Tag Archives: Greek economic crisis

Blood, sweat, but mostly tears

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.

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Battle-hardened Venizelos faces defining moment

It’s a feature of politics at its Machiavellian best that even the worst of enemies can end up relying on each other for survival. So it was on Thursday, when Prime Minister George Papandreou called on his one-time bitter rival Evangelos Venizelos to take on the mammoth task of steering Greece through the economic crisis. Venizelos has craved influence and attention for years but as Greece’s finance minister at this particular juncture, he may find that getting what he wished for wasn’t worth the wait.

The Thessaloniki MP and former defense minister should be aware of the dangers of being thrust into the spotlight when the timing is not quite right. His recent political career has been defined by a moment of political opportunism that went badly wrong. Following a disastrous showing for PASOK in the general election on September 16, 2007, Venizelos attempted to usurp Papandreou as the party’s leader. Even before the final results were in, he headed to Zappeio Hall in central Athens, where the PASOK chief had minutes earlier conceded defeat, to announce he was launching a leadership challenge.

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Privatization, a very public matter

Illustration by Manos Symeonakis

Trying to make out what’s going on with the Greek economy at the moment is much like attempting to get a good night’s sleep when there is a clutter of pregnant cats outside your window. Somewhere between Greece’s emergency lenders, its government and its opposition parties, reality has been lost and it has become difficult to judge the privatization plans – which have prompted all the scratching, biting and catcalls – on their merits, if they have any.

When he was in Athens a few months ago, the International Monetary Fund’s managing director, Dominique Strauss-Kahn, likened himself to a doctor, called in to save the sick man of Europe: debt-ridden Greece. But recent developments suggest that what Greece really needs is not a doctor but a psychologist. More than anything else, the country is suffering from a serious case of schizophrenia. Certainly, the PASOK government and its main opposition, New Democracy, have displayed a worrying mental instability and lack of clear thinking in their reaction to the tactless statement by representatives of the IMF, the European Commission and the European Central Bank (the troika) on February 11 about Greece needing to raise 50 billion euros over the next five years from the sale of state assets.

The government’s delayed response to the troika’s statement made it seem as if Prime Minister George Papandreou and his team had stirred from a deep slumber. It was a slow, clumsy comeback that clouded the real issue. PASOK had every reason to feel aggrieved about the troika now not only shaping but also announcing Greek economic policy, and not even paying lip service to the country’s sovereignty, as compromised as it may be. But this was a point that had to be made – as forcefully as possible – behind closed doors. Trying to play tough in public with the organizations that are lending you 110 billion euros and preventing you from going bankrupt really doesn’t cut a swath. Nobody in Greece, or anywhere else, will for a minute think that angry words via the media will shift the balance of power between the government and its creditors. It’s clear to everyone who wears the pants in this particular relationship.

The outburst that emanated first from the keyboard of government spokesman Giorgos Petalotis and then the mouths of various PASOK members had an immediate negative impact because the troika said its February 11 news conference would also be its last, meaning that its representatives would no longer have to answer questions or justify their decisions in public – hardly a victory for transparency or democracy. Beyond that, the jingoistic tone of the government’s retort, which suggested that only the Greek people had the right to order ministers around, did nothing for informing the debate over privatization.

Greece has debt of more than 300 billion euros to pay off. As of 2013 its emergency loan installments will end and it cannot expect to receive cash injections from the EU and the IMF forever. It has to find a way of tackling, on its own, the debt it built up through years of irresponsible governance. One of the options available is to seek to profit from state assets. To couch this debate in nationalist terms is irresponsible and counter-productive. Papandreou’s assertion, for instance, that the government would pass a law forbidding anyone in power from selling state land without the approval of Parliament is virtually meaningless. Apart from a token symbolic value, it has no real substance because any government at any given time, unless it’s a coalition, will have a majority in Parliament and will therefore be able to approve any sale it needs or wants.

Also, it seems a bit rich for Papandreou to make bold claims about selling public land in the same week that a think-tank named after his father, the Andreas Papandreou Institute of Strategic and Development Studies (ISTAME), said that a study it carried out found that 45 percent of the state’s land had been snatched by land-grabbers and that Greece would be lucky if it could find 100 pieces of prime real estate to sell. In Greece, it seems, it is fine for public land to be taken over by opportunists, profiteers, monasteries, or whoever else it may be, but it is anathema for it to be sold to pay off the debt that burdens every Greek taxpayer.

Determined to prove that it can beat PASOK at its game, New Democracy displayed an even more pronounced split personality by both castigating the government for being supplicant to the troika but at the same time saying that it should have started selling off state assets much sooner. This neurosis was epitomized by ND leader Antonis Samaras in his speech to the party’s political committee on Saturday when, in almost the same breath, he accused PASOK of handing the keys to Greece over to the troika and proudly reminded people that he had suggested that 50 billion euros could be earned from privatizations as far back as last summer.

