Greek Crisis Will Require €500 Billion ($700) in 2010-2020 – And it Won’t Be Enough

Author: Dan Steinbock  ·  October 26th, 2011

Brussels has failed to contain the Greek debt crisis, which is deteriorating rapidly. The first two bailout rounds, which amount to EUR 220 billion ($305 billion), will not suffice. In the next decade, Greece will require more than EUR 250 billion ($350 billion).

In the past two years, Greece has witnessed many demonstrations. But during the past week, the scale and militancy has reached a new level. In downtown Athens, the Parliament building on Syntagma Square was circled massively by the All Workers Militant Front, which is affiliated with the Greek Communist Party.

The strike was timed to coincide with a vote on yet more austerity and union-busting measures aimed at appeasing demands from the “Troika” – the European Central Bank (ECB), the European Union (EU) and the International Monetary Fund (IMF) – which threatened not to release the latest $11 billion ($15 billion) installment of the second-round bailout package if the measures were not passed.

The two-day general strike paralyzed Greece as violent attacks by police and anarchists caused injuries, arrests and one death.

Despite the fire and the smoke, the Greek Parliament did approve the austerity measures that fueled the protests. The measures will sharply cut public and private pay (even up to 50%) and pensions, force the privatization of public enterprises, and undermine collective bargaining agreements in the interests of labor flexibility.

These measures come on top of already painful, previously enacted austerity and privatization measures.

So is this, finally, the end of the Greek debt crisis? The simple answer is no; not even close. In effect, if the Troika sticks to its current policy approach, the Greek nightmare may escalate.

In 10 years, Greece will need another EUR 250 billion

In May 2010, the eurozone supported Greece with EUR 110 billion; now Athens hopes to stay afloat with another bailout round of EUR 109 billion. But neither will suffice.

For two years, I, along with others, have spoken for debt restructuring in Greece.

For two years, the European Central Bank (ECB) and most euro leaders shunned all talk about Greek debt restructuring. When the idea has been presented to ECB chief Jean-Claude Trichet, he has simply walked out.

And yet, recently the euro leaders did conclude that Greece probably needs a 21% debt reduction. By now, the consensus figure is close to 50% (and the right figure probably 60%-75%).

In return for the eurozone support, Greek Prime Minister George Papandreou and Finance Minister Evangelos Venizelos have struggled to implement painful, yet necessary structural reforms.

For all practical purposes, the Greek government is trying to achieve in two to three years the kind of privatization that normally requires a decade. But the government is losing ground, time is running out and social turmoil is deepening.

Neither the first nor the second bailout rounds – altogether some EUR 220 billion ($305 billion) – will contain the Greek debt crisis.

In the next decade, Greece will need at least another EUR 250 billion ($350 billion) or more. With current measures, it will not have access to capital markets until the early 2020s.  And that’s the benign scenario.

Worse ahead

In the past two weeks or so, the Troika has finally realized that all previous assumptions used for the Greek debt sustainability analysis have been wishful fantasies.

What is now certain is that, after a 5.5% contraction in the ongoing year, the Greek recovery will be substantially slower than anticipated. Second, privatization proceeds will be significantly lower than expected, from 1.5% of GDP in 2012 to 2-2.5% in the next few years. Third, Greek access to market financing is unlikely to be restored until in 2021.

In the coming years, Greece’s debt as of GDP will continue to climb and peak at 190% of GDP in 2013. Unfortunately, the debt dynamics is more likely to deteriorate than to recover.

If primary balances prove lower than expected, or if there are shortfalls with privatization receipts, or permanent growth and interest rates shocks, the Greek debt burden will be unsustainable.

Most importantly, Greece is not the only euro economy close to insolvency.

EconoMonitor : EconoMonitor » Greek Crisis Will Require €500 Billion ($700) in 2010-2020 – And it Won’t Be Enough

The two halves of the eurozone are locked in a broken marriage

 

By Ambrose Evans-Pritchard, International business editor

7:15PM GMT 30 Oct 2011

One by one, the democracies of Southern Europe are being broken on the wheel of monetary union.

Yes, Greece has gained debt relief: €100bn (£87bn) if pension funds "volunteer" to join banks in accepting a 50pc haircut. This will leave Greece with a public debt of 120pc of GDP in 2020 after nine years of depression, if all goes perfectly.

Greek ministers are now cruelly depicted in cartoons knuckling to German orders or delivering the Nazi salute. The yearly march commemorating the struggle against the Axis was blocked in Thessaloniki by protesters shouting "traitor" at Greece's aging president, himself a teenage resister.

I do not wish to be anti-German, since Germany itself is the chief diplomatic victim of EMU's unfolding tragedy. But this is what happens when you insert words such as "monitoring capacity on the ground" into EU summit texts.

