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Greekonomics: a country in crisis June 1, 2010

Posted by Yilan in Yunanistan.
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Bars, restaurants and theatres may still be busy, and Europe may be bailing them out, but Greeks remain furious about their broken economy, clannish politics and corrupt society

GREEK PEOPLE are disillusioned, bitter and frightened by a financial meltdown that has taken their country to the brink of bankruptcy. As anger mounts, the country’s dynastic political class is under fire.

Walk around Athens at night and you’d scarcely think this was a society in the grip of acute anxiety about the future. Restaurants and bars seem busy, queues form in the theatre district and traffic clogs the streets even well after dark. Start talking to people, however, and worries spill forth about the country’s dire predicament.

“People want justice, they want somebody to go to jail. The corruption is everywhere. Not only should the ordinary people have to pay, but also the big people. Otherwise we will not resolve our problems,” says Alex Opuolos, a business analyst in his 50s.

Greece is on the rack, and its socialist government is struggling to borrow the tens of billions of euro that are needed to keep a porous system of administration afloat. At great cost to taxpayers, premier George Papandreou has pared back the budget three times this year already.

For Greeks – always proud of their ancient heritage – the current episode is something of a humiliation. Emotions are running high. For Papandreou, the son and grandson of Greek prime ministers, the family franchise is on the line. That his immediate predecessor, Kostas Karamanlis, of the conservative New Democracy (ND) party, is nephew of another former prime minister underlines the awesome power of Greece’s political clans.

The present state of affairs does no credit to either of the two “royal families”. Neither does it reflect well on a divisive political culture still split along traditional left/right ideological lines. It used to be said that every village had three cafes: one each for conservatives, socialists and communists. In Greece today, the divide finds its reflection even in soccer, in the sense that the two dominant teams are politically aligned. Olympiakos shoots left, say locals, Panathinaikos shoots right.

This factionalism makes political reform difficult. Yet reform, radical and immediate, is badly needed. Rampant maladministration has been exposed, leaving the country vulnerable to speculative attacks on the financial markets and to the imposition of a form of “economic government” from Brussels.

Papandreou’s strategy of attacking the speculators has won some international support, but it cannot gloss over the spending binge that brought Greece to this sorry place. The country’s powerful trade unions are up in arms, but there is no water left in the well.

Money is tight, very tight, fear is everywhere. In a debt-laden country that created no less than 75,000 civil service jobs in five years, pay cuts and tax hikes are the new order. While in-jokes suggest that Greeks are given to short-termism and the “last-minute school of management”, things are running very late indeed. Yet the latest austerity plan may – just – have done the trick in keeping the markets at bay.

In the fiscal maelstrom in which the country finds itself, there is relative calm now after weeks of wrenching uncertainty.

“It was a very scary experience. People have been afraid of losing their deposits in banks,” says Yannis Stournaras, director of the Foundation for Economic and Industrial Research in Athens. Such fears are potent, he adds, pointing out that there was legislation to freeze bank deposits immediately after the second World War.

But what of the strikes? Will they continue? “People say they’d prefer to see 10 per cent of their salary go, rather than see their deposits in banks disappear,” Stournaras says.

Numerous national idiosyncrasies have been shown up recently, some of them in the realm of outright absurdity. Thanks to old quarrels with Turkey, for example, military spending here continues to be the EU’s highest.

“We lived in total surrealism,” deputy defence minister Panos Beglitis told Le Monde last month.

As Greeks brace themselves for a prolonged period of austerity, what is at issue is whether the country’s politicians can reverse decades of laxity in relation to corruption and the collection of taxes. With millions of ordinary folk struggling because of government efforts to balance the books, the estimated seepage of up to €15 billion in personal and valued added tax has become a lightning rod for anger.

Much private wealth is salted away in Switzerland and Liechtenstein. Some locals say this is a legacy of socialist domination in the 1980s because the administration was “unfriendly to wealth”. Whatever about the background, the issue rankles now more than ever. In Washington this week, Papandreou said that fewer than 5,000 Greeks declared an annual income of €100,000 or more.

“We’ll be prosecuting offenders, no matter how rich and powerful, to show that we mean business,” he promised. Critics argue that the problem should have been tackled long ago.

THE SAME APPLIES in respect of corruption, for Papandreou himself has also acknowledged that the Greek state is riddled with the problem. Stop strangers on the street and they raise the issue in a flash.

“It’s been so corrupt for so long, we’ve reached rock bottom. There’s nowhere to go but up, but it’s going to be tough and difficult,” says Xenophou Kyririazas (45), an architect.

The culture of bribes in “little envelopes” is common in dealings with the health, planning and tax services, and is seen to a lesser extent in transactions with banks and lawyers. A local businessman explains: “If you want an operation – so that you have it tomorrow and not in six months – there’s no negotiation. There’s just an envelope put on the table.” Expectant parents are particularly vulnerable on this front, he adds.

The problem goes further up. Allegations that German engineering giant Siemens paid millions of euro in bribes to politicians and public officials to secure lucrative contracts are currently being heard before a parliamentary committee. It is not surprising then that suspicion is rife in a country in which the business world maintains close ties with the political classes.

“There is a huge lack of credibility between the citizens and the political parties,” says Costas Bakouris, an upbeat character who chairs the local chapter of anti-corruption group Transparency International. “Almost 85 per cent of the people don’t believe that the parties are capable of making tough decisions and that they are corrupt.”

Bakouris is 73, a businessman who was the first managing director of the 2004 Olympic Games project and is a former chairman of Greece’s inward investment agency. Drinking a can of sugar-free cola in a sparse office, he attributes the ballooning cost of the Greek public sector to clientelism in the political system and the creation of public jobs for cronies.

“The everyday person, of course, he was not directly responsible; he wanted to have a job, and an easy one,” he says. “We left the farm and, instead of planting tomatoes, we decided that if we go to the government we could get a job, a permanent job that nobody can fire you from, and therefore solve your problem and do nothing. So the whole society, in a way, is guilty, but primarily it is with the leadership that we had the problem.”

Greece’s modern political system dates from the restoration of democracy after the military junta fell in 1974, but in many ways the Greek economy is still stuck in that era. As many as 70 professions are closed shops, massively inflating prices, and the business system is structured to protect insiders.

“Everything is built around connections. There’s no meritocracy,” says a businessman.

Locals also speak of an “entrenched sense of entitlement” on the part of labour unions which derive their power from the expansionary period of socialist rule in the 1980s. Indulgence is not the word.

“There have been sweeping changes in the world that the Greek left has failed to understand,” argues Stournaras.

On the other side, meanwhile, the previous conservative government lost all control over expenditure as it pump-primed the state. The ND movement always argued that it inherited a mess in 2004 from the socialists, who had been in power for 19 of the previous 23 years. Still, the situation is so grave now that even senior ND figures acknowledge the party’s role in the debacle.

“We just benefited from the cheap funding and resisted making any structural change that had any cost. The same kind of policy was continued by my government, a conservative government,” says Kyriakos Mitsotakis, an MP whose own father was prime minister in early 1990s.

“We did make a considerable effort at reducing the deficit, but that proved not to be enough and we were rather timid as far as implementing those structural changes that would make the economy basically more competitive.

“The problem with the Greek political system is that both major parties have, to various degrees, used the state to promote their own political agenda. It is still – less than it was – a political system that works based on clientistic logic and I think it is very, very clear that we can no longer fund this state. It is inefficient, it is to a certain extent corrupt and it needs to be drastically curtailed.”

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