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talkpoliticsScenario #1.
It's May 2011 and Athens is baking in the morning summer sun. Exactly a year ago, EU and IMF gave the 110 billion euro to Greece, trying to help her get out of the shit, which was threatening to bring ruin to the entire Eurozone. But all this now seems like decades ago. In the last 12 months, the country and the Greek people have made a dramatic U-turn and those shrieky voices who used to predict armageddon have crawled back into their cellars, awaiting the next occasion to creep out.
The PM Papandreu is featuring on the "World's Top 100 Most Influential People Of 2010" at the Times magazine. In Boston and Oxford, all microeconomics schoolbooks are being withdrawn and rewritten in order to accommodate the new key chapter about the 'Greek Miracle'. Dominique Strauss-Kahn, the IMF chairman, is about to return to his home country, France, where he's planning to start a presidential campaign against the incumbent Nicolas Sarkozy, heavily relying on his newly gained laurels as the man who successfully steered Greece out of the financial maelstrom... In her turn, Angela Merkel who used to be in huge trouble with her constituents for using their money to bail out Greece, is again comfortably sitting at the Throne of Europe.
Well sure, there used to be some problems in Athens at first. Nationwide strikes and giant demonstrations which used to degrade into outright violence every now and then, hundreds of gallons of Molotov cocktails carpeted the central streets of Athens and Thessaloniki, and the country had been paralyzed for some time in May 2010. But that was expected - the state bureaucrats were going to have their salaries cut after all; the pensioners became poorer than they were before; the VAT hike was a direct blow on the small businesses... Etc.
But in the year that followed the harsh reforms, the Greeks more or less grew accustomed to the new realities. Unemployment increased just a little - from 11.6% to 13%, but that's nothing compared to the 20% in Spain, duh. Sure, a few small shops closed doors here and there, and the economy shrank a bit. But at the end of the day, the taxes finally began to get collected conscientiously, new factories opened up and productivity increased.
And more importantly, the real shift actually happened inside the heads of the Greeks. That wasn't easy, after decades of excessive lifestyle. But eventually they started living more modestly, without spending way beyond their means. The gas excise increase taught a lot of people to use public transport, instead of owning two and a half cars per household. The sluggish social services were substituted with the vibrant voluntary services.
The 2012 forecasts are looking fairly good. By the way Spain and Portugal were also spared somehow, and we might have all reasons to expect brighter days.
Scenario #2.
It's May 2011 and the blinding Athens sun is concealing the dark secrets of the life of Athenians. Compared to exactly a year ago, the country is now unrecognizable. Unemployment has reached 17% and that among young people has surpassed 26%. This has been the main reason for the huge emigration of young people. The New York, London, Amsterdam and Frankfurt airports are regularly flooded with poor, desperate Greeks who want jobs, any jobs. The economy has shrunk by 15% and the forecasts point at a continuing shrinking throughout 2012 as well. Thousands of people are unable to pay back their credits; a number of banks are on the brink of bankruptcy; uncertainty urges people to spend their dwindling money only for the most urgent necessities. Barter trade has come back in the 21st century. The strikes and demonstrations are an everyday thing, the country is often totally paralyzed by them, and they often turn violent; many state services are practically non-available. The borders to all northern neighbors are sealed because the farmers in northern Greece have blocked them again with their tractors, demanding their unpaid subsidies. IMF assesses the share of gray economy to somewhere between 35 and 45% of the GDP.
The PASOK government has found itself engulfed in the 'perfect storm', half of the cabinet have resigned, the opposition demands emergency election but there's no money for that right now. Rumors say the PM Papandreu is roaming somewhere on 'vacation' around the Alps, trying to 'clear his mind'. The uncovering of the most recent corruption scandal involving top ranking officials from PASOK and government members has brought tens of thousands of protesters to the streets, and everything ended with the death of 9 students and 2 cops. On top of that, the traditionally strong leftist anarchists on the island of Crete want to secede because the locals are fed up with Athens 'stealing all their money'. They want to build a communist republic relying on the olive industry and tourism, and they want nothing to do with Athens. Papandreu has responded by sending the military, imposing curfew in the city of Heraklion and banning all gatherings of more than 10 people.
The EU and IMF bail out supervisors are advising stopping the sending of further installments. Apparently the money is sinking into a broken bucket. Angela Merkel is under immense pressure from her own government to get rid of Greece - Greece should be kicked out of the Eurozone, and her national debt be restructured as much as possible, all state assets sold out, the social system scrapped, etc.
Scary, eh? Surely, neither scenario is totally viable, is it? Or maybe it is? Will Greece survive and rise like a phoenix out of the shit pile, after months and maybe years of painful privation? After all, history abounds of such examples. Or would the country collapse under the weight of these incredibly tough reforms, which are too radical for the pampered, lazy Greeks, and too ambitious for their crippled middle class, which is obviously going to carry the bulk of the burden?
The only ones who can answer this question, and the only ones who will determine how Athens will look like in May 2011 are no-one else but the Greeks themselves. From the prime minister to the ordinary tax payer. Many are saying that the country is now in a post-modern form of foreign occupation, and quite a necessary one at that. But actually, this could be the first time in many decades that the choice between Scenario #1 and Scenario #2 is totally in the hands of the Greeks.
