How did it come to this? The roots of the current Greek economic crisis

Looking into the abyss - Giorgos Papandreou, prime minister of Greece, originally uploaded by Teacher Dude's BBQ.

This article was originally written last February but I thought that I would post it again since most of the points remain valid and especially in light of the fact that Eurostat has warned that Greek debt numbers are to be revised upwards for the years 2006-2009.

Much of the current media coverage over Greece's debt crisis is focused on how the country is going to raise the funds necessary to cover the $400 plus billion it owes creditors. Scenarios concerning the role of Germany and/or France in bailing out Athens are discussed constantly on national TV and in the newspapers and what will need to be done in order to convince Greece's European partners to cover cost of lending the billions needed just to keep the country afloat.

However, whatever happens in the coming months the question of what Greece does next in a world in which its financial choices are closely scrutinised by whatever monetary institution steps into the breach to save the country from bankcruptcy has not been addressed.

The prospect that an elected socialist government will be obliged to implement a conservative fiscal policy controlled by unelected officials raises all kinds of political dilemmas which Giorgos Papandreou's PASOK administration will have to deal with in the immediate future.


Papandreaou will be forced to challenge directly exactly those public sector trade unions which have put him and PASOK in power. In addition he will be forced to cut areas of spending which have been used by successive government to ensure political support.


The prospect of a place in the Greek civil service has long been the source of political power for parties on the right and left of the political spectrum. This combined by the promise of public sector contracts to economic elites in the private sector form the basis of the country's feudal political structure and in no small measure contributed to its present woeful economic situation.


Instead of land and power being swopped for military service the present Greek version of feudalism sees votes and political support flowing up the system in return for public funds and the influence it garners flowing downwards. It is a structure of patron-client relations which links the heads of the major parties to the humblest villager and is the lifeblood of modern Greek politics.


The ebb and flow of such influence and the complicated web of personal, familial and political relations that it engenders helps explain much of the apparent confusion and chaos of modern life in Athens and other major cities. Much of the country's infrastructure is divided into a patchwork of competing fiefdoms that have formed as a result of the present political setup. Each participant owes their position and continued economic well being to maintaining the right connections with those above and below them in the hierarchy. In such a system qualifications, skill, effectiveness and ability play second fiddle to being able to stay in with those who are in a position to advance your career.


Another by - product is chronic inefficiency and confusion as its duty of every fiefdom to ensure that it gets the maximum amount of resources in order to guarantee its survival. Co-operation and cost cutting mean giving up exactly those resources one needs to make sure that money and influence continues to flow to those whose support you need.


The effects of this system also affect the private sectors as the companies competing for contracts with the public sector, a huge player in the Greek economy, do so on the basis of political, personal and family connections. In some cases this takes the form of outright bribery but many others there is the mutual understanding that favours given must at some point be returned. It is no coincidence that many of the country's richest men have media wings attached to their business conglomerations which can be used to promote or attack parties and politicians .


The upshoot of this unholy alliance is that crony capitalism and "licence Raj's" dominate the economy stifling innovation and competition. There is little incentive to cut the cost of your product or improve the quality of your service in such a system. As a result Greek companies will dominant nationally rarely have the expertise to break into developed markets where transparency means that methods used at home cannot be employed.


Whilst foreign observers often point the finger of blame at Greece's powerful public sector unions for lack of competiveness and low productivity the reality is that pay in the private sector has remained stagnant for years and that much critised worker protection laws are rarely applied to non - public sector businesses. Despite a pool of cheap, educated labour which can be hired and fired at will the private sector has done little to prepare the demands of a modern globalised economy and instead reaped the benefits of European Union's lowest wage while raising prices far beyond the rate of inflation safe in the knowledge that an invisible web of cartels and unofficial "gentlemen's agreements" mean that they will not be faced with any real competition.


It is difficult to see how an economic and political system run on such principles can reform itself in the kind of time scale being proposed by Europe and controlled by exactly those people who helped run the country into the ground in the first place. The obvious answer is that Greece will not be able to implement the kinds of reforms being demanded and that in trying to square the circle the country will tear itself apart as different social and economic groups turn on each other to preserve a semblance of their priviledges and power.


Already there has been a growing wave of political violence with terrorist attacks now forming a staple of the daily news. That combined with a burgeoning crime rate form the background to a society that appears to be gradually coming apart at the seams.

http://www.nowpublic.com/world/greece-morning-after

Despite crisis business as usual for Greece's politicians

Κώστας Καραμανλής - Costas Karamanlis. Prime minister of Greece, originally uploaded by Teacher Dude's BBQ.

Towards the end of the ex - Greek prime minister, Konstantinos Karamanlis's second term yet another corruption scandal erupted which would ultmately be the death knell for the ruling conservative New Democracy party in the 2009 general elections. After less than two years in power the party founded by his uncle, also called Konstantinos Karamanlis in 1974 lost power to the left of centre PASOK party lead by Giorgos Papandreou, son and grandson of previous Greek PMs Andreas and Giorgos Papandreou.

The revelations that senior New Democracy officials had collaborated in a highly dubious land swap in which a remote lake in the north of Greece was exchanged for a large piece of prime Athens real estate outraged public opinion and ultimately ended in Karamnlis calling for early elections.

