Greek Report
Introduction
by jch
The Greek Report is different from the accounts of economic collapse in Chile and Russia published here in that it will be a real-time report instead of one filtered by time and hindsight. In some ways, it will be similar to Fernando Aguirre's writing from Argentina except that Argentina is a decade past economic collapse while Greece is just now experiencing it.
I present it here because the USA is not far behind Greece in racing toward political, social and economic collapse. Maybe US citizens can see how agonizing it would be for the USA to follow Chile, Russia, Argentina and Greece down the path of debt and failure. It probably won't change the path of history because events are spiraling out of control and have life of their own. But maybe it will help a few Americans prepare for a future that is very different from the recent past.
The Greek Reporter prefers to remain anonymous for now but he is an average middle class, well-informed and educated Greek citizen. Since the Greek Reporter is writing in real-time without the benefits of hindsight, these reports may lack organization and flowing storyline a reader expects in a book. It will be more like reading a weekly magazine where the focus shifts and fades as time moves on.
Greek Map & History
Here is a map of Greece and a few facts from the US State Department website that might help people who have never been there understand the reports.
Area: 131,957 sq. km. (51,146 sq. mi.; roughly the size of Alabama).
Major cities: Capital--Athens. Greater Athens (pop. 3,566,060), municipality of Athens (772,072), Greater Thessaloniki (pop. 1,057,825), municipality of Thessaloniki (363,987), Piraeus (175,697), Greater Piraeus (466,065), Patras (171,616), Iraklion (137,711), Larissa (126,076).
Terrain: Mountainous interior with coastal plains; 1,400-plus islands.
Climate: Mediterranean; mild, wet winter and hot, dry summer.
People
Population (2010 est.): 11,295,002. (Legal immigrants make up approximately 6.95% of the population.)
Population growth rate (2010 estimated): 0.1%.
Languages: Greek 99% (official), Turkish, others. Albanian is spoken by approximately 700,000 Albanian immigrants. English is the predominant second language.
Religions: Greek Orthodox (approximately 98% of citizens), with Muslim (1.5%), Jewish, Catholic, Protestant, and other religious communities.
Education: Years compulsory--9. Literacy--97.5%. All levels are free.
Health: Infant mortality rate--5.43/1,000. Life expectancy--male 77.69 years, female 82.35 years.
Work force (2009 estimated): 5.0 million.
Government
Type: Parliamentary republic.
Independence: 1830. National Day: March 25 (1821).
Constitution: June 11, 1975, amended March 1986, April 2001, May 2008.
Branches: Executive--president (head of state), prime minister (head of government). Legislative--300-seat unicameral Vouli (parliament). Judicial--Supreme Court, Council of State.
Political parties: Panhellenic Socialist Movement (PASOK), New Democracy (ND), Communist Party of Greece (KKE), Popular Orthodox Rally (LAOS), and Coalition of the Left (SYNASPISMOS).
Suffrage: Universal and mandatory at 18.
Administrative subdivisions: 13 peripheries (regional districts); 325 municipalities; two wider metropolitan area administrative councils to encompass the whole of the Attica region and the Thessaloniki agglomeration.
Economy
GDP (2010 forecast): €236 billion (about $315 billion).
Per capita GDP (2009 estimated): $30,035.
Growth rate (2010 forecast): -4.00%.
Inflation rate (2010 forecast): 4.6%.
Unemployment rate (annual average, 2010 forecast): 11.8%.
Natural resources: Bauxite, lignite, magnesite, oil, marble.
Agriculture (5.4% of GDP): Products--sugar beets, wheat, maize, tomatoes, olives, olive oil, grapes, raisins, wine, oranges, peaches, tobacco, cotton, livestock, dairy products.
Manufacturing (21.3% of GDP): Types--processed foods, shoes, textiles, metals, chemicals, electrical equipment, cement, glass, transport equipment, petroleum products, construction, electrical power.
Services (73.3% of GDP): Transportation, tourism, communications, trade, banking, public administration, defense.
Trade: Exports (2009 estimated)--$21.37 billion: manufactured goods, food and beverages, petroleum products, cement, chemicals. Major markets--Germany, Italy, Bulgaria, U.S., U.K., Romania. Imports (2009 estimated)--$64.27 billion: basic manufactures, food and animals, crude oil, chemicals, machinery, transport equipment. Major suppliers--Germany, Italy, France, Netherlands, Russia.
HISTORY
The Greek War of Independence began in 1821 and concluded in 1830 when England, France, and Russia forced the Ottoman Empire to grant Greece its independence under a European monarch.
At independence, Greece had an area of 47,515 square kilometers (18,346 square mi.), and its northern boundary extended from the Gulf of Volos to the Gulf of Arta. Under the influence of the "Megali Idea," which in its most broad interpretation meant the expansion of the Greek state to include all areas where significant Greek communities existed, Greece acquired the Ionian islands in 1864; Thessaly and part of Epirus in 1881; part of Macedonia, Crete, Epirus, and the Aegean islands in 1913; western Thrace in 1918; and the Dodecanese islands in 1947.
Greece entered World War I in 1917 on the side of the Allies. After the war, Greece took part in the Allied occupation of Turkey, where many Greeks still lived. In 1921, the Greek army marched toward Ankara, but was defeated by Turkish forces led by Kemal Mustapha Ataturk and was forced to withdraw. In an exchange of populations under the Treaty of Lausanne, more than 1.3 million refugees from Turkey poured into Greece, and nearly 800,000 Greek Turks were sent to Turkey. This large influx of people created enormous challenges for the Greek economy and society.
