Angelos Tzortzinis for The New York Times Updated: Dec. 13, 2012
Over the last decade, Greece went on a debt binge that came crashing to an end in late 2009, provoking an economic crisis that has decimated the country’s economy, brought down its government, unleashed increasing social unrest and threatened the future of the euro.
Since a change in government revealed the true size of the country’s massive deficits, Greece has been kept afloat by its fellow euro zone countries, but at a steep price: the austerity measures demanded by France and Germany in return for two massive bailout packages, totaling 240 billion euros, have ripped holes in the Greek safety net and plunged the country into a recession of near-Great Depression dimensions.
After long resisting the idea of a default, European officials in March 2012 helped Greece negotiate a landmark debt restructuring deal with the vast majority of its private sector lenders, who agreed to swap $77 billion in Greek debt for new bonds worth as much as 75 percent less. It was the largest default in history.
The deal cleared the way for the so-called troika — European Commission, the European Central Bank and the International Monetary Fund — to begin releasing funds from the second, 130 billion euro ($163.4 billion) bailout package, avoiding an uncontrolled default. But many economists said it still left Greece saddled with unsustainable debts and little prospects for growth.
While Greece received billions of euros in emergency assistance from the lenders overseeing its bailout, almost none of the money is going to the Greek government to pay for vital public services. Instead, much of it is flowing directly back into the troika’s pockets. The European bailout that was supposed to buy time for Greece is mainly servicing the interest on the country’s debt; other funds have been set aside for propping up the nation’s shaky banks. Meanwhile, the Greek economy continues to decline.
In early May 2012, voters upended the country’s political system in a parliamentary election that saw the crushing defeat of the dominant parties, who were blamed for Greece’s collapse. Parties representing the left and the far-right made gains, as Greeks protested the austerity pact.
More Austerity, but Bailout Terms Are Eased
A second round of elections was held in June, after no party was able to form a government. The winner was Antonis Samaras, the leader of the center-right New Democracy party, who became prime minister after cobbling together a shaky coalition and began seeking concessions from the country’s lenders.
In late July, officials in Germany began to speak openly of the possibility that Greece would leave the euro in the fall. But in August, when Mr. Samaras made a plea in the German press for “a little breathing room,’' there were signs of a more conciliatory atmosphere. Euro zone leaders also began to acknowledge that the austerity program imposed on Greece by the troika had taken such a toll on living standards that it had become counterproductive.
In September, Mr. Samaras drafted a plan for an €11.5 billion austerity package that included fresh cuts to pensions, salaries and other expenses, hoping to convince the troika to release nearly 32 billion euros, or $40.7 billion, in financial aid that the country needs to stay solvent. But the troika rejected an initial version of the plan, saying in effect that they did not think he would be able to deliver.
Even as Mr. Samaras worked to revise the plan, public opposition to more austerity deepened, with polls showing both Syriza and Golden Dawn, a right-wing party linked to anti-immigrant violence, making gains. In summer and fall 2012, Golden Dawn stepped up its attacks against immigrants.
In October, Greece reached an agreement with the troika of lenders on a revised plan, totaling $23 billion in savings over four years. In November, after some of the most violent protests to date, Parliament passed the plan, but the coalition was shaken by the large number of defections.
By the end of the month, it was clear that Europe’s leaders planned to release the next round of financing, and to give Greece some measure of relief, perhaps by extending the deadline for bringing the budget back into primary surplus. But they remained at loggerheads over how to do so without angering residents of northern countries, since any extension would require more money to patch Greece’s deficit.
After weeks of wrangling with the International Monetary Fund, which insisted on steps to lower Greece’s debt burden, finance ministers agreed on a complicated set of measures meant to provide some relief without having to actually write off loans, through longer maturities and lower interest rates on bailout loans. Greece was also able to buy back 32 billion euros’ worth of deeply discounted privately-held bonds, using new money it borrowed from the troika; the step wiped 20 billion euros in debt off the country’s books. The next day, the E.U. approved the release of nearly €50 billion in badly needed new bailout funds.
But many questions remained, and many economists remained dubious that Greece would be able to pay off its remaining debt without stronger measures to spur growth, or at least to counteract the contractionary effect of austerity.
The new target is a reduction of the debt to 124 percent of gross domestic product by 2020, rather than 120 percent. That would be down from the current level of 175 percent.