Europe's inspectors are to establish an occupation office in Athens to ensure "full implementation" of austerity policies. Greece has been stripped even of the pretence of sovereignty, reduced to a Sanjak again.

Yes, Greece has gained debt relief: €100bn (£87bn) if pension funds "volunteer" to join banks in accepting a 50pc haircut. This will leave Greece with a public debt of 120pc of GDP in 2020 after nine years of depression, if all goes perfectly.

In Spain, unemployment is just shy of five million, or 21.5pc. There are 1.4m households where no family member has a job.

 

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The latest job losses have been in health care and schools, a foretaste of what will happen once the EU-imposed guillotine drops after this month's elections.

It is an unhappy starting point for an economy tipping back into recession. "We can't go on like this. It is impossible to get out this crisis with austerity alone," said Socialist leader Alfredo Rubalcaba, calling on Europe's Left to force a change in EU policy.

Meanwhile, Germany's jobless rate has fallen steadily to 6pc, and there lies the rub. EMU convergence never happened. What exists instead is a 30pc or 40pc North-South currency misalignment, the cause of all the grief.

The two halves are locked together in a broken marriage. The structural gap cannot be closed by debt-deflation in the South. It could arguably be mitigated by ECB reflation, yet the central bank has done the opposite, blighting the chances that Spain might just be able to struggle back to viability.

Spain is cutting stoically. The ECB did not have to have make matters worse by tightening monetary policy as well. It chose to do so, knowing that core inflation is tame and that Europe's banks are about to shrink their balance sheets drastically.

Portugal is already under EU-IMF administration, or "a state of occupation" in the words of Labour leader Carvalho da Silva. The unions have called a general strike this month.

This honourable nation, which pays its debts, has seen its external capital accounts swing from surplus to a deficit of 104pc of GDP under the perverse effects of EMU. The current account deficit is 8pc of GDP.

What Portugal needs is a 40pc devaluation against Germany. Instead, premier Pedro Passos Coelho is attempting an "internal devalution", with swingeing cuts to pay, pensions, welfare, and health. You cannot deflate an economy back to viability where total debt is 350pc of GDP. It is mathematical suicide.

Italy in turn has been told to balance its budget by 2013, even though it has a primary surplus and one of the lower debt levels (public and private) in the OECD club. This risks pushing Italy into a slump that sets off the destructive debt dynamic so widely feared.

It misdiagnoses the problem. Italy is in crisis because it cannot compete. It is in the wrong currency.

The EU refuses to confront the core issue, instead seeking to buy time for the South by conjuring a €1.2 trillion bail-out fund (EFSF) that seeks uber-leverage through "first loss" insurance of bonds.

This concentrates risk for creditors. It further endangers France's AAA rating, the foundation of the fund. It almost guarantees faster contagion to euroland's core. Europe has resorted to this twisted device because Germany has vetoed all moves to fiscal union, Eurobonds, debt-pooling, or ECB activism. It is a Hail Mary pass, a last gamble when all else fails.

Chancellor Angela Merkel warns that euro failure threatens a thousand plagues. "No one should think that another half-century of peace and prosperity is assured."

She has the matter backwards. The euro itself has become an engine of destruction and cross-border rancour. Europe will not be happy again until this misguided experiment is shut down.

The two halves of the eurozone are locked in a broken marriage - Telegraph

Why Doesn’t Greece Pull an Argentina and Default?

Written by Bob Adelmann Tuesday, 11 October 2011 16:49

With the announcement that Greece was going to get another bailout in November and that France and Germany were close to a permanent solution to Greece’s financial problems, stock markets around the world leaped for joy, gaining three percent inside the first 15 minutes on Monday morning.

Reality began to settle in, however, when it became apparent that details of the master plan to save the Eurozone were missing or, as the U.K. Telegraph expressed it, “full of rhetoric but devoid of detail.” And the additional bailout of Greece in the amount of $11 billion will barely be enough to keep that country afloat for another month. The “troika” of internationalists (the European Union, the International Monetary Fund, and the European Central Bank — the EU, the IMF, and the ECB) who have been pressuring Greece to increase its austerity measures in order to “qualify” for the money noted that Greece simply won’t be able to meet its 2011 objectives: Its targets are “no longer within reach” due to “slippages” in the Greek economy, but things ought to be just fine by 2012. 

Observers of the Eurozone’s rolling crises have concluded that Greece is insolvent and that default on its nearly $500 billion of sovereign debt is just a matter of time. Inevitable parallels are being drawn to Argentina’s default in December of 2001 on most of its $132 billion sovereign debt, and the question being asked of Greece is, Why delay the inevitable? Why not just admit the reality, declare your solvency, and get on with life? Just like Argentina?