Greek politics, particularly between the two world wars, involved a struggle for power between monarchists and republicans. Greece was proclaimed a republic in 1924, but George II returned to the throne in 1935. A plebiscite in 1946 upheld the monarchy, which was finally abolished by referendum on December 8, 1974.
Greece's entry into World War II was precipitated by the Italian invasion on October 28, 1940. Despite Italian superiority in numbers and equipment, determined Greek defenders drove the invaders back into Albania. Hitler was forced to divert German troops to protect his southern flank and overran Greece in 1941. Following a very severe German occupation in which many Greeks died (including over 90% of Greece's Jewish community) German forces withdrew in October 1944, and the government-in-exile returned to Athens.
After the German withdrawal, the principal Greek resistance movement, which was controlled by the communists, refused to disarm. A banned demonstration by resistance forces in Athens in December 1944 ended in battles with Greek Government and British forces. Continuing tensions led to the outbreak of full-fledged civil war in 1946. First the United Kingdom and later the U.S. gave extensive military and economic aid to the Greek Government. In 1947, Secretary of State George C. Marshall implemented the Marshall Plan under President Truman, which focused on the economic recovery and the rebuilding of Europe. The U.S. contributed hundreds of millions of dollars to rebuild Greece’s buildings, agriculture, and industry.
In August 1949, the Greek national army forced the remaining insurgents to surrender or flee to Greece's communist neighbors. The insurgency resulted in 100,000 killed, 700,000 displaced persons inside the country, and catastrophic economic disruption. This civil war left Greek society deeply divided between leftists and rightists.
Greece became a member of NATO in 1952. From 1952 to late 1963, Greece was governed by conservative parties--the Greek Rally of Marshal Alexandros Papagos and its successor, the National Radical Union (ERE) of Konstantinos Karamanlis. In 1963, the Center Union Party of George Papandreou was elected and governed until July 1965. It was followed by a succession of unstable coalition governments.
On April 21, 1967, just before scheduled elections, a group of colonels led by Col. George Papadopoulos seized power in a coup d’état. The junta suppressed civil liberties, established special military courts, and dissolved political parties. Several thousand political opponents were imprisoned or exiled to remote Greek islands. In November 1973, following an uprising of students at the Athens Polytechnic University, General Dimitrios Ioannides replaced Papadopoulos and tried to continue the dictatorship.
In July 1974, the Greek junta sponsored a coup in Cyprus led by extremist Greek Cypriots against the government of President Makarios, citing his alleged pro-communist leanings and his perceived abandonment of enosis, or political union with Greece. Turkey, citing the 1960 Treaty of Guarantee, intervened militarily to protect Turkish Cypriots. In a two-stage offensive, Turkish troops took control of 38% of the island. Almost all Greek Cypriots subsequently fled south while almost all Turkish Cypriots moved to the north.
Senior Greek military officers withdrew their support from the junta, which toppled. Leading citizens persuaded Karamanlis to return from exile in France to establish a government of national unity until elections could be held. Karamanlis' newly organized party, New Democracy (ND), won elections held in November 1974, and he became Prime Minister.
Following the 1974 referendum, the parliament approved a new constitution and elected Constantine Tsatsos as president of the republic. On January 1, 1981, Greece became the 10th member of the European Community (now the European Union--EU).
Parliamentary elections were held March 8, 2004, and ND won 165 seats to the Panhellenic Socialist Movement’s (PASOK) 117; Konstantinos Karamanlis, ND leader and the nephew of the former prime minister of the same name, became Prime Minister. Karolos Papoulias was elected President by parliament in February 2005. On October 4, 2009, PASOK won an early parliamentary election with 160 seats to ND’s 91. PASOK leader George Papandreou succeeded Karamanlis as Prime Minister. On February 3, 2010, Papoulias was re-elected President by parliament with a majority of 266 votes out of 300.
GOVERNMENT AND POLITICAL CONDITIONS
Greece is a parliamentary republic and last amended its constitution in May 2008. There are three branches of government. The executive includes the president, who is head of state, and the prime minister, who is head of government. There is a 300-seat unicameral "Vouli" (legislature). The judicial branch includes a Supreme Court. Greece is implementing a program (“Kallikratis”) that reorganized and consolidated its system of local governments into 13 regional districts and 325 municipalities. Suffrage is universal at 18.
Recapping the Greek Crisis
by Greek Reporter
It all started a bit before 2000, when the EU countries were preparing for the Euro. Now, it was not that easy joining in since members had to show specific fiscal performance to meet specific criteria. It is no secret today that several of them cooked their books –common knowledge among the ranks of the EU mechanism ever since- but Greece went too far and couldn’t keep it to itself, attracting unneeded attention by the speculators. Later Greek governments followed this same path.
At the same time an intra-EU loan industry was set. The ECB (European Central Bank) would lend to members’ banks at a minimal rate (around 1%), then these banks would buy EU state bonds paying a considerably higher rate, while using these same bonds as a collateral to the ECB for yet more loans. If this is not a bubble waiting to burst I do not know what it is!
The masks shielding the bad state of the Greek economy flew off in 2009 in the aftermath of early Greek elections. With the advent of a new party in power two things became evident: 1) The Greek economics were in a much worst shape the common man could imagine (courtesy of the cooked books), and 2) Greece had gone so far down the easy (loaned) money route that it would be unsustainable.
