3 May 2010

Greeks face tough times – but reality has yet to sink in

Jonathan Rugman blogs from Athens on the Greek financial crisis

I knew that Greece was in trouble before the Greek airline plane to Athens had even touched down. After the in flight meal, I opened one of those silly little towelettes packed in foil so I could clean my hands, only to find an advertisement for a credit card on the wrapping.

Greeks have been living on the never never for years. The biggest difficulty they now face after the massive multibillion Euro bailout announced on Sunday is facing up to a grim new reality, and the sacrifice expected of themselves in return for Europe’s unprecedented and embarrassing help.

But again and again in Athens in the last few days, I have been told that somebody else should pay to clean up the financial mess.

“The working class have no responsibility, no blame” was how an unemployed construction worker put it. He wanted the European banks who had lent Greece the billions in the first place to take the loss now that those debts are due.

A woman who runs a stall in the Monastiraki flea market said she didn’t see why she should have to pay tax, if others far richer than her had been avoiding it for years.

And at Saturday’s May Day demonstration, which turned violent, Greeks seemed to think that prosecuting the rich for tax avoidance and squirreling money in property in London would be a fairer way of digging Greece out of its financial hole.

But life isn’t fair, and no mainstream political party is advocating these kinds of answers, not just because the Greek establishment looks after its own, but because the hole is so vast that such measures alone would not plug the gap. It has been left to the unpopular Socialist government of George Papandreou to tell the people what they don’t want to hear in that government’s unhappy first few crisis-stricken months in office.

We don’t know if yesterday’s plans – VAT up to 23 per cent, a freeze on public sector pay till 2014, civil service bonuses cut, pensions cut, tax on fuel and alcohol up by 10 per cent – will deliver the extra 30 billion Euros the government claims.

Or whether a growing chorus of protest – there is a general strike called by the unions on Wednesday – will derail the government’s plans. A debt default or exit from the Euro cannot be ruled out entirely.

Some Greeks say they have no choice but to take the pain, while others who see the logic and the scale of their predicament seem determined to protest against it all anyway.

My theory is that the Greeks are held back by an image of themselves. Because they live in the celebrated birthplace of democracy, and because they have joined the Euro, they think they deserve the same standard of living as the French and the Germans, though apparently without the same obligation to pay tax.

This notion of themselves as western Europeans gets in the way of comparisons with smaller EU countries outside the Eurozone – I am thinking of Hungary, Latvia and Lithuania – who have undergone harsh austerity measures with far less fuss in recent years, often under IMF supervision.

I don’t mean to sound unsympathetic. Once the potentially lucrative tourist season ends in September, these austerity measures will cause widespread suffering. The government said nothing about sacking some of the legions of civil servants yesterday, which some economists argue is long overdue, but it seems inevitable that as the public sector becomes poorer, unemployment in the private sector will rise.

The debate on whether Sunday’s cuts, the latest of several, will choke off growth is not so very different from that being debated by politicians in Britain ahead of an election which is bound to usher in spending cuts there.

But my point is simply this: until the Greeks hold a mirror up to themselves, they cannot hope to change.