Tuesday, May 25, 2010

Looking into the abyss - Greek market shock therapy threatens to kill patient


Sometimes it's the little thing that show you how grim things are getting here in Thessaloniki, the long lines of taxis waiting at ranks for customers to turn up even in the middle of the day when up till recently getting a cab was next to impossible. Or perhaps its the accents of wandering street vendors who are now more likely to be people from the city than some recently arrived immigrant from West Africa or a member of Greece's Rom community. The city centre has become a near ghost town on week nights, a mere shadow of its former, vibrant self with cafes uncharacteristically quiet and empty streets, this in a place that prided itself on 4am traffic jams.

Despite the ruling PASOK government's claims that the country is on the way to re-inventing itslef and "entering a new era" the IMF - EU imposed Stability Pact brings to mind the old medical joke, "the operation was a success, but the patient died". The price being paid to trim public spending and raise revenues to pay off Greece's massive $420 billion debt load has been steep indeed and the greatest burden is being carried by those on middle and lower incomes. i.e those least likely to have benefitted from previous state profligacy.

They have been hit by the double whammy of falling wages and rising prices. Even in the relatively priviledged public sector incomes have taken a 20% dive whereas in the private sectors wages which had been been stagnant for the last five years have taken a nose dive as threat of unemployment forces people to accept whatever they are given (regardless of labour legislation laws or union agreements) or face losing their jobs.

On the other hand inflation still rages at nearly 5% with the steepest rises being observed in food, clothing and transport, i.e goods and services used by all. As a result the the greatest pressure on budgets is being felt by the poorest. The rises in VAT and a second round of tax hikes on petrol have just added to the problem and as a result the economy is going into free fall as people consume less so adding to financial woes. The numbers speak for themselves; 48% of Greeks reported in a recent newspaper poll that they have cut down on food expenditure recenty whilst 90% have cut down on money spent on clothing.

With petrol averaging 1.50 euros a litre, (the most expensive in Europe) those in the tourist industry are bracing themselves for a rough summer season as fewer and fewer Greeks are able to reach holiday destinations, let alone afford to stay there. The crisis has already become obvious in the last few months with a 21% drop in car use in the greater Athens area. Similarly the recent bank holiday saw a signifigant drop in Athenians leaving capital for nearby villages and beaches, with many of those who did leave opting for a day trip rather than taking advantage of the gorgeous weather to spend three days away from the city.

However, perhaps the most corrosive effect of the economic crisis is not one that shows up in accountants' ledgers or bankers' balance sheets, its the fear and sense of desperation that is eating away at many, even those who have a job and money in their pockets are terrified that all could just disappear in the near future.

The problem is even greater for the young who have seen what little hope they had for the future evaporate with nothing it seems to take it place except the prospect long term unemployment or a lifetime of insecure badly paid labour with nothing to show for it at the end. Many people I talk to speak obsessively about living the country, trying their luck elsewhere. They are angry and disappointed that after years of study and hard work their qualifications mean virtually nothing in Greece.

They may be right as it is very hard to see how Greece is going to pull out of the present financial nose dive brought about imposition of "internal devaluation" which is also being applied in Latvia with similarly devastating results with a drop in 25 % GNP in just one year. The total loss is estimated to reach 30% next year, a figure greater than the USA during the Great Depression during 1929-1933 according to the Centre for Economic and Policy Research.


melusina said...

Great post. This is the kind of thing foreign media should be reporting, instead of stories that make it sound like ALL Greeks have been milking the government and getting rich.

Liam said...


Here in the Czech Republic, the public is generally unsympathetic to the plight of the Greeks, because the media has told them that they are a bunch of Southern unmentionables. (That is my paraphrase of far more racist comments)

What they don't want to talk about is that they are standing on the edge of the same precipice, since the Czech deficit is just as large and will need the same amount of cutting, if not more. While our currency is not in the Euro, it has been rising against the Euro, the Pound and the Dollar for a long time and seems unlikely to fall in the current climate.

The economy in terms of jobs and growth is equally stagnant and employers are routinely ignoring labour laws and getting away with it.

My advice to the Greeks is, before you decide to go somewhere else, be careful because Greece is simply the first to go down the road that most of Europe will follow shortly.

At least when you are at home, you have your families - abroad you have nothing and the locals won't want you there either.

Hope this comment is useful.


greek_bear said...

Great post, though painful to read. Thoughtful bloggers like yourself do a great service to Greek democracy. I wish the Greek government would be more sympathetic to you.