There are significant parallels between the crises. The Argentine crisis had been brewing for years (some say as far back as 1913 when the welfare state began to be installed) but came to a head when a new government was elected in December, 1999 and found itself facing years of mismanagement and fraud left over from the previous administration, including much higher debts and deficits than had been claimed. In December of 2000, Argentina fell for the siren song of the IMF (“we’re here to help you”) and received its first bailout. IMF aid made the problem worse. The Argentine currency, the peso, was tied one-to-one to the American dollar and had become grossly overvalued. With foreign trade declining and interest payments to the IMF increasing, the government couldn’t continue supporting the peso. An overnight devaluation of the currency took place, dropping the peso’s purchasing power by 40 percent over one weekend, and beginning an inflationary spiral that reached an annual rate of 5,000 percent by the summer of 2002. The continued decline of the peso to 4 pesos per dollar reduced the standard of living of the average citizen drastically. By October 2002 nearly 60 percent of the population was living under the poverty line (defined as not having enough to eat). At the worst, some 30 to 40,000 people scavenged the streets for cardboard to eke out a living by selling it to recycling plants. 

Under continued pressure by the IMF to pay up, the government defaulted on its debt. The 500,000 foreign holders of Argentina’s debt took “haircuts” of 65 percent, but the IMF was paid back in full. Argentine President Nestor Kirchner told the United Nations Assembly that the IMF had revealed its true colors, “which took it from being a lender for development to a creditor demanding privileges.”

Once the financial pressure had been lifted, Argentina took advantage of its agricultural resources, especially soybeans, and began selling its crops to China in exchange for currency that could be converted to dollars. The recovery was dramatic, with gains in its Gross Domestic Product between 2003 and 2007 averaging nine percent annually. Wages increased sharply as well, pulling down the number in poverty from over 50 percent to under 12 percent. 

Casual observers might be quick to suggest that Greece do the same thing: to yank the bandage off the wound in one quick swipe rather than pulling it off an inch at a time, but the situation in Greece is different in some substantial ways, including the degree to which the Greeks have succumbed to the welfare state, with more than a quarter of its working citizens holding government jobs, usually with union support. Although Greece has some specialization in chemicals and petrochemicals, and its other mineral wealth has been depleted. 

As noted by Floyd Norris in the New York Times,

The Argentine experience was not pretty, but it may well be more attractive than the seemingly endless rounds of austerity, strikes and missed fiscal targets that seem to be leaving the Greek economy in a permanent recession. From the Greek perspective, the course [of declaring default] could seem attractive.

While ignoring any mention of regaining its national sovereignty from the clutches of the “troika” and the resultant negative implications for the Eurozone itself, Norris suggests that Greece would benefit from being on its own once again. It could reinstate its own currency, the drachma, in place of the Euro, it could declare that it won’t be honoring foreign holders of its debt, and it could begin the hard road back to independence and self-sufficiency. 

It would be a hard road. It would mean that, without continuing support from supranational financial interests, it would have to live within its means. That would be a major adjustment for those attached to and dependent upon the welfare state. Realistically, the drachma would soon be seriously devalued in the process, meaning that the citizens would again be paying the bill for their freedom. At least, as Norris puts it, it’s not likely that foreign troops would invade Greek soil to enforce Eurozone agreements. He notes, “In other words, Greece would fare poorly if it tried the Argentine strategy, but would have hope for recovery.”

Ansgar Belke, a professor at the German Institute for Economic Research in Berlin, agrees with Norris: “What happened in Argentina proves that it is possible for a country to come back after bankruptcy and once again play an important role in international financial markets.” He concluded,

I always supported a restructure of debt in Greece. The damage would not be as grave as is commonly feared. Greece is a relatively small country. A restructure would stagger a few German and French banks … but this scenario is more sensible than the massive credit that we’re currently giving.

Why Doesn’t Greece Pull an Argentina and Default?

European debt crisis jargon buster

Confused by haircuts, rollovers and bonds? Our jargon buster should help you get to grips with the Greek crisis.

 

The Greek prime minister George Papandreou arrives at the European Union summit on the debt crisis. Photograph: Keystone USA-ZUMA/Rex Features

Most of us can't get far into any article about the Greek debt crisis before coming across several terms that sound like English but don't really make much sense. Yet rather than bothering to find out what they do mean – it's just too much effort and we're not that interested – we tend to assume we've vaguely got the gist of things. As a result, most of us still don't have a firm grasp on what is going on. So here's an idiot's guide to some common misunderstandings regarding recurring terms in the euro debate:

Greek debt haircut

This sounds like shorthand for: "We all know Greece is completely screwed so we'll knock a bit off their debt to make it look a bit less bad to give us some breathing space." Not so. The haircut is actually something the Greeks are proposing to give its creditors; it's basically a way of Greece getting banks/countries to write off some of their debt without anyone having to lose face by calling it a write-off. In other words, if some of the debt isn't written off, Greece threatens to go bankrupt thereby ensuring its creditors gets nothing. It's the kind of sweetheart deal you'd love to make with your own bank.

