A year after the crisis was declared over, Greece is still spiralling down
The historic third bailout awarded to Athens after weeks of brinkmanship last year was supposed to have secured its future in the EU. But little has changed
In a side street in the heart of Athens, two siblings are hard at work. For the past year they have run their hairdressing business an enterprise that was once located on a busy boulevard out of a two-bedroom flat. The move was purely financial: last summer, as it became clear that Greeks would be hit by yet more austerity to foot the bill for saving their country from economic collapse, they realised their business would go bust if it continued operating legally.
We did our sums and understood that staying put made no sense at all, says one sibling. If we didnt [offer] receipts, if we avoided taxes and social security contributions, we could just about make ends meet.
They are far from being alone. A year after debt-stricken Greece received its third financial rescue in the form of international funding worth 86bn, such survival techniques have become commonplace. For a middle class eviscerated by relentless rounds of cuts and tax rises the price of the countrys ongoing struggle to avert bankruptcy the draconian conditions attached to the latest bailout are invariably invoked in their defence. Measures ranging from the overhaul of the pension system to indirect duties slapped on beer, fuel and almost everything in between and a controversial increase in VAT are similarly cited by Greeks now reneging on loan repayments, property taxes and energy bills.
Against a backdrop of monumental debt 320bn, or 180% of GDP, the accumulation of decades of profligacy fatalism is fast replacing pessimism on the streets. Our country is doomed, sighs Savvas Tzironis, summing up the mood. Everything goes from bad to worse.
Close to half a million Greeks are believed to have migrated since the crisis begun, thanks to the searing effect of persistent unemployment (at just under 24%, the highest in Europe) and an economy that has shed more than a third of its total output over the past six years. The nation has been assigned some 326bn in bailout loans since May 2010 the biggest rescue programme in global financial history. Yet the fear that it is locked in an economic death spiral was given further credence last week when Eurobank analysts announced that consumption and exports had also fallen, by 6.4% and 7.2%, in the second quarter of the year.
The duration and depth of the recession is such that the World Bank now compares it to the slumps seen in eastern European countries in the early 1990s. The poorest 20% of Greeces 11 million people have suffered a 42% drop in disposable income since 2009.
If we continue down this road, a fourth, even a fifth, bailout should be expected, says Aristides Hatzis, associate professor of law and economics at Athens University. I dont see any progress. The economy is stagnant, the private sector devastated, the public administration underfunded and ineffective. And there is always the spectre of Grexit at the end of the tunnel.
The 14 August bailout deal was meant to have put paid to that. Announcing the agreement after months of negotiations that not only brought Athens to the brink of euro exit but provoked the continents biggest existential crisis in recent times, EU commission president Jean-Claude Juncker chirpily announced that Greece was irreversibly part of the euro area. The 19-member currency bloc had looked into the abyss, but henceforth, he said, there was no looking back.
A year on, however, there are many who would argue otherwise.
In many ways, the Greek debt drama has disappeared in the folds of other crises now stalking Europe: in quick succession, fractious debate has moved from the influx of refugees through the Aegean islands to repeated terrorist attacks and Britains shock referendum vote to leave the EU.
The runaway train that was carrying Greeks downhill at the height of the crisis has slowed down to the point where loss and sacrifice have almost been normalised. The gradual relaxation of capital controls imposed to prevent a run on banks as fears grew that Greece might crash out of the eurozone has helped reinforce the sense that the economy has returned to a path of stability. The global lack of appetite for any more Greek drama is such that eurozone finance ministers disbursed a whopping 10.3bn in emergency loans in June and made an unprecedented promise of debt relief when the current programme finishes in 2018, on condition that Athens presses ahead with yet more unpopular reforms. The country is predicted to see growth of 2.5% next year.
No economy can withstand endless recession and stagnation, says George Pagoulatos, professor of European politics and economy at Athens University. At some point there could be a change of preferences, with forces who would want to continue outside the euro, he adds. It is anyones bet what will happen if the economy doesnt [exhibit] a strong recovery in 2017.
But few believe it will get better before it gets worse. After promising to eradicate austerity, the once popular leftwing prime minister, Alexis Tsipras, is now a reviled figure.