The details of the deal which featured the Greek Orthodox monastery of Vatopedi are as convoluted as they are legally dubious. However, an insightful article in Vanity Fair by Michael Lewis paints a lucid, if dark picture of corruption and lawlessness at the heart of the Greek political establishment. According to Lewis it was exactly the ability of polticians to operate without oversight or restraint that helped create the present financial crisis and massive debt load.

Yet even as the country set to enter its third year of recession with the prospect of still more cuts and the economy set to shrink even further the the political establisment in Athens are still playing the same constitutional games, seemingly untouched by the financial maelstrom embracing Greece. Evasions, denials and endless parliamentary manouevering still rule the day and even after the appearance plethora of evidence indicating wrong doing the former prime minister of Greece can say that neither he, nor his administration have any repsonsibility for either the Vatopedi scandal of the dire state of Athens's coffers.

It would be nice to think that by ousting a corrupt government Democracy has once more won out. The reality of the situation is that one corrupt poltical oligarchy has been replaced by another. The current rulers of Greece, PASOK have a rich history of scandal and corruption which has been not resulted in a single conviction, The Sieman's bribery case and a list of pay offs by other German firms to PASOK officials in the run up to the 2004 Olympic Games has also been put on the parliamentary back burner, to be quietly dropped at a future date.

Given that the current political scene is full of exactly those officials who presided over the creation of Greece's present woes its is very hard to have faith in their ability to not repeat the mistakes of the past. In all probability the future holds more of the same just on a smaller scale reflecting the country's dire fiancial state.

It's a bitter irony that Kostas Karamanlis was elected on a reform ticket by an electorate fed up with the corruption of the previous PASOK government lead by Kostas Simitis. His promise to clean up politics and reform the dysfunctional Greek state stroke a chord with voters who hoped that the right of centre New Democracy party would change the status quo. As history has shown the differences in ideology between Greece's two largest parties are nothing compared with their inability to resist the financial temptations offered by power.

Faced with the failure of both PASOK and New Democracy to control the greed of their own officials the local elections in November may prove to be the beginning of the end of the current Greek party political scene.

Wild goose chase

It has been a particularly difficult summer here in Greece for everyone, rising prices, galloping unemployment and deep salary cuts have made people worried about how they are going to make it through the winter, which contrary to popular myth actually exists in Greece. Hard to believe when you 're on the beach and it is in the high 30s that the temperatures here in the north often are colder than those in the UK.

To make my particular situation even more difficult was the fact that I was burgled in May, which damn near wiped me out financially at the worst possible time of the year for a teacher. So when I got the chance to apply for a job as an IELTS examiner you can imagine how welcome that news was. Despite lack of funds I managed to scrape together the money necessay to travel to Athens for the interview. I travelled through the night by coach in order to save the cost of a hotel room and kept my spending to an absolute minimum.

After a long and stressful interview I returned the same day so spending endless hours stuck in a coach during the course of the day. As you can imagine a 14 hour, 1100km round trip is nobody's idea of a fun day out.

The only problem was that the British Council wanted me to do a five day series of training sessions in Athens, which was just impossible for me financially. As you can imagine spending five days away from home staying in a hotel, eating out and commutting is a major layout even in the best of times, let alone during one of the worse periods of economic crisis in modern Greek history. So I said that it was impossible for me and could I do the training closer to home. Thankfully, the BC assured me that someting could be worked out come September. September came and no word, when I sent off emails I was first told that the person responsible was unavailable, then I was told that the training material were appropriate for groups only and finally, today I received an email saying that is no job anyway.

I am angry that this whole procedure has been a waste of time, energy and money in which I foolishly participated, thinking that I might get a job out of it. I feel that that I have been misled and that an organisation has chosen to treat people with indifference and/or contempt. It's something that I have seen a lot of here in Greece as the economic situation has deteriorated and more and more people chase fewer and fewer positions. Teachers are being seen as just another commodity which can be exploited and discarded at will. An endless stream of other applicants can take their place if they are unhappy with expoitative wages, lack of social insurance or outrageous demands.

Athens to audit kids in bid to raise tax revenue

Lydia, originally uploaded by Teacher Dude's BBQ.

The Greek government is introducing "tax cards" in the new year in order that children as young as seven years old have their financial transactions recorded electronically. As ludicrous as this sounds the Finance Ministry is all set on issuing 1.5 million cards to the country's primary, secondary and tertiary level students. The idea is that when young people buy anything there will be a record available for tax purposes.

It is a typical of the fact that faced with an IRS/Inland Revenue service riddled through with corruption and inefficiency the Greek state once more requires that every citizen police themselves. A less charitable comparision can be made with Pol Pot's Khmer Rouge who used children to gather information and evidence against their parents. Had the Khmer embraced technology instead of destroying it I'm sure they would have loved this idea.

On a more practical level every single retail business in the country will be obliged to buy card readers and keep records whilst 1.5 million kids/teens/young adults will be required to keep the card on them if they want to buy anything. As you can see this is a recipe for confusion, chaos and massive cost over runs - exactly the factors that helped the country get in the mess it already finds itself in.

All this from a government that doesn't even know how many students are studying at state universties and polytechnics after nine months of asking nor how many people it employs as a whole.