ND’s consternation has combined very well with the government’s muddled thinking to leave Greeks with little idea about where the country stands, what assets it has and how they could be used to help Greece stand on its own two feet. There has been little talk of which, if any, state enterprises could be sold off, of which publicly owned companies investors might be willing to take over the management or if the ambitious 50-billion-euro target is even remotely achievable. Most importantly of all, there has been absolute silence on the question of what the drawbacks to privatization might be, whether the medicine being administered to Greece by Dr Strauss-Kahn and his associates is actually any good for the country.

Privatization may be a way of Greece taking ownership of its own debt problems and an injection of capital would allow it to buy back its own bonds at a discount, thereby helping pay off a sizable chunk of what it owes. However, this should not disguise the fact that privatization comes with many deep pitfalls. Britain, which was the first European Union country to embark on widespread sell-offs in the 1980s, is another country that has been toying with the idea of privatization over the past few days. Prime Minister David Cameron is set to present within the next two weeks proposals to allow private firms to bid for contracts to run virtually all public services.

This is light years beyond what Greece is currently considering but it’s a reminder that Britain is testament to why privatization is often not in the public’s greater interest. The first wave of sell-offs in the early 1980s included Jaguar cars, Rolls Royce, British Gas and British Steel, signaling the beginning of the end for the country’s industrial base and its potential to create jobs. This was followed up in the 1990s with the disastrous privatization of the railways, which led to a more expensive and inferior service. The Labour government of the late 1990s allowed the private sector to extend its reach through a series of Public Private Partnerships (PPP), which meant that by the beginning of the last decade key services such as healthcare and education were largely reliant on private investment, which often came with some very dangerous strings attached, such as private contractors being able to sell their contracts to build public infrastructure or run services to subcontractors. This whole process led to some firms that were particularly successful in winning these contracts transforming themselves from financial small-fry to profit-making behemoths in just a few years. From a Greek point of view, though, the most significant lesson to be drawn from the British example is the implication that the PPP schemes had for British debt. The partnerships were essentially a form of borrowing – private firms were given contracts to build or operate for a fixed-term in return for reaping the revenues from the project. In 2003, the Treasury estimated that the government had accumulated 110 billion pounds worth of debt from its PPP initiatives.

As Greece considers how to exploit its assets, its schizophrenia will only cloud its judgement. Privatization is neither a panacea for the country’s ills, nor – if approached with maturity – is it a threat to national sovereignty. It’s a policy that should not be adopted just for the sake of it, nor avoided just to make a populist gesture. It’s a strategy that should only be followed if it’s in the public interest to do so. Sadly, nothing that has happened over the last few days suggests that anyone – be it the troika, the government or New Democracy – really has the public interest at heart.

Nick Malkoutzis

Barbarism at the gates

Illustration by Manos Symeonakis

Politicians often say things during election campaigns that they later regret. Looking back on his first year as prime minister, George Papandreou must be wondering what possessed him ahead of last year’s October 4 poll to utter – with excruciating regularity – the words: “The money is there.” Unless, of course, by “there” he meant in the back pockets of pensioners, civil servants, motorists and most middle and working class families that are now footing the bill for Greece’s economic rescue effort.

The money was never there and everybody, including PASOK, knew it. This didn’t stop Germany’s Werkstatt Deutschland organization from awarding Papandreou the Quadriga Prize for “Power of Veracity” on Sunday. The award, named after the sculpture of a horse-drawn chariot that sits atop the Brandenburg Gate in Berlin, was in recognition of Papandreou revealing the truth about the state of Greece’s public finances, which seems a bit like giving a lollipop to a child who admits its part in smashing a vase but only after discovering there was nowhere to hide the broken pieces.

Nevertheless, the trip to Berlin may have given Papandreou an opportunity to contemplate one of the other regrettable statements he made before last October’s election. “Socialism or barbarism,” the PASOK leader had said, echoing Marxist activist Rosa Luxemburg, a late resident of the German capital who believed adopting Socialism was the only escape from an unjust existence. Papandreou spoke in a slightly different context, arguing that the global financial crisis was proof that the capitalist model was unsustainable and that a center-left structure, with more emphasis on regulation and the state, should replace it.

However, 12 months on, his dreams of 21st century Socialism have vanished into the same vortex that is consuming the billions of euros Greeks are paying to prevent their country from going bankrupt. In the meantime, the threat of barbarism has become very real.