Debt rollover

This has connotations of a reverse Euro Lottery, with some unlucky bank ending up carrying the can for a Greek default. It's not that simple. Greece has many thousands of packages of debt – the loans range from three months to 10 years – with one coming up for repayment almost every day. Except Greece hasn't got the funds to repay the loan, nor is any bank daft enough to lend it any more. So rather than suffer a default, banks merely extend the loan for a longer period. Hence the rollover.

Euro bonds

Surely this must be some dodgy financial instrument designed to wave away the debt crisis at a stroke? Well, it might be if the euro bond actually existed, but there isn't a cat in hell's chance they ever will. Greece loves the idea of a euro bond because it basically mean the whole of the eurozone would be responsible for Greece's debt, not just Greece. Understandably the Germans are not keen. As the only solvent country in Europe, the Germans would end up underwriting everyone else's debt. And they aren't that stupid.

Sluggish growth

The implication of this is that things are basically going in the right direction, if a little slower than would have been ideal. That's what finance ministers and politicians want you to think. They want you to hear the word growth. Actually it's a whole lot worse than that. What it means is that the economy is almost stagnant and, with inflation running at over 4%, we're in the worst recession since the 1930s without the promise of a looming war at the end to kick start growth. In short, it means the politicians don't have a clue what to do and it really is time to panic.

European debt crisis jargon buster | John Crace | Comment is free | guardian.co.uk

Preparing for Greece's Failure - European Current Events

 Peter Zeihan

Vice President of Analysis Peter Zeihan examines the obstacles to Greek prosperity and the challenges in ejecting Greece from the eurozone.

The financial news of the week again is about the eurozone and we are seeing lots of entities come up with lots of possible solutions about how to solve the eurozone problem. They all of course rest on what to do about Greece. The problem is, they are coming from the wrong angle. From STRATFOR’s point of view, Greece does not have a particularly bright future as a state before the eurozone crisis is taken into account.

Modern Greece has traditionally been supported by three pillars. First is shipping. As a culture that is mostly coastal it makes sense they would be very good at sailing; however, in the age of modern transport and super container ships, Greece simply can’t compete, and most of its ship building industry has long ago left for greener pastures in places such as Norway, China or Korea. The second pillar is tourism and this continues to be an option, but tourism by itself cannot support a modern state. The final option and the one that the Greeks have gotten the most mileage out of is leveraging Greece’s position. Typically to allow some external power a means of battling somebody in Greece’s neighborhood. When Greece achieved independence in the early 1800’s that external power was the United Kingdom who used Greece as a foil against the Turks. Later, the Americans played a similar role supporting Greece against the Soviets. In both cases massive volumes of capital came in to support Greece. However, in the post-Cold War era Turkey is a member of NATO, and while the Greeks might not get along with the Turks, nobody is looking to use Greece as a military foil against them. Greece no longer has a regional foe that it shares with anyone else. The closest might be the Turks again, but only if the Turks miscalculate their ongoing relationship with Israel or Cyprus and miscalculate very very badly.

Bottom-line, the various supports that have allow the Greek state to exist since the 1820’s simply aren’t there anymore and so the path forward goes like this: Greece is not salvageable. Greece simply can’t compete unless it is being given a constant, steady supply of capital from abroad that it doesn’t necessarily have to pay back. And even if that could be restarted, Greece can not emerge from its own debt load. It is simply too large. Greece has to be kicked out of the eurozone if the euro is to survive, but between here and there, first, a firebreak fund. The EFSF expansion has to happen because if you cannot sequester the 280 billion euro of Greek government debt that exists outside of Greece, then you’re going to trigger a massive financial catastrophe that the eurozone simply can’t survive. And so to prepare for a Greek ejection, you have to prepare a fund that can handle three things more or less simultaneously. First, you need about 400 billion euro to firebreak Greece off from the rest of eurozone. Second, you need about 800 billion euro in order to prevent a wide-scale banking meltdown, because the day that Greece defaults on that debt, the day that it’s ejected from eurozone, there will be catastrophic banking collapses in Portugal, Italy, Spain and France, probably in that order.

Third, the markets will go wild and the state that is in the most danger of falling after Greece is Italy. Using the bailouts that have happened to date as a template, any bailout of Italy would have to provide enough financing to cover all Italian needs for three years. That comes out to about another 800 billion euro. So until the Europeans have 2 trillion euro in funding stashed away, they can’t kick Greece out of the system.

Preparing for Greece's Failure is republished with permission of STRATFOR.