The New Austerity Package
The new austerity measures passed by Mr. Samaras’s government — including sharp cuts to pensions, salaries and social services, as well as tax increases and increases in the retirement age to 67 from 65 — were designed to persuade Greece’s foreign creditors to unlock around $40 billion in aid that the country needs to meet expenses.
With state coffers virtually empty, an economy near depression and unemployment at a record high of 25 percent, Greece is counting on the money to keep the government running. It also needs to pay off a portion of more than 8 billion euros in arrears that it owes suppliers for basic products, like medicines, that some companies have stopped supplying to Greece until they are paid.
And yet most of the money would not be put directly back into the economy. Instead, about 85 percent of the loan installment would go to replenishing the capital reserves of Greece’s shaky banking system. Those cushions were depleted early in 2012 after the banks lost huge amounts of money, when the government forced its creditors to take a 50 percent loss on the Greek bonds — held in large part by Greece’s banks.
Background
In late 2009, the new government of Prime Minister George A. Papandreou announced that it had discovered that its conservative predecessor had falsified budget figures, concealing a swollen debt that was growing rapidly in the wake of the global economic meltdown.
The roots of the crisis go back to the strong euro and rock-bottom interest rates that prevailed for much of the past decade. Greece took advantage of this easy money to drive up borrowing by the country’s consumers and its government, which built up $400 billion in debt, much of it lent by banks in France and Germany.
When the global economy crumpled, those chickens came home to roost.
After the revelation of the true size of its deficit, Greece was quickly frozen out of the bond markets, and in May 2010 began to rely on an aid package of €110 billion, or $152.6 billion, agreed to by its richer European neighbors.
The price was a series of austerity measures meant to cut the country’s bloated deficit and restore investor confidence. Greece cut the pay of its public workers — a quarter of the work force — by 10 percent — but continued to miss deficit targets as its economy sank deeper into recession, shrinking by an estimated 5.5 percent in 2011.
Throughout 2010 and 2011, investors continued to demand ever higher interest rates for Greek borrowing as the market appeared to conclude that some sort of default was inevitable. Mass demonstrations turned violent in October 2011 as Parliament barely passed additional austerity measures Europe demanded to keep the bailout money flowing.
Also that month, European leaders won agreement from banks to reduce some of Greece’s debt by 50 percent. But the conditions coming along with the aid plunged Athens into turmoil, and in November, Mr. Papandreou decided to step down. Lucas Papademos, an economist and former vice president of the European Central Bank, was named prime minister and assembled a temporary government of national unity that pledged to quickly approve the tough terms of a second European aid package of $150 billion.
Tensions in the Euro Zone
For Greece — and for Spain, Italy, Ireland and Portugal — the financial crisis has highlighted the constraints of euro membership. Unable to devalue their currencies to regain competitiveness, and forced by E.U. fiscal agreements to control spending, they are facing austerity measures just when their economies need extra spending.
Other economies like Germany, the Netherlands and Austria have kept deficits down while retaining an edge in global markets by restraining domestic wage increases. France lies somewhere between the two camps.
The chief difficulty in working out a package to support Greece was the popular sentiment in Germany — deeply concerned about becoming the answer to the debt problems of all of Europe’s endangered economies — that Greece should pay a penalty for its former profligacy.
Since the euro’s inception in 1999, no member had sought support from the I.M.F., which typically comes to the rescue of emerging-market economies rather than developed countries. Beside unsettling the markets, Greece’s troubles have undermined the common currency it and 15 and other European nations share.
Meanwhile, questions were widely raised about the role played by banks, including Goldman Sachs, in constructing elaborate financial deals that helped the previous government hide the extent of its deficit.
Bond Losses, Second Bailout Package
By early 2012, the sense of crisis had returned, as the leaders of France and Germany threatened to withhold the second aid package without further cuts and promises of structural economic changes. Greece plunged into meetings with banks and hedge funds about deeper writedowns on its debt.
With elections looming in the spring, the parties that make up Mr. Papademos’s coalition feared that they were essentially being told to commit political suicide to save the country, and one party to the alliance bailed out. But with an uncontrolled default seeming unthinkable, the government shrugged off violent demonstrations and hurried to pass the necessary legislation.