Some of the measures taken over the last 12 months were undoubtedly necessary and long overdue but the manner in which they are being applied and the IMF/EU market-driven philosophy that underpins them is brutal. While all eyes are trained on safeguarding financial capital, little attention is being paid to the negative effect on social capital.

The recent liberalization of the road haulage sector set a dangerous precedent. Apart from the truck owners themselves, most people would argue that time had run out on the closed-profession privileges the truckers enjoyed for so many years. Yet, it’s unsettling that the forced end to their lengthy strikes – first with a civil mobilization order in the summer and then with legislation threatening truckers with jail sentences in September – should be met with such satisfaction within the government and among some of the public. After all, this was a failure of democracy and had a distinct totalitarian element to it. PASOK backtracked on its promises to the truckers, one of the many groups that have been pampered by successive governments, and then portrayed them as being unreasonable and obstructing progress. Unable to engage in debate and then formulate policy – functions of the democratic systems we uphold and the governments we vote for – PASOK rammed the liberalization through Parliament and down the throats of the truckers. The government’s heavy-handedness throughout the dispute does not bode well for the future.

Greece’s experience is being replicated in other European countries, such as Ireland, Portugal, Spain and Britain, where citizens are being presented with a fait accompli. Their governments, regardless of political hue, are telling them that austerity measures must be adopted without question. In doing so, elected politicians are not only perverting the very system that put them in power, they’re also sowing the seeds of deep discontent as people grow increasingly aggrieved with the impact of the austerity measures and the lack of alternatives.

The United Nations work agency, the International Labor Organization (ILO), warned last Friday that the global employment market, where 22 million new jobs are needed, would not recover from the crisis until 2015 and that this would only fuel social unrest. “Fairness must be the compass guiding us out of the crisis,” said ILO director general Juan Somavia. “People can understand and accept difficult choices if they perceive that all share in the burden of pain. Governments should not have to choose between the demands of financial markets and the needs of their citizens. Financial and social stability must come together. Otherwise, not only the global economy but also social cohesion will be at risk.”

While scenarios of popular revolution are pure fiction as far as Greece is concerned, the country is no stranger to social unrest. The longer that measures which impact on people’s viability are passed one after the other, with no discussion or effort to present a vision for a better future, the more resentment will fester and the threat of a backlash will grow.

The possible breakdown of social cohesion creates the conditions for another, even darker, reaction to austerity. While understandable to some extent, the glee some citizens and commentators expressed at the abrupt way the government dealt with the truckers is a tell-tale sign that, given the current circumstances, a larger proportion of the population than usual thinks the use of force – psychological or physical – is acceptable. The danger is that the longer the government depends on this tactic, the more people will become accustomed to it and start believing it’s a perfectly legitimate way to run a country and get things done. In Greece, where society has been fragmented for many years thanks to each group pursuing its narrow interests, the flourishing of this mind-set will lead to even graver polarization.

Hungary, which was discovered in 2006 to have been fiddling its economic figures and had until this year been applying the austerity measures prescribed as part of the rescue deal it signed with the IMF, offers a salutary tale for Greece. Earlier this year, the extreme right-wing Jobbik party won 850,000 votes in the parliamentary elections on the back of a campaign that targeted the Roma but also played up the failures of the traditional guardians of power in Hungary, the conservative Fidesz and the Hungarian Socialist Party (MSZP). “The main factor behind Jobbik’s rise has been its ability to make political hay out of popular demand for extremist policies,” writes Peter Kreko for the Political Capital think tank in Budapest. “The primary driver behind extremist sentiment is a decline in public morale: Many Hungarians feel they can no longer trust the political elite or their governing institutions. The other fact is a rise in prejudice, especially toward foreigners.”

So, as Greece takes stock a year on from when Papandreou made his foolhardy election campaign pronouncements, it can draw some timely conclusions from its own and others’ experiences. It’s clear that the money is not there, nor is Socialism. As for barbarism? It’s creeping through the gates.

This commentary was written by Nick Malkoutzis and was published in Athens Plus on October 8, 2010.

No sleep till Athens

Illustration by Manos Symeonakis

There isn’t much to laugh about in Greece at the moment. So, it was with great pleasure that I read an e-mail last week from one of our readers in the USA in which he suggested how Greece could overcome its economic problems. One of his ideas was that Greeks should stop taking lunchtime siestas because they lose valuable working time. It was the first time I laughed out loud for weeks. I don’t know any Greeks under the age of 65 that take a nap at lunchtime, apart perhaps from my son. But he’s only 20 months old, so perhaps he can be forgiven for not using these hours to contribute to the country’s gross domestic product.