World - Preparing for Greece's Failure | Greece - European Current Events

Greek Problems Underestimated — Again

Written by Bruce Walker Monday, 03 October 2011 15:35

The stock market in Europe took another hard hit when the Greek Finance Minister announced that his nation’s government will not meet its deficit reduction goals.

After the cabinet meeting, the Finance Minister said that the Greek national deficit would be $25.2 billion or 8.5 percent of the nation’s GDP, compared with the target goal of $22.8 billion or 7.6 percent of GDP. Even this projection was issued with caution. In an official statement the Finance Ministry said: "Three critical months remain to finish 2011, and the final estimate of 8.5 percent of GDP deficit can be achieved if the state mechanism and citizens respond accordingly."

In that cabinet meeting on Sunday, a draft budget for 2012 was approved. It was this meeting that produced the projected deficit of 8.5 percent. It issued more bad news: The Greek economy will shrink even faster than was previously stated. A 5.5 percent reduction in GDP is now projected for this year. The government tried to sound steady and sure. Minister George Papandreou told an extraordinary Cabinet meeting Sunday to approve a 2012 draft budget: "I want to repeat that we will be unswerving in our goal — to fulfill all that we have promised to ensure the credibility of our country.”We have a single and steady goal — to meet our commitments so that we guarantee our credibility." Papandreou’s budget called for reducing the pay, firing, or forcing into early retirement 30,000 government workers.

The Greek government also announced that without a bailout from the European Union of $10.8 billion, it will not be able to pay its bills this month. The Greek government has been dependent upon loans from the euro zone and the International Monetary Fund since May of last year, when it received a $150 billion loan. Although it received a loan of slightly less in July, it is interesting that the details on that last loan are still being worked out. The May 2010 loan had certain targets that, in theory, were required in order for Greece to access the loan funds. These goals included paying off bondholders of Greek loans and paying salary and benefit obligations of the government.

A “troika” of representatives was created to insure that Greece complied, and these individuals represented the European Commission, the European Central Bank, and the International Monetary Fund. The group will be meeting in Athens, and they will review closely the financial records to see if it is appropriate to provide access to more funds by the Greek government. The pressure is on that troika. The pressure is also now on the Finance Ministers of the eurozone. Michael Hewson at CMC Markets notes: "Greece continues to be the major source of market angst as we head into the final quarter of 2011. Today's meeting of finance ministers will continue to delay the inevitable and look at ways and means of avoiding a Greek default.”

Professor Yannis Varoufakis, who teaches economics at the University of Athens, noted the very difficult situation now: "The vicious circle continues for the government. We have disappointing revenues, missed targets and this will bring new measures and new austerity." The measures proposed are very unpopular in Greece, and a nationwide strike has been planned for October 19 in the country by the two largest public employee unions. These unions have also vowed a campaign to bring down the current Socialist government of Papandreou. Protestors had already gathered at Syntamgma Square, in front of the Greek Parliament. Sofia Vardaki, a 49-year-old public employee said: "I've been honestly working for 25 years. They have no right to throw me out now. I don't want to sit on my couch doing nothing. I want to work."

Germany’s DAX stock exchange dropped 2.4 percent down to 5,372 and the CAC-40 stock exchange in France also fell 2.2 percent to 2,926. The FTSE 100 index of British stocks fell a bit less, 1.9 percent to 5,030. The crisis is growing more serious for several different reasons. First, the almost certain need for funds to bail out the Greek government means that the financial structure of all the rest of Europe takes a hit. As one example, banks have invested in the sovereign debt of other nations. Italian banks, for example, have some Greek bonds in their portfolio. As Greek bonds are downgraded, the assets of those Italian banks must also be downgraded. French banks, in turn, own sovereign debt of Italy as part of their assets. So when Greek bonds drop, Italian banks are pulled lower, as well as the French banks. Collapse is too strong a word for the short-term effect, but weak banks mean all sorts of problems in the rest of the eurozone.

This is a particularly tricky political problem because nations like Germany, Holland, and Austria, which have been more responsible regarding their national deficits, are the ones who may be called upon to be the ultimate firewall to collapse.

Second, the downgraded growth rates for Greece portend a weaker general economy in Europe. Although normally a drop in the price of oil would be very good news, it actually reflects the weakening of the economies of Western-style major industrial nations. With few exceptions, growth data is anemic throughout these nations.

Third, the resistance to “austerity” for Greek government employees in the face of an utterly untenable situation for the government may mean that the reaction of other nations on the border of disaster may face the same threats of strikes. Europe has labor unions with more clout politically than in America, and resistance “to the death” (so to speak) in these nations, when austerity is required, may mean no way out of the crisis.