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Date: 10/5/10 13:31 (UTC)(no subject)
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Date: 10/5/10 18:16 (UTC)I really doubt they can get private money either, once you're caught lying about your finances you won't find many private lenders willing to go in at anything less then junk bond rates.
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Date: 10/5/10 15:38 (UTC)The crisis is really about Portugal, Spain, Italy, and Ireland. If something like scenario 2 applies to one or more of them, this is a problem. If they see something more like scenario 1, the Eurozone has a future.
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Date: 10/5/10 18:05 (UTC)(no subject)
Date: 10/5/10 15:54 (UTC)Don't get me wrong, I have no problem with a welfare state, but it has to be reasonable and affordable.
I would go with scenario 3. The economy improves worldwide which helps to bridge the gap all on its own. Greeks get riled up for a short time about the cuts before mostly forgetting about them as they are not that severe. The loans get paid back, though it takes a bit longer than people think.
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Date: 10/5/10 19:56 (UTC)Btw, 14 paid months is cool, man! :-)
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Date: 10/5/10 15:56 (UTC)Let's tie the German economy, one of the strongest and most productive in the world, to a series of marginal states with diffident fiscal polices at best. What could possibly go wrong?
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Date: 10/5/10 18:14 (UTC)the productive giving to the non-productive? this always results in a good, happy outcome.
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Date: 10/5/10 17:29 (UTC)"Jesus Christ, poor Lou Gehrig. Died of Lou Gehrig's disease. How the hell did he not see that coming? You know. We used to tell him, Lou, there's a disease with your name all over it, pal! "
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Date: 10/5/10 19:58 (UTC)(no subject)
Date: 10/5/10 20:10 (UTC)(1)
Date: 10/5/10 20:57 (UTC)Glad you mentioned the subsidies. The lack of transparency, clientelism and the total corruption and mismanagement of state and EU subsidies is what brought Greece on its knees. That, and the grand foreign speculations that i mentioned about earlier (http://community.livejournal.com/talk_politics/449338.html).
Ever since '81 when Greece joined the EU, the Greeks have always heavily relied on these subsidies and they've consistently made up about 4-5% of their GDP (that number dropping somewhat in the 00s). For those 30 years, Greece received ca. 240 billion Euro of subsidies, which roughly equals their entire expected 2010 GDP!
But most of those funds were serving clientelism rather than the motivation of economic effectiveness. Those funds were not being managed properly: instead of using them for increasing competitiveness and productivity, they were being diverted towards stimulating over-consumption.
There were many scandals in the 80s and 90s, related to these misappropriations, especially in the farmer industry that you mentioned. The farmers used the money to buy limos and to repair their houses, and they put their relatives to manage the production process in the EU-subsidised factories. There were also Ponzi schemes that sucked up money without doing anything essential. Like the recently discovered one, where a state school of dance and theatre was sucking 1/3 of all sums which were supposed to be used for cultural activity, without providing any. And thats just the most recent example. Meanwhile, several consecutive governments, regardless of their proclaimed political affiliations, were turning a blind eye to this because they were getting a share of the pie too...
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Date: 10/5/10 21:08 (UTC)Re: (1)
Date: 10/5/10 21:12 (UTC)Re: (1)
Date: 10/5/10 21:21 (UTC)Re: (1)
Date: 10/5/10 21:23 (UTC)(2)
Date: 10/5/10 21:04 (UTC)There was a total lack of control in Greece, but paradoxically, not in EU. Because when Maastricht was adopted in '93, EU had a strict mechanism for controlling and managing those subsidies. But that still didnt stop Greece from cheating. A Transparency International investigation showed that the main factor for the Greek collapse is exactly the lack of transparency: almost 790 million in bribes in '09, a 50 million increase for just one year (since '08)! The most affected state sectors being health care, city planning services and the tax administration.
Granted, Papandreu has stated several times since he came to power for the umpteenth time in October, that ending clientelism is priority number one in order to restore financial health. I kindof dont buy that, given the fact he has himself been part of all this over many periods before, and he's deep in the shit too. Last week he criticised the management of state funds and EU subsidies which, instead of being used for development, had been used for buying fancy houses, posh cars and living in pompous indolence. Thats ironic, to say the least.
All said, the current situation could truly serve as a waking shower for all those people who had gotten so used to laziness and cheating. But changing their habits, mentality and behaviour could turn out to be a much trickier thing, that those naive "poodles" in Europe, as you like to call them, might not be fully able to fathom. Everyone steals, including the poodles, but they do it with finesse and not in such amazing quantities. Greece just crossed way beyond the line.
So the tough reforms may work initially, but achieving a long-term shift in the way things are being thought and done in Greece is the real trick, and knowing the Greeks somewhat (having worked there for a time), unfortunately i dont see that coming soon.
I just hope this won't affect your country too badly, though the first signs are becoming noticeable: many of your banks are branches of Greek banks, and though a part of the EU measures is blocking the mother banks from sucking up all resources from their branches abroad to save their own asses, there still is some risk. Also, your tourism could suffer a bit. On the other hand, you might've noticed already how much cheaper it has become to spend a vacation in Greece ;)
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Date: 10/5/10 21:15 (UTC)Re: (2)
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