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.