These very facts sent vibrations on the whole of the EU artifact exposing more countries fiscal weaknesses. But concerning Greece, the markets acted in their own sensible way by depreciating the value of the Greek bonds. At the same time rates for new loans skyrocketed. Greek CDS values (premiums on default insurance) peaked too. Greece was unable to refinance itself and pay off existing bonds with new loans. Practically speaking, Greece defaulted.
The new government was not up to the task of coping with the situation to say the least. It took long, long time to react and also did it in the unique modern Greek political way. They were searching for a political solution to a fiscal problem.
Leaving the technocrats, diplomats, economists, and market specialists out of the loop, the new government just succumbed to their EU counterparts demands when a deal for immediate economic/fiscal support was negotiated. EU officials were also interested in the viability of their own banks that held the big sum of the Greek bonds. As a result, Greece got an unfavorable deal. The specifics of the deal are not to be discussed at the moment because to do so would take us away from the the effects on average Greek citizens. Suffice it to say, the new loans to Greece were given not by the banks, but by the EC member’s themselves. Along with them came strict conditions –as to be expected- regarding Greek economics mending, especially on indexes like the budget deficit and the loan/GDP ratio.
Now a government, especially one that is in a hard currency system that excludes the possibility of a currency depreciation to achieve the new goals, can 1) cut back on State expenses, 2) collect more money from outstanding payments, 3) revive the economy and have proceeds from the expected growth, or 4) downright impose more taxes.
The current Greek government has received much criticism on its inability to perform these tasks after 2 years of effort The outstanding exception is the last option - More Taxes.
I have lost count how many times new taxes were imposed and the old were raised in these past years and we have more road to go. The effect is easy to predict. Taxing a growing economy usually works. But taxing an economy that is already downsizing is a recipe for one thing - A Recessive Spiral.
The effects of which are stories to soon be told.
Greek Reporter - 14 August, 2011
Unemployment
by Greek Reporter
If one thing can break a man, it is unemployment. Unemployment not only deprives him of funds to support himself, but alienates him, at least partly, from social life. Now unemployment is not a new thing for the Greek –or for the matter of fact for any country- but during a financial crisis it is one of the first things to affect the average citizen and should be taken care of.
The Specifics of The Situation in Greece
A few days ago new data on unemployment was published. Unemployment rates climbed at a rate of 4% per year, reaching the 16% mark. We are still in the peak of the tourist season, ergo more jobs lost in September. Furthermore, the word is that these are not the actual percentages, since people that work odd and part-time jobs are included in the working numbers.
Additionally, some other indexes are worrying too. Young people & women seem to be hurt the most as their rates hover around 40%. This means that the most productive part of the population is out of the market AND that an explosive economic situation is forming. It directly affects family formation and can even make retirement questionable. Some people speak of a Lost Generation.
Unemployment for older people is high too. In such a competitive labor market, some of them will never find a job again. They will have to make do with odd jobs.
Aside from personal unemployment, the economic crisis is devastating for small businesses. The Greek economy is based on small businesses. These were actually the ones to take the first blow. Right at the start of the crisis, retail sales in the non-primary goods fell. Tens of thousands of small businesses (in a country of 10,000,000) went under. Most owners closed up with outstanding payments. That raised the real unemployment percentage even more.
But this is not the scariest statistic of them all. For the first time the economically active population (this means the people that have a job and pay taxes) is LESS than the inactive one. (i.e. the children, elders & unemployed). That means that the working people have to work harder to support their families and that the state will have even less revenue in the future. To some it seems like a point of no return.
The 3 Safety Nets
I believe we are lucky to have several safety nets for the people that loose their job and find it hard to get a new job quickly.
When an employee is laid off (in accordance with the European practices) the employer, by law, has to pay him a form of compensation. (That is a salary for ever year in service, IIRC). That acts as a safety net for the employee.
Also the state has an unemployed support mechanism related to the number of years on a job. The employee is eligible for a monthly welfare check that is about 40% of a worker's salary. Contrary to popular belief, it can only go as far as 12 months, sometimes even less. (For those laid off from a seasonal job, unemployment benefits are not even guaranteed. They must have a minimum of workdays and then the benefits can not exceed a period of 6 months).
These two measures act supportively for the unemployed during the first months of an almost desperate situation. They may barely make the food and house bills but at least they have that to start over.
Sadly the state has proven itself incapable of managing unemployment, but also of setting a system of matching available workers with open job slots.
The Biggest Safety Net is Family
I will be covering the issue and its savior effect these days in a future installment, but let’s just say that the traditional Greek family is closer to the young than most.
In these troubled times it means direct and indirect financial support (i.e. the Granma’s home becomes the daycare station), moral support, even housing in the extreme situations of unemployment if the new couple loses their house.
Indeed more and more people are starting to move back with their families. In many cases it is also a movement from the cities back to the smaller towns. Family ties are strengthened and a more sensible approach to household economics is taken. Maybe the Greek collapse recuperation mechanism is already at work.
The Effects
The obvious and direct effect is that less money comes in the hands of the people that need it the most. Unemployment in a closed economy like Greece, predominantly affects cash availability. The effects circulate and grow throughout the economy as less buying leads to less selling which, in turn, leads to even less buying.
