Greece hasn’t hit bottom yet

June 29, 2012


— This upscale suburb of Athens offers a snapshot of a country sliding toward bankruptcy. It’s an ugly picture, as expectations of prosperity and stability vanish, and fear begins to take over.

The trendy shops in the town center looked empty during a visit this week; many stylish restaurants were said to be closed or open only on weekends; banks here, as everywhere in Greece, have been depleted over the past month by a riptide of withdrawals.

I’m here visiting Yannos Papantoniou, an old friend from graduate school who served as Greece’s minister of economy and finance from 1994 to 2001. Those were the years when everything seemed to be going Greece’s way. The deficit fell sharply, inflation declined, and real incomes and investment increased. Greece was struggling (maybe too hard) to make the numbers for inclusion in the European common currency. Next came the euro in 2002, the 2004 Olympic celebration — and then eventual disaster as Greece had to pay its debts.

Greece is a morality play in the usual telling of the European economic crisis: It’s seen as a country that elbowed its way into the eurozone and treated the new currency as a German-backed credit card. After living so far beyond their means, the Greeks are getting what they deserve, it’s argued. Even those who scold Germany’s Chancellor Angela Merkel for recommending austerity therapy have little sympathy for the Greeks.  The country seems almost like a debtor’s prison, with angry creditors jeering at its demise.

This day of reckoning for Greece may be necessary, in economic terms. But it doesn’t take account of the social cost of the unraveling here and in other distressed European nations. The norms of middle-class life that people here took for granted are beginning to come unstuck.

I gathered some loose anecdotal examples of what the recent upheaval feels like in Kifisia and, presumably, a hundred other places like it. Burglary is said to be on the rise, so many residents are adding new security to their homes. Some have purchased guns to protect their property — quite unusual in this cosmopolitan suburb.

Local firms are shrinking amid the double-digit economic downturn. Construction companies are concentrating on overseas jobs and laying off domestic workers. The tourist industry has suffered this summer as vacationers canceled plans because of fears of disruption and unrest if Greece abandoned the euro.

It’s a classic Keynesian downturn, says Papantoniou. “Failure breeds more failure.”

With less money to spend, many Greeks are delaying paying their bills or simply defaulting. And because everyone is angry with the government, Greece’s already egregious problem of tax evasion is getting worse.

At a local doctor’s office, it’s said that an embarrassed physician’s assistant tells patients there is a dual system: If the patient wants a receipt, the fee is 150 euros; if it’s a cash transaction without documentation, the visit will cost just 100 euros.

Even the off-books “black economy” is in trouble. With so little work, the illegal immigrants who once rushed to Greece are going home. The traffic is all outward bound, including money. According to Papantoniou, bank withdrawals were running an estimated 500 million euros a day in late May and early June, rising to 1 billion a day immediately before the June 17 parliamentary election. The pro-euro party won, but this hasn’t done much to restore confidence that Greece can avoid default.

What went wrong? Papantoniou offered this diagnosis in a recent economics paper: “Selfish interest prevailed. Business groups attempted to capture specific markets. Public-sector trade unions fought for preserving privileges. Tax discipline was further weakened. The welfare state was transformed into a system of endemic waste.” As the economy went haywire, support for the two major political parties collapsed.  

Eerily, when I hear people describe the downward spiral, it reminds me of descriptions of Germany at the end of the Weimar Republic, on the eve of the Nazi rise to power. The European parties that seem to be benefiting most from the current turmoil are those on the extreme right and left.

That’s not a prediction, mind you, just the observation of a worried traveler who likes Greece and wants to see it get healthy again, but can’t yet see a cure. This patient is going to get sicker for a while longer, and it’s hard to know whether the acute stage of the crisis that precedes recovery will be economic, or political,  or both.

— David Ignatius is a columnist for Washington Post Writers Group.    


cato_the_elder 5 years, 11 months ago

"The welfare state was transformed into a system of endemic waste.”

Barack Obama, in 2008: "We are five days away from fundamentally transforming the United States of America."

America, wake up.

just_another_bozo_on_this_bus 5 years, 11 months ago

Greeks have longer work weeks than most Europeans, including Germans, and the social welfare system makes up a smaller percentage of the GDP than in Germany and many other Euro countries.

Not that facts mean anything to you, cato.

jhawkinsf 5 years, 11 months ago

"Greeks have longer work weeks than most Europeans, including Germans ... " Look at their respective productivity. The index I looked at of productivity per hour worked ((EU = 100) had the Germans at 123.7 while the Greeks were at 76.3.

To me that indicates that while the Greeks were "at" work an average of 1.7 hours more per week than the Germans, the Germans were "doing" substantially more work.

just_another_bozo_on_this_bus 5 years, 11 months ago

Yes, German productivity is higher, but there are lots of reasons for that that don't include Greeks being lazy slackers who deserve the scorn of either you or cato.

jhawkinsf 5 years, 11 months ago

The problem Bozo is that you chastise cato with that little "not that the facts means anything you you" comment and then you throw out a fact that is entirely misleading. If you're going to throw out facts, then do so. But don't throw out misleading half-facts while criticizing someone for not using facts.