Fourth, the other economies that might be able to lift Europe out of the doldrums are also in bad shape: The American economy is a mess, with huge federal debt a major drag; Japan, also, faces serious problems; and the Chinese “miracle” may be more mirage than miracle: hyper-speculation in business and residential development, for one example, may have overextended businesses as many malls and business offices are vacant.

The fifth area of concern has more to do with that most precious commodity of all: trust. The news from Greece over the last few years has invariably been bad. That means government official estimates, when revised, are almost invariably revised to show largest deficits, slower growth, and smaller tax revenues. This is a pattern in troubled Europe. As was reported here in January, the Irish Central Bank printed its own euros and used part of the money to pay bonuses to bank executives. This was one month after the Irish Finance Minister, Brian Lenihan, provided information on the amount of bonuses paid in December, which at the time was reported as zero. Later it transpired that the amount of bank bonuses was actually in the tens of millions of euros. This was not, technically, counterfeiting — the bank was allowed to print euros upon notification to the eurozone financial regulators — but it certainly looked questionable, especially at a time in which Ireland was receiving emergency loans to prevent default. Greece is a small nation, but its impact on the economic future of Europe looms large. There are models of how healthy economies work — America before the New Deal, Switzerland, Hong Kong, and a few others — but the eurozone looks like it is a long spiral into chaos.

Greek Problems Underestimated — Again

Greece is slipping into the abyss

As the economic crisis worsens, the very fabric of society in Athens is being ripped apart as the Greeks lose their good humour and generosity.

The wheels come off: striking taxi owners protesting in front of the Greek Parliament in Athens in September Photo: EPA

By Christopher Humphrys

7:30AM BST 01 Oct 2011

Greek grannies are as ubiquitous and iconic as Greek cats. Dressed immaculately in widow’s black, and with their grey hair neatly styled, they are proud figures. They are treated with respect by even the most rebellious youths, and acknowledged by all as the head of the fiercely maternal family groups that bind Greek society together.

The old lady I saw on the street in Athens this week was typical, except in one shocking respect. She was begging. Beggars are normal here these days, but almost all are immigrants or drug users. This was different. The image of this proud woman sitting on a plastic crate outside the supermarket with her hands out has stayed in my mind. If a symbol is needed to illustrate the unravelling of Greek society, then this is it.

The Athens I knew 20 years ago has changed radically. I used to tell British friends that despite its chaos, it was a very civilised city. When I moved here, you didn’t have homeless people sleeping on the streets, there was little crime and the sick and needy were looked after. That civility is vanishing fast. With economic doom becoming ever more likely, it sometimes feels as if the fabric of society is being ripped asunder.

Muggings used to be a rarity; not any more. Walk down the main streets of central Athens at night and you will see people sleeping rough. The other day I had to deal with a young man who had passed out on my doorstep. He may have been drunk, but in these crisis-stricken days, it is just as likely that he was high on crack cocaine, now selling for 5 euros a hit. I wasn’t going to risk disturbing him – I had my children with me.

My area of central Athens is a relatively “bad” location, but there are much worse places. The neighbourhood of Psirri borders the popular tourist attractions. Ten years ago, Psirri was rejuvenated. Bars and cafes opened, old buildings were restored. A live jazz club opened that was an instant hit. The club is gone now, and most of the shops are closed. The area became so dangerous that people simply stopped going there. Now it’s riddled with drugs. People shoot up on the street and accost anyone foolish enough to stray through the area for money. And all of this takes place a short walk from the Acropolis.

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Many friends have headed to the suburbs – but they aren’t as safe as they were. Last week, an elderly couple in a decent neighbourhood were held hostage in their home by men carrying AK-47 assault rifles. They took their cash and credit cards and then stole the couple’s car.

These changes to Athens didn’t happen overnight, but have occurred astonishingly fast. A perfect storm has been created, with the financial meltdown which threatens to bring down Greece and the rest of the EU, combining with social breakdown and that ''other’’ crisis – immigration.

Despite the turmoil, illegal immigration isn’t slowing. An Afghan refugee doesn’t care if Greece is in trouble, he only intends staying long enough to find a way to get to the promised lands of Germany, Britain or Scandinavia. But many illegals don’t make it any further. Before the crisis this didn’t matter too much. There was work on building sites and in the fields. Manual labour that Greeks have become used to paying someone else to do. But most of this work has gone, too.

Five years ago, I met Mahjid, a Pakistani with legal status in Greece. He’s lived here for 15 years, ran a successful building business and sent enough money home to keep his family happy. He even captained a fledgling cricket team. Now he hasn’t worked for six months and is leaving for Germany. The Bangladeshi in my local shop keeps asking me why I haven’t gone back to Britain. He thinks I am mad. “Even the Albanians are leaving!” he tells me. If Britain thinks the Greek crisis won’t have an impact there, it is wrong.

