(GREECE) – A 60-year-old man and his 90-year-old mother jumped together off the roof of their apartment building in central Athens. In what appeared to be a suicide note, the man referenced the financial crisis, and his own illness, as reasons for their decision. (Kathimerini English edition, May 25, 2012). Earlier, reports circulated of two separate suicide jumps from the Corinth canal bridge.
These are individual incidents, and despair occurs in all cultures, but each day seems to bring more signs of stress in Greek society, stress that has no simple answer.
Turmoil
Pharmacists went on strike across the entire country for one day last week. They were protesting that they had not been paid. People bring prescriptions to pharmacies to be filled, and the government is to reimburse the dispensing pharmacist, but they are upwards of €250 million behind. The government is also attempting to reduce the total amount spent on medicines from €5.5 billion to €3.8 billion this year, a 30 percent reduction. There are also claims of drug shortages for many critical drugs (Kathimerini English edition, May 22)
However there may be more going on.
Thomas Friedman famously consulted a taxi driver for perspective on world trends, so perhaps I can be forgiven for consulting a hotel desk clerk and a bus driver. They suggested to me that the reason the government can contemplate such major cuts to drug expenditures is that there is rampant corruption in the system with many bogus prescriptions being presented and filled by companies. That the government has been struggling for months to implement a national system of tracking prescription fulfillment lends credence to that idea.
However, ordinary people are being caught in the transition to a tighter system. The reductions in covered prescriptions are leading many with chronic conditions to go without drugs amid considerable suffering (Financial Times, May 24).
Greece’s budget deficit is regularly presented as massive and out of control, but two stories this week suggested how close the country could be to a more stable situation.
Tourism is nearly one fifth of the nation’s economy, and tourism is down by as much as 15 percent. Naturally, some tourists in general, and German tourists in particular, are worried about the risk of going to Greece. Moreover, people from countries like Italy and Spain are simply not traveling anyplace due to the financial crisis in their own countries. And the London Olympics are thought to be reducing tourism to the continent. Should Greece have a banner year for tourism, one above the long term trend, it might cut the budget deficit by up to half.
Greece has suffered from chronic tax evasion for years, and Greece’s wealthy citizens (including ship owners who are legally exempt from certain taxes by provision of the constitution) seem to be in hiding and not stepping up to contribute to charity or to propose any higher taxes. The total amount of taxes in arrears is nearly half the annual budget deficit (International Herald Tribune, May 24).
Greeks are taking money of out banks and hiding it in their homes, leading to an increase in burglaries.
So where are things going?
The plan
Last week, I suggested that no one had a plan to solve the crisis. I was wrong, both Greece and European nations have, in fact, the same plan: play chicken. I thought of this analogy a while back, but both Martin Rhodes (Athens News, May 18) and the historian Niall Ferguson (London, the Sunday Times, May 12) beat me into print with it.
It works like this: Greece threatens to leave the Euro, default on its debts to Europe and points to the Eurozone unraveling in consequence. “Give us support, change the terms of the treaty, or Spain and other countries will follow us out, and you’ll be left holding the debt.”
From the European side, the threat goes like this: “follow the terms of the austerity program or we’ll throw you out of the Euro and your country’s banking system will collapse, the new drachma will deprecate to nothing and your country will be a basket case.”
Unfortunately, the dire consequences of both threats could well prove true and you will notice that both sides threat is the same: Greece leaves the Euro.
Just last Thursday, Germany’s Bundesbank struck a hard line, saying, “A significant dilution of existing agreements would damage confidence in all euro area agreements and treaties and strongly weaken incentives for national reform.” (Financial Times, May 24). One wonders whether or not having untold thousands of people decide their government, and the government of their neighboring countries, has abandoned them to sink into near-destitution would “damage confidence.”
From the Greek side, Alexis Tsipras seems to have pinned his hopes on a German “blink.”
Despite the continuation of this sort of rhetoric, in the last few days it seems there are signs that both sides are coming to realize that without change they’ve locked themselves into a Greek exit from the Euro, with unpredictably bad consequences for everyone.
Rising Greek political star Alexis Tsipras seemed to reverse course and traveled to France and Germany seeking to persuade voters and governments into modification of the terms of the austerity program. Tsipras is portrayed as an anti-Europe firebrand. That he would, less than a month before election day, take time to woo Europe is significant. At one level his trip was a farce, with no major party leader being willing to be seen with him. But it was reaching out to Europe and delivering a message that even he was not anti-Europe nor anti-Euro.
The efforts of new French president Hollande to push for so-called Eurobonds has also now put the topic of new efforts to save Greece on the agenda. This has changed the debate, even though his initial efforts were fruitless.
It also was reported this week (Financial Times, May 22) that the European Central Bank in Frankfort has extended €100 billion of liquidity to the Greek banking network. This was more or less a complete secret. The injection of liquidity was widely reported here, but described as an effort by the Greek government. This action by the Central Bank indicates the degree of concern in some European circles to keep Greece afloat.
But there are signs that the Eurozone is already planning on the departure of Greece and perhaps other countries.
Breaking up is hard to do … and in progress
There are indications that many financial players across Europe have decided that a Greek exit from the Euro is probable or even certain. Banks are starting to match assets to liabilities by country: attempting to make, for example, their liabilities in Spain no larger than the Spanish assets they hold, in essence treating Spanish Euros as if they were a different currency than German or Italian Euros.
The same Bundesbank quoted above has also indicated that a Greek exit might be “manageable,” which is one way of opening space to discuss how the exit might be accomplished.
And Niall Ferguson, in the article referenced above, voiced the view that such a breakup was going to happen at some point anyway – that without a political union, the monetary union was doomed to failure. That view has been expressed in various editorials this week across British and Greek papers.
When you say the relationship had no chance, it’s a sign you’ve given up, and a formal breakup is on the way.