The collateral effect seems equally important. As mentioned in the starting paragraph unemployment affects the whole life of the jobless. The effect, that gradually builds up, is the so-called “Social Alienation”. Practically speaking this means the unemployed has not only lost his job, but a large part of his social interactions as well. He is forced to spend less time with friends and fellow workers. Many of the activities that happen in a daily, normal life are lost. He is also constantly subjected to the pressure of supporting a family without a steady job.
Being unemployed can be demeaning, as a person is expected to stay productive and contribute to society. Even though unemployment is not a person’s choosing, the pressure is to find a job. Thankfully, that does not apply too much in Greece because it is not the first time Greece has faced a recession or an economic disaster (which is reminiscent of the after-WWII crippled Greece of the 50s). Because of this, unemployment is not a black mark, but a situation, or if you want a challenge, to live by.
What really scares the unemployed most of is the lack of prospect. Can there be any expectations of a new good job in a time of recession with no end? When it is evident that the rocky path Greece is treading is spreading to the rest of the European countries? When practically there is no alternative?
Greek Reporter - 23 August, 2011
The Greek Family
by Greek Reporter
While conversing with the readers, it became evident to the writer that the traditional Greek families are not that different from the typical American ones, in most of their forms and transformations.
But before moving forward a distinction might be helpful. One can safely differentiate the Traditional Rural Greek Family from the Modern urbanized one. Urbanization in Greece came late in the 60s & 70s, and being fast, caused differences between the two to be more pronounced.
The Traditional Family
Greek families are rather small, cohesive and live close together. Sometimes even under the same roof. While younger people seek their independence and try to live on their own, it is not a rare phenomenon to live with their parents, at least until they start a family of their own. As a natural consequence, the Greek family is supportive to its younger members and a special kind of household economy has been formed.
With the whole family being close, a young man that is forced to odd jobs will get by with the help of the elders. The elders will help with babysitting later on, saving on the expense of hiring outside help. In a similar fashion the young couple will take care of their parents as they get older. This way another income is added in the house, that of the granpa’s (-ma’s) pension.
Another characteristic is that the family invests in kid education. Over the years it has become a prerequisite to give kids a college and above education, the result being Greece having the highest percentage of university educated people in the EU. In older days education used to be a way to a better life as a graduate in a bigger city, and then it evolved in a means to secure a good paying job at the public sector. Now it is only a small edge in getting a little better paying job in an inflexible market with steep competition that does not need that many college degrees.
Family Business
It is not uncommon for families to own a small local business that is carried to the next generation. This means that there is little risk since there is a steady clientele and a small capital to risk. On the other hand these small businesses are not competitive against the big players. With the exception of the tourism oriented ones, their sheer number makes the Greek economy an internal one that aims in servicing itself and not exporting.
It is also common for a family to differentiate its income sources, especially in the rural regions. While the man may have his own business the wife will maintain a small shop, like the local grocery, cafe of the 7-11 store. The younger members may be employed in the public or civil sector adding a different source of income to the family, while at the same they lend a helping hand in their parents business, especially if it is farming which usually is labor intensive.
In effect this small, family-scale economy may not generate big profits but it is flexible versatile and adaptable.
Family Housing
If you have seen the “My Big Fat Greek Wedding“ movie, you may remember the last scene. The couple moves in their own home, which is gifted by the father of the bride. But the big surprise is that it is built in the same lot, right beside his own!
Indeed, the very first priority for a Greek family is to have their own house. Next priority is a car and a third is a house for the kids. This used to happen rarely and after a lot of hard work and savings, but coming the 60-70s an indigenous method of acquiring houses for all in the family was devised.
Land to build modern buildings being scarce, ownership of the family lot and house would be transferred to a contractor that would build an apartment building and give back a third of these apartments to the family. This way the family not only had a “modern living space” but would secure extra housing for the kids or extra income if the apartments were to be leased.
With the advent of the crisis the real estate market went to a standstill, and the growing unemployment brought more pressure on it as demand for leased apartments dropped. Practically this system cannot work anymore and it is a good luck that most families have already benefited from it.
The Family’s Farm
Greece is a small country with a lot of islands and mountains in the inland. That means less space to inhabit and SMALL lots for the Greek people. The average farmer owns about 10 hectares, and the small family lots are about 1 acre big (though there may be 2-3 of them). That is hardly a productive force but coupled with a dynamic species (like peaches, apples, olives, and grapes) the produce will supplement the day job income well.
In such low-scale farming there can also be space for a small garden. Rural families, especially the ones in villages of 1-2 thousand people and less, will work on gardening, drying food, canning and deep freezing while at the same time maintain a small stock of chicken, the odd pig and a couple of goats (the “poor man’s cow” as they have been called). It is obvious that even if Greece defaults and the system goes to shambles these people will not starve!
But all of the above typify the Greek family economics up until the late 90s. Since then a transformation has taken place. A craving for a well paying job in the state services organizations brought corruption and a move towards the larger urban areas. Some family lots were abandoned and it was good luck that the crisis happened when the older generations had already retired.
The Modern (Urban) Greek Family
It started with the transformation of Greece into an urban society in the 70-80s. New jobs in the public sector and its services opened up in the big cities, and the need for more houses brought new jobs in the private sector. For a few decades the system was blooming and people eagerly left their villages and their parents behind.
And to a certain extend they were alienated by the traditional family model explained above. Now they had to find someone to cater for kids, they needed a second car for the wife that should commute to her own job, and they would only travel back to the village in the major holidays. Let alone the bigger grocery bill as more things had to be bought from the supermarket where you had to spent gas to get to.
