After more than a year of wage and pension cuts, tax hikes and a deepening recession that has spread a cloud of gloom over Greece, Simos Menexis hoped the worst was over. But on Wednesday, international lenders forced the government to announce that more austerity would have to come so the country could keep getting its fix of international bailout loans to avoid default. Menexis, a 36-year-old telecommunications worker, says he wasn't surprised. Bad news has become the new normal in Greece. "We're living in constant uncertainty," he says. "If there was a program to boost the economy, we might have been able to hold out some hope. But the government hasn't had anything like that."
Instead, Prime Minister George Papandreou's center-left PASOK government has been in nearly non-stop crisis mode since being elected on a mandate of hope nearly two years ago. On Thursday, many Greeks responded to the latest cuts demanded by the European Union and International Monetary Fund (IMF) by going on strike. Transport workers, taxi owners, civil servants, air-traffic controllers and teachers all walked off the job, most for 24 hours. The main private-sector union, GSEE, and the country's biggest public-sector union, ADEDY, called for further strikes next month. The civil service will shut down on Oct. 5 and a general strike will be held on Oct. 19. (See photos of the protests in Greece.)
The Greek government quickly accepted the EU and IMF's newest set of demands so that auditors can return to Athens to decide if Greece can receive the latest $11-billion slice of international bailout loans. The auditors had suspended their review in early September because they were unhappy with the slow pace of enacting reforms. Since then, markets have been fluctuating over fears of a Greek default and its potential effect on the fragile euro zone.
Greek Finance Minister Evangelos Venizelos told reporters on Thursday that the situation was "extremely critical" and "dangerous." He said the government was doing everything it could to stop Greece from falling into a Argentine-style debt crisis, referring to the financial mess that withered the South American country and forced it to declare bankruptcy IN 2002.
Venizelos was sworn in as finance minister in June after the PASOK government nearly collapsed amid infighting over how Papandreou and former Finance Minister George Papaconstantinou were handling the crisis. Not long after the PASOK government won elections in October 2009, it was revealed that Greece was more than $400 billion in debt. In May 2010, Greece became the first European Union nation to ask for a bailout. Since then, the EU and IMF have approved two packages of international bailout loans totaling nearly $270 billion in exchange for harsh austerity measures. (See photos of the global financial crisis.)
Those measures have provoked riots outside parliament. Greeks say the middle class is paying for debts racked up by corrupt leaders running a hopelessly inefficient political system rife with cronyism. Cuts to public-sector salaries, as well as pension cuts and tax increases, have worsened a deep recession and pushed unemployment to nearly 17%. And now a new round of measures, which include taxing Greeks who make as little as 5,000 euros ($6,700) a year and adding a new levy on property that will be collected through electricity bills, are causing Greeks to wonder if their government has ceded control of the country to international lenders imposing ineffective fiscal policy.
George Katrougalos, a constitutional law professor at Democritus University in Thrace, says default would be a better option at this point. "The government has said yes to everything our creditors have asked for. This has resulted in an impasse that has only deepened the crisis," says Katrougalos, a former supporter of Papandreou's government who, like many former cadres disenchanted with PASOK's handling of the nation's economic problems, has turned into a critic. "The IMF predicts that our debt in relation to GDP will nearly double next year even after current austerity measures. So we have sacrifices without any kind of return."
Katrougalos is considering a legal challenge to the new tax on low-wage earners. "That's simply immoral," he says. "People will be forced to pay a tax they can't afford and then have their electricity cut off. They won't be able to pay their bills. It's like sentencing them to a kind of death." (See why it's make up or break up time for the Euro Zone.)
The government on Wednesday also announced that pensions will be cut for anyone getting more than 1,200 euros ($1,650) per month. That outraged Manolis Sarantopoulos, a 69-year-old retired pharmaceuticals salesman who has already seen his pension cut once under austerity measures. "They are cheats," he says. "I paid what they asked me to pay when I was working but they aren't paying me the pension I was promised. I need that money to live, to buy food, to pay my bills - not to go to the bar. They are forcing us to live like misers because they messed up."
Also controversial are the cuts to the public sector, which employs about 780,000 people in a country of 11 million. International creditors have asked Greece many times to streamline the bloated civil service, which the country's two main political parties have used for years to reward supporters with jobs for life. It was an especially difficult decision for PASOK, which built up the public sector during the reign of the party's founder and former prime minister, Andreas Papandreou, in the 1980s and 1990s. On Wednesday, the government, now led by his son George, announced a temporary layoff for 30,000 state employees.
The party relies heavily on public-sector unions for support during elections, and the layoffs erode the little support PASOK still has. Though opposition leaders are calling for early elections, polls show that most Greeks do not want them. Papendreou says he will do whatever he can to keep from calling early elections.
Beyond surviving the immediate crisis, Greeks - especially young ones - face a grim future. About a quarter of Greeks between the ages of 25 and 35 are already unemployed, and they face such a stagnant economy in coming years that surveys show many are trying to find work abroad. That would lead to a massive brain drain, says Lois Lambrianidis, an economic geographer at the University of Macedonia, which is the last thing the country needs if it plans to get back on its feet in the future. "This economic crisis is going to deteriorate because the Greek talent is not going to return and on top of that, those who are in Greece at the moment might decide to go abroad, too," he says. "That's a big problem for a country that desperately needs to find innovative ways to rebuild its economy."
With reporting by Nick Malkoutzis / Athens
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