BTW - German productivity isn't just higher, it's a lot higher.

just_another_bozo_on_this_bus 5 years, 11 months ago

And what exactly does that higher productivity mean? Care to explain it? Does it mean that Greeks are lazy slackers who deserve your scorn?

jhawkinsf 5 years, 11 months ago

Higher productivity mean higher productivity. The "lazy slackers" comment is yours, I did not say that.

If I were to venture a guess, and it's only a guess, I'd say that the typical German worker has a much higher expectation placed upon him/her and they are living up to that expectation. The Greek worker is not expected to be as productive and is living down to that expectation.

BTW - See how that works. You ask a question and though I don't know the exact answer, I give my opinion and clearly label it as such. As opposed you who throws out opinions disguised as fact.
Would you like to explain why the German are so much more productive than the Greeks, either with facts or opinions, clearly indicating which is which?

jafs 5 years, 11 months ago

I'm curious where American productivity falls on that scale - any info on that?

jhawkinsf 5 years, 11 months ago

Sorry, Jafs. The chart I looked at only compared European countries with each other. That said, on another site I saw that Americans, on average, worked 180 hours per year more than the European average. (I'm certain some countries would have worked more than us while others work substantially less).

But as to my speculation that with greater expectations comes greater results, I would expect our total productivity to be higher given that we work more hours. Then again, we may produce less per hour worked, which might give us a higher total but a lower per hour productivity. All just guesses.

just_another_bozo_on_this_bus 5 years, 11 months ago

"As opposed you who throws out opinions disguised as fact."

Huh? I did no such thing. It's you who are taking blunt statistical measures and bludgeoning the Greek people with them.

jhawkinsf 5 years, 11 months ago

Wasn't it you who took blunt statistical measures by suggesting the Greeks worked more because they were at work more than the Germans That's very suggestive of the Greeks in fact working more than the Germans. But when given more information that I provided, a different picture is being drawn. And you chastised cato for not using facts. The truth is just about the opposite of what you suggested.

I'm not beating up the Greeks. You're the one who comes out with comments like "lazy slackers". I said no such thing. You brought those words and that implication into the discussion, not me. The reason the Greeks are so much less productive is unknown to me, and I stated that. I asked you if you could explain it, but you chose to evade the question.

just_another_bozo_on_this_bus 5 years, 11 months ago

Both cato and you consistently maintain that the cure to all the world's ills is more austerity for those who already have little, and more wealth to the wealthy.

"The reason the Greeks are so much less productive is unknown to me, and I stated that."

You don't even know what "productivity" means, or how it's calculated, but you're passing judgement on them based on this ambiguous statistic.

But hours worked in a week and the percentage of GDP spent on social welfare are pretty straightforward calculations, and are clear indications that Greece isn't in the mess it is merely because they are lazy slackers, as you and cato are clearly implying.

jhawkinsf 5 years, 11 months ago

Translation: You haven't a freaking clue as to what you're talking about so you're going to rant and rave like a child.

You keep evading the question, Bozo.

And you keep reading into other people's comments what you think they might be saying. I said nothing about austerity or what the size of their social welfare system should be. I didn't say they were lazy slackers, though this is now multiple times you've accused me of saying that, each time I've denied it. Shall I do the same to you? Fine. I'll assume you said that you think all monies spent here on education should be given to a Greek bailout. There, now it's true. How heartless of you, Bozo, taking all monies for American children and giving it to a foreign country. You must be un-American. You, Bozo, giving every dollar intended for American children. Terrible. Cruel. I'll say it again, to make it more true. You believe in giving every penny of our educational budget to a foreign country. That's what you said. Right? (In Bozo-speak). You cruel thief.

ud5 5 years, 11 months ago

the reason for the above discrepancy is due to bureaucracy, inefficiency, and worker's rights. Bureaucracy costs alot of money! Greeks can also retire early, get large payouts if made redundant and often have other benefits (high unemployment benefit payout etc) that many German workers don't get. Wages definitely need to be driven down in Greece - they are much much higher than in Portugal, and Portugal is not in the same problem. Obviously corruption and self interest is going to prevent any real change and the system will collapse. Also, when we talk about productivity and worker's rights, we talk about the normal economy. Many people who don't have contracts work very very long hours for very little money (they effectively support the distorted economy that the government produced).

cato_the_elder 5 years, 11 months ago

They certainly don't mean anything to you, bozo.

ljwhirled 5 years, 11 months ago

No, but Turkey is a member of NATO and the USAF, NAVY, ARMY and MARINES would kick the living S%^& out of poorly paid and prepared Russian soldiers.

The only real question would be if the US political establishment would allow the military to finish the job and march all the way to Moscow.

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