And then came the Euro in the beginning of the 2000s (a.k.a. “noughties”). Easy hard currency can buy a lot of the once scarce and much craved for imported goods. Loan interest were in the single digit figure. These combined with an economy that was marked by an inflation of 15% in the 90s and you will get three things: A credit card frenzy, overspending and the demise of the family savings plan.
Housing loans where also cheap, and who would wait tens of years to save for a flat? To say the truth, it seemed prudent at the moment. The interest rates being so low, the monthly loan installment was not much higher than one would pay for renting a similar apartment. Even if a new couple already had their own house they would go for a bigger car (the number of Utility vehicles that live an easy life of street rides soared) and a country home close at sea.
One more thing that happened is that easy money got people accustomed to be paying for things to be done for them and not by them. The new housewife would pay for house chores to be done for her, and the husband would not bother with fixing things around the house. He would hire someone for it and would replace broken appliances with new (better) ones. This means two things. More money spent and loss of skills, both proven much needed with the advent of the crisis.
Another effect of such an urbanization is that when the younger generation become separated from their rural family, the family will looses income twice - Once by the youngsters’ salary and twice by loosing their helping hands that must now be replaced with hired help.
To the eyes of this writer, all of the above describe a society that its pieces are interwoven with thin strings made from easy money. The more strings break, the bigger the load becomes on the remaining ones.
Time to Burst the Bubble
The Greek economy bubble burst in 2009, though it has been hovering close to the needle for quite some time. Some say that Greece should have defaulted by 1993.
So now it is less easy money and wages, loans have to be paid back, and people have to readjust to a lifestyle that they may have never experienced. While the Greek economy, income and lifestyle has downsized by about 30%, most people are still getting by, at least for now. Indeed there are couples that lose both their jobs, carry a burden of loans, and are still coping.
But Middle class and Lower class families are affected differently . In both cases borrowing, overspending and living above their means was a way they both shared. But while a 30% drop in the income –or even a job loss- can shake a middle class family, it will topple a lower income one.
Furthermore a specific occurrence to the Greek crisis is that it is developing into a stable situation. Contrary to the Argentina experience, the middle class did not loose their money overnight. Situation-conscious people are securing their savings in cash as Euro notes will turn into hard currency on their hands if the Greek economy defaults and is forced to exit the Eurozone.
It is the poor they suffer the most and those with loans on their backs with payments they cannot meet, irrespective of social status. And just as soon as the unpaid household electricity bills reached a record breaking of 425 million Euro this month, the state imposed a one-time surcharge on property taxes to be included in the electricity bill itself. For this trimester alone income and housing taxes will reach or exceed a month’s paycheck.
The effect on people already living below the poverty line will be nightmarish to say the least, as they face payment or a government sponsored loss of the electrical service and a writ of seizure of their meager assets. (all this elaborately means that the new tax will be incorporated in the bill. Those that cannot pay what amounts to a paycheck of taxation will be in risk of loosing both the electrical service and the state taking legal action against them)
Living the Crisis
Under such a financial condition it is expected that most will have to adapt to a meager and more traditional lifestyle. Some will go back to their villages and try a new smaller life. Gardening, canning and freezing is coming back. Family farm lots and labor are no longer frowned upon.
That is the sunny side of things. Parents that live on a pension cannot chip in that much, especially when the face pension cuts. And starting over in another place, in another job, is not easy when you need the capital for the land, the tools and the machinery.
Family is coming to the rescue once more as it provides housing and a generous contribution the now-desperate families revenues.
And it is not only people moving inside the country that is happening. A lot of young graduates holding university degrees are seeking a job abroad. Sometimes they are leveraged to lower salaries than the natives, but his is far better than the prospects back home where the economy is back-stepping to a pre-industrial era.
What may come as a surprise is the immigration wave of the elder people. Some of them that live in northern Greece move to nearby Bulgaria upon their retirement. There, life being much cheaper, they not only make do with their meager Greek pension, but sometimes they can save a tidbit too.
A small note must be inserted here on the effects of the situation on the small businesses that amount to a considerable percentage of the Greek economy.
Next to construction these have been blighted the most. One could say they are caught amidst a slap-dance (That where the victim is surrounded by the bullies and is slapped on the head)
The banks are on the verge of collapsing and hold their money instead of pushing liquidity in the market.
The continuing austerity has drained the money from the consumers wallet. On top of that, new measures that are threatened but never enforced have scared them into abstaining from any unnecessary purchases. And the repeating taxation, with new taxes every trimester, hitting both consumers and shop owners has brought the businesses on their knees.
The effect is that a quarter of the small shops are closed, with many to follow soon. It is a common secret that some businesses and shops are kept open to a net loss that consumes the past years profits. It is the expectation of an early retirement or just the desperate hope of times getting better that keep the owners going.
The effect is systemic and to some it seems like it was planned beforehand.
Even scarier, that recessive spiral we are spinning down into, has started affecting bigger businesses too. At the moment medium sized ones are facing liquidity problems and are delaying payments and paychecks.
The system has become so unstable that even the Greek export firms are having trouble. In order to maintain some minimal liquidity the banking system is delaying part of the needed influx of currency transfers. (This means that while the foreign payments are wired, the banks delay the exporters from getting their money).