The European Union’s plan of tax increases, spending cuts and wage cuts pushed the country into a deep recession; the economy shrunk by almost 12 percent between 2009 and 2011 and is expected to shrink by up to 6 percent in 2012. The crisis also stripped Greece’s political center, weak to begin with, of its last shreds of political legitimacy. With unemployment at 21 percent, businesses closing, credit scarce and the proposed new wage cuts expected to further decimate the shrinking middle class, the hard left and extreme right are rising.
In early February, Mr. Papademos reached a deal to support the new austerity measures with two of his coalition members, the Socialists and New Democracy, a center right party. The right-wing party, Popular Orthodox Rally, balked, but is too small to block the deal, which includes a 22 percent cut in the benchmark minimum wage and cuts of 150,000 public sector layoffs. Greek workers responded by walking off the job for the second general strike in a week. Street demonstrations in Athens turned violent, and 80,000 people marched in protest the day before Parliament approved the package on Feb. 13.
On Feb. 21, after more than 13 hours of talks in Brussels, European finance ministers approved a new bailout of 130 billion euros, or $172 billion, subject to Greece taking immediate steps to put the deep structural changes that they agreed to into effect.
The agreement included a reduction in interest rates on loans from Greece’s first rescue in 2010, and European central banks foregoing profit on their Greek bond holdings, that allowed the deal to satisfy a mandate set by the International Monetary Fund that Greece’s debt come down to 120.5 percent of gross domestic product by 2020.
The bailout cash is likely to be paid into a special “escrow” account that will prioritize debt servicing before money is released to general government coffers.
Though Greece may have dodged a default with its last-minute bailout deal — it faced payments it would not be able to make on March 20 — longer-term doubts over its ability to repay its staggering debts remained, raising questions about whether even more rescue money will eventually be needed.
It is uncertain if another round of austerity can bring Greece to a point whereby it generates enough revenue to pay off its obligations — even if the private sector debt deal goes through — and return to the market on its own.
The Debt Deal
In early March 2012, Greece announced that it had clinched a landmark debt restructuring deal with its private sector lenders. The deal clears the way for the release of bailout funds from Europe and the International Monetary Fund that will save the country from imminent default.
The Greek finance ministry said that 85.8 percent of private creditors holding 177 billion euros in Greek bonds participated in the bond swap. After invoking collective action clauses, provisions that will force the holdouts to accept the offer, the participation rate would rise to 95 percent and meet the target set by Europe and the I.M.F. for the release of crucial rescue funds.
The ministry also said that 69 percent of investors holding a category of Greek bonds issued under laws other than Greek law had agreed to the exchange — or about €20 billion worth. This figure was much higher than anticipated because many of these investors were expected to either challenge Greece in court or hold out for better terms.
For Greece, the better than expected numbers highlights the success of the aggressive legal strategy to force bond holders to take up the exchange even though they would accept a big loss in the process. Seen at first as a risky gambit that could end up badly, the take-it-or-leave-it approach — mixed in with tough rhetoric from public officials in Greece and Europe — proved to be highly effective as it forced even the most reluctant investors to tender their bonds.
The value of Greek 10-year bonds had shortly before hit a record low of 16 cents on the euro.
When the bailout was finalized on March 14, European officials said that if the reform program is successful, Greece’s debt level by 2020 could equal 116.5 percent of gross domestic product.
However, European officials said that Greece needed to do more to crack down on tax evasion. While acknowledging that Greek authorities made strides in 2011, collecting 946 million euros ($1.2 billion) in back taxes, Horst Reichenbach, the head of the European Commission’s task force on Greece, said it was a fraction of the potential in Greece, where tax evasion is endemic.
Concern Grows in Greece Over the Bailout
Even as the European Union signed off on the bailout deal for Greece, many people in Athens saw no end to their country’s woes.
The deal was reached amid a growing air of stalemate and concern. Greece’s foreign lenders expressed doubts that the new austerity measures the Greek Parliament passed — including a 22 percent cut to the private-sector benchmark minimum wage — would actually be carried out, at least before early national elections in the spring.
Others were concerned that in the fine print of the 400-plus-page document, Greece relinquished fundamental parts of its sovereignty to its foreign lenders, the European Commission, the European Central Bank and the International Monetary Fund.