The luckiest immigrants do make it to the promised lands, but many fail. Trapped, they rent mattresses on crammed floors from unscrupulous landlords for 12 hours a day and hang around the few open spaces Athens has to offer. One such space was a local square, which has the largest Orthodox church in the Balkans. The immigrants used to congregate here, but suffered too many attacks. Now three foot high letters are written on the ground in front of the church spelling “Foreigners Out.” Nobody will remove it. Greek reaction ranges from pity and patience, to anger and racism. The neo-Nazi “Golden Dawn” party has its headquarters nearby – while they haven’t made it to parliament yet, the dangerous mixture of increasing immigration and falling living standards ensures their growing popularity.

The immigrants are a constant reminder of how desperate things can get. I don’t bother recycling tin cans any more. The bin outside my apartment is gone through five or six times a day. Some people are looking for food, but most are metal scavengers. A small army operates all over Athens. We used to take unwanted clothes to charity shops but I can’t see the point now. If I leave anything outside the door it will be gone in minutes.

The description of Britain as a nation of shopkeepers could equally apply to Greece; except those small family businesses are closing in their thousands. Walk along a central Athens street and up to half the shops will have a small sign in the window with red writing saying “for sale” or “for rent”. Every sign represents another family for whom life has just been turned upside down.

I wrote before the summer about the difficulties of daily life. Back then, the frequent strikes were frustrating, but could be lived with. People said: “Wait until after the summer, then we are really going to see how tough it gets.” They were right.

The Greek granny begging, the daily assault course of strikes and the hopeless plight of immigrants are only the visible signs of growing despair. It is in the family homes that the full impact is being felt. Greeks can appear loud and gregarious, but their family life is intensely private. You never admit to difficulties within the family. Protesters may have grabbed headlines, but they didn’t speak for many of the decent, hard working Greeks. These people are suffering with quiet dignity, and it’s taking its toll.

It may not sound like the end of the world to lose 250 euros a month from your pay, but it is when the salary is only 1,000 euros. Salaries are going in one direction, while prices are going in the other. VAT has had a 10 point hike and the cost of milk rises by the week. We are no longer talking about lifestyles being altered: people are struggling to put food on the table. And that’s before they get hit by emergency property taxes. If you don’t pay them your electricity will be cut off, as the state is using the electricity company to collect the tax.

Looming over the day-to-day difficulties is the threat of losing your job, especially a state one, that used to mean a job for life: 30,000 jobs are to be axed immediately. The days of the gold-plated state jobs are numbered.

I spoke to a friend who runs a psychiatric hospital. He acknowledged that depression is rife. “We are all depressed now,” he said. “It’s just a question of degree. Some people make the problem worse with drugs or alcohol.”

Suicide figures are difficult to pin down, partly because the Orthodox Church says that it is a sin and refuses to bury anyone who has taken their own life. But if the Hellenic Statistical Authority can be believed, the first five months of 2011 saw a 40 per cent rise, while help lines report a massive increase in calls.

Good humour and generosity were once a Greek trademark. But that’s all gone. People are depressed, scared and exhausted by the relentless pressure of heavier cuts and taxes.

Every Greek granny remembers the hardships and suffering of the war and its aftermath. Hundreds of thousands of civilians died from starvation. The civil war that followed and the brutal military dictatorship that lasted until 1974 are recent events. Greeks were led to believe that those nightmarish times were over, that the future would be better.

But we are only at the start of this crisis. What will happen next year when unemployment doubles and people lose their homes? The Communist calls for revolution don’t look nearly as far-fetched as they did six months ago. While civil war doesn’t look likely, a return to the military days must be a possibility. If the Greek people reject their entire political system and the state falls apart, what will be left? The great danger is that the people are being pushed so far that the unthinkable becomes possible.

Greece is slipping into the abyss - Telegraph

Greece: Older Civil Servants To Face Brunt Of Cuts

by The Associated Press

October 1, 2011

Greece and debt inspectors have apparently agreed that older civil servants near retirement age will bear the brunt of personnel cuts in the public sector, according to media reports.

European Commission, European Central Bank and International Monetary Fund officials accepted the proposal that most of the 30,000 cuts in public sector personnel by the end of the year should affect civil servants over 60 who are close to retirement age, private TV channel Mega reported, quoting government officials.

The officials were speaking anonymously because the Cabinet has yet to confirm the agreement. It will do so in a meeting set to start Sunday evening. The proposal was drawn up by Finance Minister Evangelos Venizelos and Public Sector Reform Minister Dimitris Reppas.

Venizelos is still on talks with the debt inspectors regarding the draft 2012 budget, which will be finalized at the Cabinet meeting and introduced in Parliament Monday.