Conclusion
So after 2 years of crisis, political babbling and failed austerity measures, the writing on the wall is clear to read. The Greek society is transforming violently and at the cost of blood and tears.
To what it is transforming into no one can know. It will be an interesting, yet painful, transition to live.
Greek Reporter - 29 September, 2011
Progress to Freefall
by Greek Reporter
Contrary to what some may believe, the Greek economic crisis did not turn into being overnight. After 2 years living with it a pattern is emerging, one that shows the gradual decline in indexes and living quality.
Things actually deteriorated before the crisis was spoken of and this writer fell victim to the first unannounced public sector cutbacks early in 2009. Then Greece had a new government with the task to sort things out. I will flat out say they failed because they were worthless to pull it through and the story will show that next.
In a nutshell the now defunct Government was standing against parts of its own flesh and body, that had infiltrated the public sector. So it did not push any of the structural reforms to put the economy on its feet. Instead they went through with cutbacks and taxes, then more taxes, then more.
At the same time two proven propaganda blurbs were aired from the corrupt media. An unprecedented scare tactic pointing to the impending end and a dividing propaganda against the two main groups of the populace. The private and public workers. The latter were tagged as overpaid no-worths that deserved justice by salary cuts. The people bought into this and instead of asking for their pay to be raised accordingly, asked for the public servants’ heads on a plate. When the first cuts (of about 15%) went into effect they soon realized their own paychecks would be next.
The people also bought on the scare tactics. Retails sales dropped lower than the loss of income for the average consumer. Friends in the retail market report there is a drop in sales every time there is bad news on the media, only to come back again when there are good news from the EU. As a trend, people started holding on their money. Or what was left of them, to be axed again soon.
Some time latter the pay cuts reached 30% in total and this is when it was obvious that all things in the Greeks life downsized by exactly that percentage. We are buying discount items in the supermarkets now, we drink beers with our friends 30% less often, and move our cars 30% less.
But maybe I should be using a past tense for these because coming September yet more cutbacks and taxation were performed on the aching body. A yearly surcharge on property (payable through the electricity bill accompanied by the threat of terminating service) was imposed and a change on the way tax is calculated robbed one and a half paycheck from the people. They were accompanied by an increase in served food VAT by 10 points, and a further increase in heating fuel tax. All within a month.
The effect was that yet more liquidity (a.k.a money) was strained away from the market, and in spite of the raised taxation –oh what a surprise!- a net decrease in public revenues appeared.
The heating diesel example is a classic. The state announced doubling of its retail price by increasing the included tax that is more than the actual fuel cost. And then proceeded to raise it by 5 cents only. But the damage was done. People turned to alternate heating methods within a month, affecting the heating diesel sales by 50%! In this case the scare tactics backfired!
Right at the end of this year I feel we have reached a breaking point. The latest tax hurricane has forced respectable low-income families to spend the salary on them alone and god knows how they will feed themselves till the next paycheck.
NGO’s for the first time in history are asking for medicine, clothing and food not to be sent abroad to natural disaster affected areas, but to be distributed among the volunteer services that are offering food in the major metropolitan areas. The news of kids fainting from malnourishment in the classroom brings memories to the elders of another dark age in Greece that I will ask the readers to find themselves.
So what started as a stock market like correction – indeed much needed- has turned within less than 2 years into plain and simple poverty. But this is not a social justice act. Instead it has blighted the good people the most. The well off ones have enough money set aside to sail through the Greek crisis. It is the people that their social status does not allow them to hedge on the incoming depression that are affected. The retired, the laymen, the unemployed, the single income homes and particularly those among them that live in the big cities.
The loss-of-income and taxation double whammy of Greece is breaking our backs. The effect is culminating and transferable to other social groups. Small businesses are practically in a comma affecting the gross sales of the goods manufacturers. This has started a recessive spiral precisely at the point we did not need one. Businesses are laying off people constantly and some are shutting down. People are rightfully blaming the restrictive government policy which is one-dimensional. Tax.
This restrictive financial policy is said to be a well calculated intervention by Troika. The purpose -or better termed the recipe- is to force an internal devaluation of the Greek economy in order to make it lucrative to investments and competitive to export. But for the people in the market know this was bound to fail, as it did.
Greece was not ready for this because such a pirouettes are performed when you have secured a flexible production force, and a state designed and assisted export policy. The sad truth is that among the Greek plights lies the slow destruction of its productive infrastructure, as the strong currency made imports more profitable turning producers into importers.
The recession is so dire that you need more than the conventional methods to jumpstart the economy. Greece needs new businessmen with bright novel and bold ideas. And room to breathe. But precisely the opposite was being performed by the Government/Troika bed partners. It took them 2 years to catch up on the idea of the liquidity and that the problem of the Greek economy is systemic and not fiscal. It is said that for the first time their latest trimester report is talking about the EU subsidies for new state investments are being “unfrozen” and that it is high time the state pay the 6.5bn that owes the Greek private sector in the form of VAT returns and unpaid bills.
Back in tract and to sum it up, what we are seeing in Greece is a further decline of its economy. And it is gradual, or better phrased, in steps. That coincides of course with the diminishing household income.
The short term prognosis is not good too. The recession has moved faster than it was expected, costing the state more revenues. Two years of reforms and despite the austerity measures all economical data rate of change is still on the minus sign except for unemployment and inflation that are picking up 4 percent per year. The budget deficit is well standing and the total dept has soared above 150% gaining 25 points. The 2011 budget will close in deficit and the difference must be met somehow in the first trimester of 2012. How, no one knows. Or maybe we do.