Although the e-mail from America provided a moment of light relief, it left a bittersweet taste because it also underlined how the crisis has created a negative stereotype of Greeks. It is patently obvious that many Europeans, especially Germans, are convinced Greece is full of freeloading slackers. The reality, though, is different. For instance, Eurostat’s figures for the average working hours in Europe for 2009 indicate that Greeks work an average of 42 hours a week. The EU average was 40.3 hours and in Germany it was 40.8. In fact, the Greek figure is the highest in all of the 27 EU countries.

So, if the Greeks work so hard why is their country in such a mess? Well, one answer is that working long hours does not necessarily mean you are productive. In fact, in Greece you often end up working longer because of the inefficiencies of the system. The time you could be using productively may be spent queuing at a public service to get paperwork stamped or writing out invoices by hand because there is no computerized accounting system.

Of course, there are very clear economic and financial reasons for Greece’s collapse but the causes of the illness go much deeper. One of the most serious underlying problems is a bloated and decaying public sector which neglects to punish inefficiency and indifference. Until 2007, according to World Bank data, it took 38 days to set up a business in Greece. In Djibouti it was 37 days. Of course, what statistics cannot measure is the frustration that causes so many people to lose the will to fight the system and eventually play by its warped rules, even if this involves corrupt practices. And what sustains this vicious circle? Political expediency. Governments created this monster and were afraid to tackle it because their support base, and therefore their destinies, were tied not just to the public sector but to the array of professions that are interlinked with it, such as doctors, civil engineers, lawyers, notaries and farmers.

Whatever you do in Greece, you cannot avoid dealing with the state and coming up against its inertia. According to Eurostat, roughly one in 10 Greek adults is a civil servant, which is the highest proportion anywhere in the EU. This is a legacy of the 1980s, when the governments of Andreas Papandreou’s socialist PASOK sought to balance years of right-wing rule and dictatorship by finding jobs for the party faithful. Since then, each government has treated the civil service as just another party apparatus, hiring more people even when the country couldn’t afford it.

But, again, the story of the Greek public sector is a symptom of the problem rather than the root cause, which lies in the country’s political system. Since the 1970s, Greece has been ruled by two parties that helped themselves rather than the country. They awarded their friends jobs or state contracts and as soon as any social group or sections of the media resisted an attempt to change the status quo, they would cave in and abandon the offending policy. So, it’s no surprise that an opinion poll by GPO for Mega TV this week indicated that 54.3 percent of Greeks believe all the recent governments, rather than a specific one, are responsible for the current crisis.

The previous New Democracy government of Costas Karamanlis is blamed by 20 percent of those questioned. Karamanlis and his ministers have a lot to answer for. At a crucial time for the global economy and despite having a comfortable majority in his first term, Karamanlis dodged any attempt at structural reform. Instead, he handed over questionable statistics, a spiraling deficit and no new ideas.

But the current PASOK government is not without blame. As assured as Prime Minister George Papandreou may look on the international stage now, he had no idea how to be a constructive opposition leader for the previous five years. In fact, the period from 2004 to 2009 will go down as a barren time in Greek politics, when no party could come up with a vision for Greece. The leftist parties — the Communists (KKE) and the SYRIZA coalition — were content to simply battle for control of the unions. This fight is continuing and, as the crisis puts the unions in the spotlight, it is clear they have failed to overcome their esoteric attitude. Even now, they have not been able to refine their tactics beyond that of blackmail — if the government does something they don’t like, they block ministry entrances or central Athens.

So, when people ask “Why did Greece end up in this mess?” perhaps the best answer is that it would have been a miracle if it hadn’t done so. It’s only now that Greeks are beginning to realize the damage that has been done to the country over the last decades and that, as voters, they actively encouraged it. They were happy to turn a blind eye as PASOK exploited the public sector in the 1980s; they were equally oblivious to the failures of socialist and conservative governments in the 1990s, when money from the EU began to flow into Greece; and during the last decade, when entry into the euro secured cheap loans and a comfortable way of life, nobody wanted to ask any difficult questions.

The realization is a painful one for Greeks — it’s like thinking you have entertained a friend by taking him out for a few drinks only to find out that you actually fed his alcoholism.

The recovery from this crisis will not just depend on the emergency loans from the IMF, Germany and the other eurozone countries. It will not depend just on growth rates and bond spreads. It will, to a great extent, depend on whether Greeks are now prepared to take the extra step to demand better of their public sector, push for the private sector to be allowed to flourish and, above all, be ruthless with incompetent and cowardly politicians. To do all this when your salary is shrinking, your taxes are increasing and your livelihood is at risk is not an easy task. For all these reasons, Americans, Germans and everybody else should know that Greeks will not be sleeping well at night for many years to come, let alone taking lunchtime siestas.

This commentary was written by Nick Malkoutzis and appeared in Athens Plus on May 7.