Up to 23,000 older civil servants will be place "in reserve," that is, suspended with reduced pay, by the end of the year. Another 7,000 suspensions will come from the abolition or merger of about 150 state agencies.

Those mergers, decided by the government last year, have stalled and, in the few cases that they have gone ahead, no one has yet been fired. This has led to grumbling even among the ruling socialists.

"You cannot announce mergers and not do them," Christos Protopapas, one of the leaders of the socialist parliamentary group, said in a radio interview, pointing the finger at deputy prime minister Theodoros Pangalos, who has been in charge of that reform.

At stake is the disbursement of $10.8 billion by Greece's creditors, the sixth installment of a euro110 billion bailout package agreed on in May 2010 to save Greece from defaulting on its debt. A decision made July 21 to provide a second package, worth $147 billion has yet to be finalized.

Greece, eagerly looking for foreign investments to help it jump-start its recession-mired economy, got a rare piece of good news Saturday, with an investment agreement signed with Qatar that involves the emirate buying a stake in a Greek gold mining company.

The agreement, signed at a meeting between Prime Minister George Papandreou and the Emir of Qatar, Sheikh Hamad Bin Khalifa Al Thani, comes a year after a Memorandum of Economic Cooperation signed in September 2010 by Papandreou and Al Thani in New York. Hellenic Gold President Dimitris Koutras and Qatar Holding LLC CEO Ahmad Mohammad Al-Sayed signed the investment agreement.

"This (agreement) signifies Qatar's trust in the Greek economy," Papandreou told reporters after the meeting.

Qatar had previously expressed interest in the residential and commercial development of the former Athens airport and in a cargo port terminal in western Greece.

The cargo port terminal investment fell through, while the airport project has stalled.

Qatar's sovereign wealth fund is also set to be a major stakeholder in the bank that will result from the merger of Greece's two top private banks, Alpha Bank and Eurobank.

Al Thani expressed renewed interest in the development of the former airport as well as for investments in energy and tourism.

Greece: Older Civil Servants To Face Brunt Of Cuts : NPR

The Dream Of Europe And The Bailout Of Greece

by Zoe Chace September 28, 2011

Peace symbol Michael Probst/AP

"We need Greece," Maurice Minot, a Frankfurt taxi driver, told me, swerving in excitement. "We need Spain, we need Italy. It's the dream for Europeans, for more than a hundred years."

For Minot, as for many Germans on both sides of the debate, the question of bailouts goes beyond narrow self interest. It gets at what it means to be German, and what it means to be European.

Klaus Frankenberger, an editor at the newspaper Frankfurter Allgemeine Zeitung, points to the painful labor reforms Germany went through a few years ago.

"Germany's economic revival came with a price," Frankenberger says. "What has Greece done? Deliberately reduced its competitiveness, deliberately inflated the public sector."

Frankenberger happens to keep at his desk the treaty that set up the European Union. It's all marked up and dog-eared, as if he reads it in the bathtub.

"Article 125," he says, stabbing the page with his finger, "deliberately rules out the bailout of any member state! That's what it says. And we've decided to ignore this."

Sixty-six percent of Germans agree with Frankenberger, according to a recent poll. No bailout.

But what about that other 34 percent? It includes some businesspeople and bankers who would benefit from a bailout. But there's also a sizeable number of people, like my cab driver in Frankfurt, who support a bailout for more idealistic reasons.

They don't want to tell Greece to go it alone. Not because they'll recoup a financial investment, but because they'll recoup an emotional investment.

Germans care about Greece because they care about Europe.

"We had a wall behind us," says Renate Wilhelm, who used to live in East Berlin. "And now we are friends! And also with France: You don't have to use a passport, and we have the same money. It is like we are sisters and brothers. It's wonderful."

It's not just older Germans who feel this way about Europe. In Berlin I ran into Simon Banish, 20 years old and shrouded in a hoodie.

"I feel more like a European than a German," he told me. "The idea to create a United States of Europe sounds interesting— and to me, it makes sense."

This might sound a little Kumbaya. But Europe is a messy continent, with a sea of countries that suffered two enormous, brutal wars in the first half of the 20th century.

Fifty years ago, a little Kumbaya seemed like a really good idea. In fact, that's how this whole project got started in the first place. Helmut Schlesinger, former president of the German Bundesbank, pointed this out to me.

"One cannot forget that the whole strength of having a European Union is based on the fact that we never want to have war between our countries, which we have had so much, and so terrible," he says.

In the years immediately following the war, the idea of a common currency was seen, by some, as a way to keep Europe peaceful, Schlesinger says. With everyone using the same currency, Germany's strength would be Europe's strength.

That's why the bailout question is so agonizing. Because it's not simply about self-interest. It's about who Germany wants to be

The Dream Of Europe And The Bailout Of Greece : Planet Money : NPR