While their country’s fate was being decided in abstract, high-level negotiations, many Greeks said they had begun to feel that the debt writedown and new loan is aimed at saving the banks more than the country and its citizens.
Privately, Greek and European officials said they did not believe that Greece’s increasingly weak political class would have the will or the time to carry out the new austerity measures, which they say require complex legal expertise and cooperation among ministries in a state that lags in administrative capacity.
May 2012 Parliamentary Elections
In the May vote, the center-right New Democracy gained 111 of Parliament’s 300 seats, and the socialist Pasok party won 42. The Coalition of the Radical Left, called Syriza, which opposed the terms of Greece’s agreement with its foreign lenders, won 50 seats, dominating in all major metropolitan areas. In a sign of the depth of the social turmoil here, the far-right Golden Dawn party, whose members perform Nazi salutes at rallies, pulled in 6.8 percent of the vote — compared with less than 1 percent in 2009 — enough to enter Parliament for the first time with 21 seats.
The vote raised fears across Europe that Greece would back away from the debt deal, which requires that a new round of budget cuts equal to 5 percent of GDP be adopted in June. A second default by Greece could undermine banks across the continent that hold its debt.
One by one, the leaders of the chief parties tried and failed to form a coalition, as the leader of Syriza, Alexis Tsipras, said that he would not work with either New Democracy or Pasok unless their leaders repudiated their support of the debt deal. President Karolos Papoulias made a last-ditch appeal for the parties to form a unity government, but that also failed.
Leaders in Germany and elsewhere in Europe made clear that as far as they were concerned, a Greek departure from the euro was no longer unthinkable — and far more likely than additional aid.
And depositors were voting with their feet, pulling billions from Greek banks to protect against the losses that would accompany a switch to a depreciated drachma. The head of the new caretaker government said the central bank had warned of “a great fear that could develop into a panic.”
Fear of ‘Drachmageddon’
In the weeks following the May 2012 elections, talk of “drachmageddon” could be heard in conversations all around Athens — despite the fact that 80 percent of Greeks said they wanted to stay with the euro.
Any departure from the euro, if it did occur, would not come quickly, even if a new government repudiates Greece’s bailout terms; orchestrating the exit would be legally complicated and lengthy. European leaders may also move to prevent a Greek default or exit at the 11th hour, considering the almost unending uncertainties.
But few people are taking chances.
Big tourism operators like TUI of Germany and Kuoni of Britain were demanding the addition of so-called drachma clauses to contracts with Greek hoteliers should the euro no longer be in use. British newspapers were filled with advice columns for travelers worried about the wisdom of planning a vacation in Greece, or even Portugal and Spain, should the euro crisis worsen. Large multinational companies like Vodafone Group, Reckitt Benckiser and Diageo have taken to sweeping cash every day from euro accounts back to Britain to limit their exposure.
But coming up with a Plan B is proving difficult for Greek businesses, especially smaller ones. There are so many unknowns involved that many of them cannot even conceive of how they would cope. Economists say the drachma would be devalued by an estimated 50 to 70 percent compared to the euro.
Tens of thousands of Greek businesses could collapse from one day to the next, said Constantine Mihalos, the president of the Athens Chamber of Commerce and Industry. Around 85 percent of Greek companies employ fewer than 10 people, and many are already near bankruptcy as the Greek economy nose-dives and bank credit dries up.
With a devalued currency, inflation would rise rapidly, and Greek companies would struggle to pay the euro-denominated bills of their suppliers. Trade with other countries would slow sharply for a while, as suppliers halted deliveries, further crippling Greek businesses that depend heavily on imports.
Even large Greek exporters who might benefit from a devalued currency are opposed to a return to the drachma, fearing damage to the country’s image as a place to do business.
The troubled Greek banking system, which is already running on fumes, would face a serious run as depositors pulled their funds. An estimated 250 billion euros, or about $315 billion, has already left Greek banks since the crisis first broke open three years ago.
The International Monetary Fund estimates that a Greek exit from the euro would lop more than 10 percent from Greece’s gross domestic product for at least the first year after a return to the drachma.
After that, the thinking goes, a new dawn would break, as the weakened Greek currency lowers the cost of Greek labor and products like olive oil. As was the case in Argentina, businesses and consumers in other countries would eventually start buying Greek goods and services once they improved in value.
