the hefty straw breaking the camel’s back. The fact it was swiftly followed by yet more measures — such us lowering the tax threshold so far that people under the poverty line will be taxed — compounded the frustration of millions of Greeks who have been paying for problems they had very little part in creating.
Tax experts on Skai TV calculated that a couple earning a combined gross salary of 40,000 euros per year who also own an apartment and two cars will pay more than 2,000 euros extra in tax annually as a result of the measures taken over the last few months. On its own it’s clearly not the end of the world, but add the impact of the austerity measures taken in the first year of the crisis, the fact that wages in the private and public sectors have already been cut substantially and that jobs are being lost at the rate of about 1,000 a day, and you can see that Greek families are being squeezed until they are bone-dry.
We have reached the point were even scrimping and saving will not be enough for some people to maintain any semblance of normality in their lives. Hanging on to their homes, possessions and even families is going to be a challenge.
It’s now an impossible task for this government or its lenders to convince the majority of the Greek people that all this is for the best. The opportunity to persuade them that the measures are part of an effort to get Greece back on its feet and to change the way the country works has been buried under cuts, hikes and new charges.
At the beginning of all this, there was a chance to get people on board by marrying the measures with a clear and consistent drive to shake up public administration and sow the seeds of a new economic model. That never happened and the PASOK government must accept huge responsibility for it. There’s hardly a person in the country that wouldn’t have accepted some doses of austerity in return for a modern, functioning state. Instead they got more of the same: more heavy burdens for the same poor service.
The lack of action has also created resentment among private sector employees, many of whom feel they’re paying the price — through more taxes and job insecurity — of the government’s incompetence and timidity in scaling back the public sector. This emerging sentiment carries all the dangers implied in social groups butting up against each other in a time of economic crisis. If Greeks begin to buy into the image of civil servants as lazy leeches and forget that those working in the public sector also include fellow taxpayers on low wages, such as teachers and nurses, who are vital to the functioning of this country, then the economic crisis will seem like the least of our problems.
Almost two years on from when the crisis broke out, the government is still talking about deep incisions in the public sector and removing the less worthy civil servants from their posts. This should have happened from the start. Then, there would have been a chance of sifting the public sector workers who bought into the idea of a new Greece from those who had nothing to offer. Instead of a selection process, we’ll now have ministers slashing through the public administration jungle, machete in hand, placing thousands in the unemployment line’s waiting room, or labor reserve.
However, the Greek government should not be alone in accepting blame for leading us to this point. Greece’s eurozone partners and the International Monetary Fund must also accept their share for creating an ill-conceived program. It’s now clear that the scheme did not take into account the reality on the ground, allowing for the political obstinacy that it would encounter and the extra time that would be needed to reform a public sector that was years behind most in the European Union.
The program relied too much on inflicting pain through taxes and cuts rather than creating a positive perspective through a revamped economy and public administration. The IMF’s senior representative in Greece, Bob Traa, said this week that the Fund is opposed to further tax hikes as they are neither “economically nor politically sustainable.” While it’s welcome that the IMF has finally accepted the dire financial reality in Greece, it should not be forgotten that over the last two years it ushered Athens along the path to economic suicide.
Equally, we should not overlook the fact that it’s not just Greece which had trouble with its targets. The economic projections made by the troika over the last two years have been as wayward as the government’s attempts to restore fiscal stability. When Greece signed its standby loan agreement with the troika in May 2010, the IMF predicted that the Greek economy would shrink by 2.6 percent this year. When the midterm fiscal plan was passed through Parliament just three months ago, the Washington-based fund forecast a contraction of 3.5 percent. In fact, the Greek economy is expected to shrink by more than 5 percent this year. In May 2010, the IMF’s projection for unemployment this year was 14.6 percent, which was revised to 14.5 percent this June. In fact, the jobless rate is already over 16 percent and rising. The targets Greece was set were based on projections that proved to be wrong by some distance.
The failure of the past two years had many fathers. It was collective, just like the punishment wreaked on the Greek people has been. So, as we come to the end of another round of fraught good cop/bad cop negotiations between Greece and the troika, spare a thought for those who are caught in the middle, those truly offering their blood and sweat, but mostly their tears.