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Greece’s economic crisis goes on, like an odyssey without end

Last year was deeply tumultuous for the troubled country but with growing fears of social unrest, 2016 could be even more unpredicatable

When Stavros Staikos thinks of the year ahead, he expresses dread. Although stoic in demeanour, the retired merchant seaman struggles to be upbeat about his country and his own circumstances. “It’s hard to be optimistic,” he says, waiting his turn for financial advice in the central Athens branch of the Union of Consumers and Borrowers. “Who’d have thought it would come to this? Who’d have thought that at the age of 63, I’d be worried sick about losing my home.”

Like an odyssey without end, Greece’s great economic crisis goes on and the predicament of people such as Staikos is igniting new fears of social unrest.

Last year was tumultuous, punctuated by two elections, a referendum, theimposition of capital controls, negotiations to reach a bailout deal, cliffhanger parliamentary votes and Athens’ closest brush yet with bankruptcy and euro exit. But 2016 could be more unpredictable still. The hardest, many agree, is yet to come, even if Greeks have stared into the abyss and accepted there is no alternative to the constraints of membership of the eurozone.

“Just when a lot of people thought it couldn’t get worse, it seems it can,” says Toula Thanopoulou, the director of the Union of Borrowers and Consumers. “We are seeing people in really bad shape psychologically. They are incredibly scared that the next step will be banks taking away their homes. The government says all will be well, but the problem is no one believes it.”

The question now being asked, as the thrice bailed-out nation heads into its most difficult winter yet, is whether Greece will ever be able to bounce back. Six years into the country’s morale-sapping debt drama, the omens are mixed.

Ushering in the new year, prime minister Alexis Tsipras predicted that 2016 marked the beginning of the end, “a final exit from economic crisis”. With a financial lifeline sealed via an €86bn (£63bn) aid package from the International Monetary Fund, EU and the European Central Bank, the country could look ahead to radical change and “national rebirth”.

But not everyone is buying into the success story. More than 55% of Greeks signalled pessimism over the future in a recent poll. Another 61% thought their country’s enforced ejection from the eurozone remains a distinct possibility.

Alongside the rise in pessimism, the events of the past 12 months have exacerbated Greece’s economic trauma: unemployment has soared above 30% and disposable income has plummeted by more than 25%.

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However, after years of make-or-break deadlines and emergency summits, this is a nation that has learned to deal with adversity. It has accepted that, trapped in a vicious cycle of austerity and debt, salvation will not be easy as it copes with the effects of spending cuts, including hospitals and schools operating on skeletal staff.

“The risk for the country now is an anaemic recovery, unable to bring down unemployment and put the real economy back on track,” says Theodore Pelagidis, economics professor at the university of Piraeus and a fellow at the Brookings Institution thinktank.

But this year will see the Greek state and its citizens pushed further by its three lenders, who have demanded reforms in exchange for assistance. In the weeks ahead, Athens must overhaul the country’s pension system, enforce higher taxes on farmers and forge ahead with aprivatisation programme. The measures will test the resolve of Europe’s first leftwing administration to enact neo-liberal reforms.

A Syriza supporter waves the Greek flag
A Syriza supporter waves the Greek flag after Tsipras’ election victory outside Athens university headquarters. 

From being the party of resistance when it was catapulted into power last January, the anti-austerity Syriza party led by Tsipras has become the political force that will oversee implementation of the country’s most painful bailout programme.

The middle class, hit so hard by the rigours of fiscal adjustment in the form of repeated tax hikes, budget and spending cuts, will feel the pain again as the gap between rich and poor grows ever wider. Farmers, never shy of erecting tractor roadblocks, are threatening “war.” Trade unions are girding for battle and the overhaul of the pension system – seen as essential if savings worth €1.8bn or 1% of GDP are to be delivered this year – will hit households that depend on retirement income.

The prospect of banks repossessing homes – an inevitability if international creditors insist on enforcing measures reducing mortgage debtors’ protections – has further stoked fears of social upheaval.

From government quarters, defiance is already being heard. Tsipras recently declared his opposition to the continued participation of the IMF in Athens’ bailout programme when current aid disbursements expire in March. In advance of the new round of negotiations over the bailout reforms, he announced at the weekend that his coalition government, in partnership with the populist rightwing Independent Greeks party, would not be caving in to “unreasonable and unfair demands”.