A Breath of Fresh Air
Amidst all the turmoil there are signs of hope. While the Greek society has practically returned to 1970s standards, its outlook towards life has changed the same. The frivolous expenses are gone. The flashy citizens are no more the role models for success because they have been proven hollow. Young people are returning to their small town and villages and are working the land. And the general consensus is that if you want to cope through the next years you will have to be producing something.
I feel the New Greece will happen sooner than they think, but I pity the honest families that will be paved into the road to it.
Greek Reporter - 20 December, 2011
Editor's Note:
To understand the last sentence, you might want to consider the Eastern European tale of "The Walled-Up Wife" to understand how ordinary people sometimes involuntarily transcend mortality to become a part of something that lasts beyond their death. There is some commentary on the story here.
Silence of The Lambs
by Greek Reporter
While this writer avoids catchy titles, the further we were working on this article the fitter the title seemed. So how can the Greeks been so silent when a huge experiment is taking place on their backs?
The Greek family has already lost 30% of its income in pay cuts and new taxes, a situation that would already have pushed most Europeans onto the streets. And at this writing the Greek Tri-Party government is deciding on an imposed further 20% in reduction to the minimum wage. In effect they are enforcing poverty to the benefit of the lender’s banks. And still things are quiet. For a city of almost 5 million, this week’s 10,000 protesters make hardly a serious rally.
Maybe people are mourning in silence. Maybe they consider themselves too proud to shout their poverty on the streets; maybe their are reserving their strength for the coming elections or the next big rally; maybe they are venting off over the Internet and in the coffee shops with their friends, complaining about the general passivity like it is not their business too.
But how can it be? How can the people become placid and not react? We can define a wide range of reasons that work together to that effect. Some have to do with the peculiarities of the Greek psyche, some are common to all people.
The reality is that Greece was caught in a new situation that threatened its economic existence overnight. The Greek common man was far too ignorant of his country’s chaotic economics and totally unprepared, not only to deal with the new evolving situation, but to even understand the true implications of the situation. In simple words he was shocked numb. Some even say he was shocked to despair.
Then Denial came. Two years latter, there are people that do not watch the news on the TV. While their determination to avoid propaganda is admirable, it seems it turned out to be a bad choice since they are now markedly under-informed of the Greek and International happenings. Especially when things, nowadays, develop overnight. One can say that even Normalcy Bias is at play here since we have been living a cherry life on borrowed money for too long.
Attributing to that is the fact that the vast majority of the Greek population cannot cope with the complexities of today’s world where interests in economics, politics and global-strategics are in constant play. They subconsciously know this, but they choose to detach themselves from the problem rather than face the situation. They are turning off their TVs and refusing to listen to the grave news, even as others decide, not only their fate, but their living conditions and food on the table.
No one can blame them on the TV part. The media in Greece are sold off to the major parties and cannot be possibly speaking the whole truth and nothing but. Instead, we are receiving of mixture of half-truths and diversionary tactics like the new phrasing for the relinquishment of State sovereignty, the “resistance to the Troika dictated budgetary measures”. Ever since the start of the crisis we are on the receiving end of constant bad news, outright propaganda and the rehashing of the Greek government's extortion schemes. The latest powerplay of “we would rather have people with lower wages than risk loosing them” is an example.
But above all, it is that the people know that there can be no alternate ways out of the situation since there can be no realistic and working suggestions coming from any kind of political institution. You see, current Greek political entities have their roots in the revolution against the Greek military Junta of the 60s-70s. It is precisely these people that cashed in their struggle for seats in the Greek parliament and the well-paying government organizations, thus becoming part of today’s problem. When the corrupt and self-interested politicians are all over the board it is hard to expect any changes to a better future.
At the same time the people realize that it is their reflection on the board that they see. It is their inability to think and envision a new kind of politics and to form a reformed, effective administration. And to a certain extent they cannot help voting wrong again. To a certain extent it is not their fault because along with the citizenry and the politicians, the thinking, intellectual people that are needed as a counter balance to the decay of morals have degenerated also.
Even more horrible, there are people that seek the destruction and the default. For the benign interest of vindicating their anti-EU positions and to claim the righteousness of their Dogmas, while at the same time, fishing for new followers that will bring themselves power.
Another factor in the Greek populace silence is guilt. We all admit that the age of prosperity on borrowed money was a benefit while it lasted. But some have benefited big from their political parties and their ends in the corrupted government, putting family members and relatives in select positions. Their lords expect them to mourn in silence now.
Similarly, the great mass had exchanged that fleeting prosperity with tolerance to politicians that decided to follow the easy way to false prosperity. To a certain extent some are seeing this as fitting punishment, though this writer begs to differ and sees it as self-pity and a desperate self-destruction.
One more reason for the silence stems from the influence of the Greek Orthodox Christian faith on the population, especially the elders. Among its teachings is “karteria”, which can be translated as the combination of perseverance, stamina and patience in the hope of divine intervention.
Similarly linked to the Greek faith and traditions is the acceptance of faith and a peculiar mourning of its blights. These, to phrase it boldly and simply, have instilled a passivity unknown to the rest of the western world, which is exactly the opposite of what the country needs.
Practical Implications
While this article can be described as yet more crying over spilled milk, there are still things to be gained by those that see their country following Greece’s path.