Aside from shipbuilding, most of Greece’s industrial base has eroded in the 30 years since the government nationalized large areas of industry following a seething civil war. Wealth-generating businesses diminished, and tens of thousands of laid-off workers were absorbed by the state to reduce unemployment.
Today, Greek exports of manufactured products account for only 10 percent of gross domestic product, compared with a 30 percent average for the rest of the euro zone. In addition, Greece’s adoption of the euro hastened a steady shift away from agricultural production. Today, Greece imports nearly 40 percent of its food, most of its medicine and almost all of its oil and natural gas.
Cracking Down on Illegal Immigrants
With its position on the southeastern flank of the European Union, Greece has long been the most common transit country for impoverished migrants from Africa, Asia and the Middle East. But the global economic malaise and the revolutions of the Arab Spring have sharply increased the flow of migrants, and the government has been calling for more help from the European Union.
The growing population of immigrants in Greece — about 800,000 are registered, and an estimated 350,000 or more are in the country illegally — adds to the anxieties of many Greeks, who are seeing the government’s once generous social spending evaporate. They complain that the foreign residents are depriving them of jobs and threatening the national identity.
Such frustrations have been exploited politically, notably by Golden Dawn, a far-right group that has been widely linked to a rising number of apparently racially motivated assaults but vehemently denies being a neo-Nazi group. Once obscure, it drew 7 percent of the vote in the June elections.
A new report by Human Rights Watch warned that xenophobic violence has reached “alarming proportions” in parts of Greece, and it accuses the authorities of failing to stop the trend.
In early August, a vast police operation in Athens aimed at identifying illegal immigrants found that, of 6,000 people detained over the weekend, 1,400 did not have proper documentation, leading the minister of public order to say that Greece was suffering an “unprecedented invasion” that was threatening the stability of the nation.
The minister, Nikos Dendias, defended the mass detentions, saying that a failure to curb a relentless influx of immigrants into Greece would lead the country, which is surviving on foreign loans, to collapse.
Economy Continues to Contract
Official data released in August showed that the Greek economy continues to contract rapidly, a painful reminder of how Greece is chasing a moving target in trying to meet its bailout obligations.
Gross domestic product slid 6.2 percent in the second quarter of 2012 from a year earlier, the Hellenic Statistical Authority reported in Piraeus. That followed a 6.5 percent year-over-year contraction in the first quarter.
Sarah Hewin, an economist at Standard Chartered Bank in London, said the second quarter had been a fraught time, with two parliamentary elections, tough austerity measures and a flight of deposits from Greek banks all weighing on confidence.
She noted that the Greek economy, which was stumbling even before the collapse of Lehman Brothers in 2008, has shrunk almost 18 percent since the April-to-June quarter of that year, a decline that suggests economic depression. So far, there appears to be little reason for optimism, with the unemployment rate in May 2012 reaching a record 23.1 percent, up from 22.6 percent in April. The jobless rate among youth has reached almost 55 percent.
Rise in Right-Wing Extremism
Just a few months ago, the name Golden Dawn was something to be whispered in Greece.
But, since July 2012, after the extremist right-wing group won an electoral foothold in Parliament, talk of Golden Dawn seems to be on everybody’s lips.
In cafes, taxis and bars, Greeks across the political spectrum are discussing the palpable surge in Golden Dawn’s popularity, which has risen in recent political polls even as the group steps up a campaign of vigilantism and attacks against immigrants.
The poll gains come amid growing disenchantment over rising illegal immigration, and with the government of Prime Minister Antonis Samaras, which is being forced by its international lenders to push through $15 billion in additional, highly unpopular, austerity measures. If Greece were to hold new elections soon, Golden Dawn could emerge as the third largest party in Parliament, behind Mr. Samaras’s New Democracy and the left-wing Syriza. Currently, Golden Dawn is the fifth largest, with 18 out of 300 seats.
Golden Dawn’s tactics are similar to ones it used in the run-up to parliamentary elections in June. Preying on fears that immigrants are worsening crime rates and economic hardship, the group has been stepping up attacks against immigrants, many of whom are legal citizens, with the police frequently standing by. It is also trying to expand its reach with the Greek diaspora.