Retirees have suffered 12 cuts in monthly pension payments since the outbreak of the crisis, with ministers expected to argue that it is not uncommon for entire families to be forced to rely on pension income. At 41, Tsipras is Greece’s youngest leader in modern times and has proved to be a wily tactician. This was underlined by his ability to turn an overwhelming no to austerity in July’s referendum on EU-dictated measures into a humbling yes barely days later. A lacklustre opposition has also helped him along the way.

Unless the centre right opposition party New Democracy ushers in a new era when it undergoes a leadership contest on 10 January, the former communist will remain the dominant figure on the Greek political scene. But Tsipras himself opposes the reforms and the majority of his own MPs are against the measures. In the dissonance that has erupted since his re-election in a snap poll last September, his parliamentary presence has been whittled down to a majority of three. Even if reforms are turned into legislation, there are few who believe they will be implemented or attract the foreign investment that will lead to growth.

“I cannot see how this government can survive the reforms. And I cannot see how it can avoid these reforms,” says Aristides Hatzis, an associate professor of law and economics at Athens university. “I think this government will face insurmountable problems in early 2016.”

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Hatzis worries that Syriza, which was perceived to offer hope last year, will soon come to be identified with despair. And because he believes rage is despair’s mirror image, he wonders where Greeks will turn next. The anti-austerity neo-fascist group Golden Dawn has emerged as a significant political force even if its appeal appears to have peaked. Latest opinion polls have put the once indomitable Syriza at just above 18% – less than half its ratings six months ago.

Analysts agree that Tsipras will try to either consolidate his power by broadening his coalition or once again call elections.

“Politics, since the crisis, is like a meat grinder. It spits politicians out; in a split second, they can find themselves out of favour,” says Hatzis. “My greatest worry is the political and economic turmoil that will ensue if the government falls.”

Capital controls imposed to prevent the country’s financial collapse in July – bank withdrawals are still limited to €60 a day or €420 a week – are not slated to be lifted until the spring at the earliest. From showing the first signs of recovery in late 2014, the Greek economy is expected to contract again this year. Tax revenues have missed targets and deposit outflows, according to data released by the country’s central bank, have continued apace.

But the recapitalisation of banks has gone better than expected and, unlike any of their predecessors, the leftists are better placed to tackle endemic problems such as tax evasion and corruption.

Co-operation has replaced confrontation since the departure of former Greek finance minister, Yanis Varoufakis.
Cooperation has replaced confrontation since the departure of the former Greek finance minister, Yanis Varoufakis. 

After a rollercoaster ride under Yanis Varoufakis, the flamboyant former finance minister, cooperation has replaced confrontation in Athens’ relations with its eurozone partners. The firebrand Tsipras, formerly regarded as the bad boy of EU politics, now says that membership of the common currency is the best possible barrier to economic chaos, a position buttressed by Greece now being on thefrontline of Europe’s refugee crisis.

That decision, embodied by acceptance of the tough terms attached to the latest bailout deal, appears to have put an end to the tug of war that defines Greek identity as a people caught between east and west on the periphery of Europe.

“We have finally acknowledged that linking ourselves to Europe is the only way to regain lost time,” says Greece’s preeminent philosopher, Stelios Ramfos. “Lost time in the form of the centuries forsaken as a people who never experienced the renaissance. If it weren’t for Europe, its rules and directives, Greece would not be much different than Iraq.”

This may partly explain why Greece in 2016 will remain the eurozone’s weak link and why, in contrast to other bailed-out EU member states, there is no guarantee that its latest rescue programme will succeed without another bout of debt relief. This will doubtless become a further source of potential conflict with Germany, the biggest contributor of bailout funds to date.

Athens’ debt burden is expected to exceed 187% of GDP this year, a load widely viewed as unsustainable if the country is to undergo a sustainable economic recovery.

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Those given the task of saving Greece are not without blame, according to some observers. “Instead of insisting on full implementation of structural reforms during the programme’s first two critical years, creditors just poured helicopter money into Greece,” says Pelagidis. “As a result, Europe had decoupled itself from the Greek crisis by the end of 2012, but Greece was still non-reformed, over-indebted and bankrupt.”

Greece’s future stability depends on the reaction of Stavros Staikos and other citizens for whom numbers are not abstract, but biting and real. “What to say?” he shoots back when asked about the prospect of unrest. “I have a loan of €45,000, a pension that has been cut to €700 a month, bills of €300 a month and a monthly mortgage repayment of €400 a month.

“I don’t know what the future will bring. All I know is I can no longer honour the loan and I will do whatever it takes to protect my family, protect my home.”


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