It will not be easy to go through the emotions, decide, and take a stance. Not when your family is facing unemployment and hunger. You will have to sort through the dogmas and the persons, and what they are worth. In the process you will be presented with the whole truth (rarely), half truth and lies packaged as the truth.
You will be facing a situation that will be dragging on as no one will risk stepping in to take the hard decisions that will change the course. You will be surrounded with those that will gladly compromise for less their worth because they are dependent of the system and thus chose not to try. And you will be grieved to see social cohesion falling apart.
But do not forget that tolerance breeds audacity. And you’ve got to have an educated and responsible citizenry ready to take matter in its hands because you cannot possibly expect a solution from the same people that brought you there.
Ending
Many of my countrymen are saying that Greece is a pressure cooker that is building up the steam to explode. I have my doubts at that. At least it has not started yet.
What I am hearing is a phrase spoken more and more as the situation drags on. “It is better to have a dreadful end than have dread without end”.
That may prove to be yet more dangerous.
Greek Reporter, 9 February, 2012
Situation Update
by Greek Reporter
Where does one start? There are so many things, big or small that have happened.
We are a few days away from the implementation of yet another austerity package. Or better phrased, desperate internal devaluation measures packaged as austerity. Of the Troika 10 commandments all preach the Devaluation. Which is killing the people, the economy and the numbers.
You see the method is surmising on a particular performance of the Greek economy. That curtailing public spending and revenue increase by taxation do not affect the Greek GDP. But they have been proven wrong as the structure of the Greek economy returns 94% of the public sector salaries to the state through recurring state revenues (VAT etc) as money circulates around. And taxation –see it as money removed from consumption- lowers the GDP by a factor of 2.
In simple terms while the state may gain X amount of Euros by taxing, it loses 2x as much over time.
And it is about the numbers, because –right or wrong- the governments, the markets and even Economic Theories alike, all use the Debt to Gross Domestic Product ratio as an index of a sustainable economy.
More simply put, the Greek dept started as 125% of the GDP in 2009. It has skyrocketed ever since, despite the savior advertised Government-Troika measures. There is a term for this situation and it is called recessive spiral.
But What about the People?
They are locked and squashed in a vice. One jaw is the recession that limits their income. Call it unemployment, call it decreased sales and revenues, call it whatever. The pushing jaw is the ever rising cost of living. While inflation is not yet a problem, it is the taxation that has squashed the family income.
The latest government fancy is increasing the heating oil tax (for a total increase of 100% in the last two years). Assuming that one has a house fitting to his income, there are regions in Northern Greece that will take almost an entire salary to heat. And as inside info, the number of people paying their taxes has dwindled this month. They would rather heat their children even if they get in trouble with the IRS that threatens with foreclosures of their homes. And what increase in revenues can a state accomplish when heating oil demand drops at 90% in response to a rise in taxation by 40%?
In fact speaking of percentages is worthless anymore. We use “paychecks” instead. If past year’s cuts cost people 1-2 paychecks, this year will cost them another two.
People are numb. You can see it in the way they drive. You can see it in the acts of despair, like suicides that are not reported by the media anymore. The truth comes out by the EMTs occasionally. For some time now, they are having incidents in every shift. This is a humongous change for the country of Zorba the Greek. Antidepressants sell faster than candy.
But even bleaker is the rise of the Golden Dawn. Once Nazi extremists of a 0.3% voting strength, now they have worn the patriotic sheep’s hide and are actively recruiting people. Word in the street is that GD’s power is above 20%. Shocking as it may be, some politicians find solace to the fact that GD works as a venting valve of the social exasperation for the establishment. I tell you not. GD followers are high predators in the food pyramid and are involving even more followers. Ponder this. Anguish and anger have even pushed some Greek Army experts in the GD ranks. You DO NOT feed the monster. Ever!
I will end this bleak report by another critical degeneration of the Greek Democracy. It is the degradation of civil and employment constitutional rights. Everything is sacrificed on the troika demands. It started with the parliament relinquishing Greek sovereignty (decisions on economics are dictated from abroad) to be ratified with a new EU constitution soon. Then it proceeded to abolish work rights and cut retirement benefits. (The state has been getting full payment for the state-sponsored 401K funds and now pays less than the nominal, an act the Greek accountability office has termed it as unconstitutional).
And now the government accomplices have been openly harassing the lone journalists that speak the ugly truth. You might heard of one, but there have actually been four this week, all whom they spoke on the same issue. One (of the several) lists of tax evaders that have been hiding revenues in foreign accounts. And those that were elected to change things are catering for their fundraisers once more by circulating and editing the lists under the table for 3 years now and doing nothing instead.
Puzzling this together I fear that this monstrosity of a government (a Conservatives, Socialists and Liberals conglomerate) will soon have to decide if it will step down or take a blood bath.
A Springier View of Things to Come
A week ago I happen to see school girls painting the bus stop kiosk in the picture.
And this is just a little thing happening. For two years now the Greek churches have collected offers of food in the major supermarkets. It is cooked and discreetly taken to families in need. Clothes, toys and infant accessories are donated too, and volunteers take care of the lonely elders in bed. And hardly a weekend goes past without volunteers cleaning monuments and parks.
As people are binding together a new Greece is rising, maybe too late and maybe at a great cost. But still, a better one.
Greek Reporter - 6 November, 2012
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- Created: 14 August 2011