The group recently opened an office in New York City, announcing its presence with a sleek Web site depicting a stylized Swastika against a darkened Manhattan skyline. The Web site was disabled by hackers less than a day later and remains down, and the American Hellenic Educational Progressive Association condemned the group’s outreach, saying that “fascism has no place in the United States.”
Golden Dawn has also established an outpost in Australia, where Greeks have been emigrating by the thousands to escape the crisis in their homeland.
The group is still far from being a major threat to Mr. Samaras’s party, or to his fragile three-party coalition government. Most Greeks express alarm at the group’s rise, and anti-fascist organizations in Athens are continuing efforts neighborhood by neighborhood to counter its increased vigilantism.
Investigations of Corruption
In September 2012, the Greek news media published a list of 36 politicians who were ostensibly under investigation on corruption charges. It included the speaker of Parliament, who temporarily stepped down on Sept. 24, and several former ministers and mayors. It was also believed to include Leonidas Tzanis, 57, a Socialist politician and former deputy minister. Mr. Tzanis’s wife found him dead in the basement of their house, where he had apparently hanged himself on Oct. 4, days before he was expected to testify to the authorities, the Greek news media reported.
Greece’s financial crimes unit has not confirmed the existence of the list but has not denied that it is investigating politicians for corruption. It did not respond to requests for comment.
In another investigation, the authorities are looking at a list of 54,000 people who transferred nearly $29 billion abroad since 2009 and, in 15,000 cases, declared income significantly smaller than that found in the foreign accounts.
Government at Odds Over a Missing List of Names
A missing list of nearly 2,000 Greeks with Swiss bank accounts was rapidly turning into a full-blown political crisis that was imperiling Greece’s fragile coalition government at a crucial time.
When the Greek finance minister and one of his predecessors said in September 2012 that the list was missing — and another former finance minister then said he had belatedly handed it over to the authorities — the story was seen as an almost laughable caper. But amid other high-profile corruption investigations that have opened in recent weeks, it assumed a darker cast.
The corruption investigations are seen as a gloves-off fight, with politicians breaking allegiances in a destabilizing climate of suspicion and even blackmail. The same people singled out in the investigations are in the parties that form the pillars of Mr. Samaras’s government — a government blessed and supported by European leaders — and it remains to be seen how much self-examination, and how many criminal charges, it will take before the entire structure collapses.
The investigations have also revealed the close ties between Greece’s political establishment and its oligarchs and business elite. There is growing public outrage that no Greek government wanted to touch the infamous list of 1,991 Greeks with accounts at a Geneva branch of the global bank HSBC that the French government gave Greece in 2010 to crack down on tax evasion.
Widely Differing Accounts
After the Greek finance minister told The Financial Times in September 2012 that the bank list appeared to have gone missing in the Finance Ministry, one of his predecessors, George Papaconstantinou, gave an interview on Greek television saying that he had received the list in late 2010 from Christine Lagarde, then the French finance minister and now the managing director of the International Monetary Fund. He said he had given a handful of names from the list to the chief of Greece’s financial crimes unit in early 2011 and the full list to that official’s successor, Ioannis Diotis, in June of that year.
Speaking to Parliament’s ethics committee in early October, Mr. Diotis said he had received a memory stick with the names from Mr. Papaconstantinou in June 2011, the month the finance minister left office. Mr. Diotis said that he had passed the list to Mr. Papaconstantinou’s successor, Evangelos Venizelos, the current Socialist leader, but that Mr. Venizelos had not instructed him to investigate it. Mr. Diotis also suggested that the list appeared to have been obtained illegally and might not have been usable in an investigation.
On Oct. 8, the committee said it would summon the current and three former finance ministers to testify about the list. In a television interview in early October, a furious Mr. Venizelos said he had handed the memory stick to Mr. Samaras when he realized that no investigative agencies had a copy. He said he never received the list from Mr. Papaconstantinou.
Beneath the Veneer of Normalcy, a Nation Unraveling
As the economic crisis grinds along in Greece, austerity is fraying the bonds of civility, forcing long-submerged divisions to the surface.
Members of the neo-Nazi Golden Dawn party, who are widely seen to have the support of the police, clash violently with leftists and immigrants, raising fears of the precariousness of the rule of law. But the discord is not confined to them.
Lawmakers, increasingly mired in corruption scandals that alienate the public, curse one another in Parliament. Friends fall out, disagreeing over how deep the country’s troubles run and who is to blame.
