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Jan 14th 2012 | ATHENS
Greece’s economic crisis is worsening—as is life for ordinary Greeks
A Greek tricoteuse before the fall
THE news from Greece gets ever grimmer. GDP will shrink in 2012 for the fourth year in a row. Talk of a default and/or departure from the euro is growing. This week Angela Merkel, Germany’s chancellor, demanded urgent progress towards a deal imposing a “haircut” on private creditors (which may now have to be bigger than 50%), saying that Greece might otherwise not get its second European Union/IMF loan. And thieves have just stolen a Picasso painting from the national gallery, where only one guard was on duty.
Yet most evenings Athens is buzzing. Around Syntagma Square, the scene of so many protests, the streets are crowded, with cheery music playing. In nearby Karytsi Square, bars and restaurants are packed with rowdy people; some are even jolly. The mojitos may have been replaced by cheap beer, but Athenians live for an evening out with friends. “Staying home is not an option,” says a classics student from Athens University. “It’s too depressing.”
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But when day follows night, the buzz gives way to bleakness. Sofokleous Street, home of the Athens Stock Exchange until 2007, is now the site of the city’s main soup kitchen. It is a meeting-place for the homeless and for those too poor to afford food. To the east, on Kifissias Avenue, many small shops have gone bust, often to be replaced by gold dealers, pawnbrokers or seedy shops selling sexual paraphernalia.
There has been a surge in crime. Police statistics show both petty theft and breaking and entering on the rise. In the first half of 2011 some 314 house burglaries were reported in Athens, over twice as many as in 2010. Crime has spread to places thought of as safe only a couple of years ago.
Homelessness has also shot up. Klimaka, a charity, estimates that 20,000 people in Greece have no home, 25% more than in 2008. Before the crisis, the homeless were usually 35- to 50-year-old reclusive men from poor backgrounds. Now the streets are home to the young, struggling to find jobs, and the middle-aged, whose careers have been cut short. Many are educated; some are graduates. Most have lost their homes because of debts. Georgios Barkouris, a musician from a middle-class Athenian family, worked for two decades for the national radio station. When recession hit he found himself without a job—and, soon enough, without a home, too. One in five Greeks lives below the poverty line. “Expecting homelessness to double this year”, says Mr Barkouris, “is awfully optimistic.”
Since Greece’s first bail-out in May 2010, the government has imposed austerity, increasing taxes so much that people can barely manage. The unemployment rate is 19% and rising. GDP has contracted by 12.5% since 2008 and is expected to fall by another 3% this year. Even middle-class Greeks are being driven into poverty. Property prices and rents have plunged. But property taxes have tripled.
The biggest blows have fallen on small family businesses (with 50 employees or fewer), which make up 99% of enterprises and employ three-quarters of the private-sector workforce. Many have closed or sacked most of their staff. Big businesses (such as banks or private hospitals) are suffering, too. Indeed, the entire private sector is haemorrhaging workers. Of the 470,000 who have lost their jobs since 2008, not one came from the public sector. The civil service has had a 13.5% pay cut and some reductions in benefits, but no net job losses. Already low, public-sector productivity has fallen further. This has led to deep resentment of the civil service, which has mushroomed in the past three decades and now employs almost a fifth of the workforce.
Outside Athens the situation is a little better. Except for Thessaloniki, Greece’s second city, the rest of the country has not seen the protests and social unrest of the capital. The cost of living and house prices are lower and family ties stronger. “Everyone has a place to stay here,” notes a teacher in Preveza, a coastal town in the north-west. Crime is lower. Figures from the Research Institute for Tourism show that in 2011, 64% of murders and 75% of robberies took place in the capital.
The economy is also holding up better outside Athens. Tourism and agriculture have always counted for more in the countryside and on the coasts. The Association of Greek Tourism Enterprises reports that, in the first half of 2011, tourist arrivals increased by 13.9% (and revenues by 13.4%) over the same period in 2010. And farm exports have risen by 9.1%. A few city workers are even going back to the land. Outside Athens some in the public sector see their jobs as a sideline to earn pin money while their main occupation is farming.
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Many Greeks have chosen to move abroad in search of a better future. Successful academics, bankers and engineers have already fled for better pay and work conditions. Some have even gone without a job offer, usually to places such as Australia or Canada, where the Greek Diaspora is large. The most destructive brain drain is of the young. Since 2008, ever more young people (mostly in their 20s) have gone, often to foreign universities. “When I left to study abroad in 2006 I was the odd man out,” says a young Greek lawyer. “Now I thank my lucky stars.” Greece’s archaic education system and strikes have held back those who pursued their education at home. Exams have been delayed or cancelled. Some students are a year or more behind in their studies.
If they manage to graduate, the prospects are still poor. Youth unemployment is over 47% (and rising). Those lucky enough to find a job are underpaid, overtaxed and, often, overqualified. They, too, may drift abroad. Young doctors go to Sweden for specialist training; engineers move to Abu Dhabi; many others head for Berlin, where life is cheaper and more fun. All this hugely damages Greece’s prospects, given an ageing population. Within a decade the workforce will be shrinking, although the number of pensioners will keep growing.
Disenchanted on Syntagma Square
Not surprisingly the popularity of politicians and political parties is at an all-time low. Some voters have warmed to a populist, anti-EU message. But they have not yet gathered enough traction to challenge Greece’s pro-EU, pro-euro course. The chief feeling is of disenchantment, not with Brussels or Berlin, but with the two main parties whose corruption, nepotism and incompetence helped create such a terrible mess. Polls find 77% of Greeks wanting the unity government led by Lucas Papademos, a technocrat and former central banker, to take all necessary measures to keep Greece in the euro. For the time being, the consensus is that an exit would spell disaster.
The preference for Mr Papademos reflects his apolitical credentials and financial expertise. His 66% approval rate is the highest among political leaders and over three times that of his Socialist predecessor, George Papandreou. Since he took over in November a measure of calm has returned. But that is now threatened by renewed crisis—and by a general election expected in April. The election may prove a risky distraction from the structural changes required for Greece to secure its next tranche of aid. The centre-right New Democracy is expected to trounce the Socialists, but voters could yet elect a parliament with seven or eight parties, forcing it into a coalition that might find it harder to push through reforms.
For over 30 years Greeks lived lavishly as the public sector became bloated, EU money poured in and many people routinely tricked the system. During the past three years, Greeks have been asked to endure hardship and humiliation. It is no wonder that they have often taken to the streets, nor that they feel depressed. The question is how much more they can take. The election could prove to be a breaking-point, as Greece stumbles towards disorderly default. So far the Greek people have demonstrated extraordinary stoicism—but that may not last forever.