The divisions are not only political. With unemployment at 25 percent, and exceeding 50 percent for young people, tensions are rising between generations, public- and private-sector workers, haves and have-nots.
As the talks drag on between the government of Prime Minister Antonis Samaras and Greece’s foreign lenders over politically toxic new austerity measures in exchange for more aid, the news media are filled every day with leaks about possible cuts to salaries and pensions, leading to a state of constant, low-grade panic.
Mr. Samaras recently provoked public outrage when in an interview with a German newspaper he likened Greece today to Weimar Germany, referring to the fragile democratic republic in which fascists and Communists fought for power while the political center eroded before Hitler came to power.
Critics warn of a climate of intimidation against journalists. Those who are seen as representing the business elite often need security details to protect them from angry citizens. Investigative reporters for Reuters looking into the Greek banking system said they were followed, Reuters reported.
Public Rage in Athens Over Merkel Visit
Earlier in October, Chancellor Angela Merkel of Germany visited Athens in a show of solidarity with the country. While Greek authorities sought to shield her from rowdy protesters who see her as the arch-villain of the euro crisis and their national pain, Prime Minister Samaras greeted her as “a friend of Greece.” He tried to reassure the Greek people that Ms. Merkel was not here “as a teacher, to give grades” but rather “as a good friend and a real partner.”
Unpersuaded, furious Greeks held rallies and protests that included a job walkout by civil servants, including teachers and doctors. Some banners read “Don’t cry for us Mrs. Merkel” and “Merkel you are not welcome here.” A group of protesters burned a flag bearing the symbol of the Nazi swastika while protesters dressed in Nazi-style uniforms drew cheers of approval as they rode a small jeep past a police cordon.
Ms. Merkel’s visit stood as the high point thus far of her recent efforts to show a renewed dedication to European solidarity after years of harsh words and increasingly strained relations within the bloc. At a joint news conference with Mr. Samaras, Ms. Merkel said Greece must make good on its commitments to creditors but acknowledged the suffering that the Greek people had endured as the government forced through deep spending cuts in the midst of a recession that has lasted for years. But she said the country was headed in the right direction. “I am convinced that the path, which is a difficult path, will lead to success,” Ms. Merkel said.
Nationwide Strikes to Protest Austerity Cuts
On Sept. 26, clashes erupted in Athens as unions called a nationwide strike to protest the plans for new cuts.
On Oct. 18, tens of thousands of Greeks joined a second nationwide strike, moving to bring the country to a near-standstill in a bid to show European Union leaders meeting in Brussels that new austerity cuts being demanded by Greece’s lenders would cripple society and further depress the economy.
Protest rallies in Athens began peacefully but were disrupted when demonstrators broke away from the crowd near Syntagma Square outside Parliament and threw rocks, bottles and firebombs at the police, who responded with tear gas. A police spokesman said 40,000 people joined rallies in central Athens, while organizers put the figure at around double that. Smaller rallies were held in other Greek cities, including the ports of Thessaloniki and Patra, in northern and western Greece.
Editor Not Guilty in Publishing Names With Swiss Accounts
Kostas Vaxevanis, the owner and editor of a respected investigative magazine was acquitted on Nov. 1, 2012, on charges of breaching privacy laws in publishing the names of more than 2,000 Greeks believed to be holding accounts at a bank in Switzerland. The case tested news media freedom in Greece and fueled a scandal over whether officials failed to aggressively pursue people suspected of evading taxes.
The verdict came four days after a phalanx of police officers arrested Mr. Vaxevanis, as his magazine, Hot Doc, hit newsstands with the list. Before a packed court, Mr. Vaxevanis and his lawyers portrayed him as the target of a politically motivated campaign aimed at damping the public anger at Greek officials.
The list that Mr. Vaxevanis obtained and published was handed to the Greek authorities two years previously by Christine Lagarde, then the French finance minister and now the head of the International Monetary Fund, to help Greece crack down on tax evasion as it was trying to mend its economy. The list held names of 2,059 Greeks who held accounts at a Geneva branch of the British bank HSBC, which includes a former culture minister, several employees of the Finance Ministry and a number of business leaders. “The court finds the defendant innocent,” Judge Malia Volika said in handing down the decision.
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