The Greek tragedy: no money, no hope
Despairing middle classes could be the biggest threat to Greece's future, writes Paul Mason in Athens.
By Paul Mason, BBC Newsnight's Economics Editor, Athens
9:00PM BST 24 Sep 2011
Dmitris Andreou made the last sale out of his small estate agents business in June. His wife Mary, makes her living preparing high-school students for English exams.
But her living has dried up. Their savings are exhausted, their disposable income has dropped by about 50 per cent in two years, and they are angry.
"Some days we only buy the basics and a few days lately we were not able to buy even those. We have to count our cents to decide between buying bread, milk or butter," says Mary.
"Some days are better, but some are difficult. We don't buy clothes any more. People don't go out. There is simply no money around out there."
In their neat apartment in an Athens suburb, surrounded by family heirlooms and lace tablecloths, they are a world apart from the anarchist demonstrators who snatch the headlines whenever opposition to the EU-imposed austerity measures is discussed.
But what's happening in living rooms like theirs presents the bigger danger to the future of Greece. People are switching off: from politics, from the mass media, from social life.
"We would like to see the politicians executed," says Maria, not smiling as she delivers the joke. "Most people are saying this: politicians deserve capital punishment – at the Greek equivalent of Traitors' Gate. It would be a nice time for politicians to be heroes, to stand up and defend the people. But they're not."
"We can't watch the television news any more," says Dmitris, shaking his head. "If you watch it, with the constant uncertainty, it can make your psychology very low. It's like a nightmare we can't wake up from. Perhaps it's fortunate that we've had to cancel our cable TV subscription. I don't trust the media any more: I get all my news from the internet."
Across Europe, governments are reining in public spending to prevent the markets' confidence in their finances ebbing. Ireland and Portugal have made sweeping cuts; Italy and Spain are under intense pressure to perform better.
But it is the 11 million Greeks who are feeling it most acutely as their government struggles to head off default - or worse.
If Greek public sector workers at all levels have been hit by pay and pension cuts, for the middle class – people like the Andreous, both of whom are self-employed – it is tax that is the problem.
Tax rises, a property downturn and the collapse of business income has halved their spending power, and that's before the next round of austerity measures, due to be voted on in parliament on Tuesday, begin.
It is this sudden collapse of middle class lifestyles that makes the Greek situation so volatile.
In Britain and the USA, public spending hawks have argued: reduce the size the state and the private sector will grow. In Greece the debt crisis – which has spiralled out of control in 2011 – means that cutting public sector jobs and services is not enough. The pensions, savings and incomes of the middle-class are being raided too.
As a result Greek politicians have started to worry about something called "anomie" – a pervasive listlessness, low-level social conflict and the erosion of bonds between the country's citizens and the state.
You can read it in the figures: suicides have soared by 40 per cent in a year. Thefts and break-ins almost doubled between 2007 and 2009. Hostility to migrants – their arrival ignored during the good times after entry into the EU and the euro – has become widespread and unconcealed.
At the doors of small charities, queues of single men – ranging from Iraqis to Somalis to Nepalese – form in the early morning to receive free food or medical treatment. Now, to their intense anger, some Greeks are being forced to join these queues: 39 per cent of the country's under 24s are unemployed.
And there is more austerity to come. With total Greek debt headed for 189 per cent of the country's GDP - the equivalent of almost two years' entire economic output - the EU pushed the government and parliament into agreeing a second austerity package on June 29, in return for the promise of a new €159bn bailout.
That was supposed to be the circuit breaker, and its passage was marked by burning barricades in the smart, historic Plaka district of central Athens, manned by shopkeepers and restaurateurs alongside the anarchists.
But that deal has fallen apart. Greece needs to raise a further €2bn just to meet this year's deficit target, which it will do through an emergency property tax, collected through people's electricity bills. When the energy workers said they would refuse to issue the bills, the crisis escalated.
Phone calls, emergency cabinet meetings, walkouts by IMF negotiators – the familiar choreography of a Greek bailout tranche by now – produced a third austerity package.
The Andreous now face an extra property tax of between €500 and €1,000 a year until 2014, and a further income tax hike.
After the deal in June the protests had been muted. With general strikes called for this week they will escalate, but Greek commentators are no longer focused on the organised protests: it's the disorganised and random events that worry them.
Antonis Papayiannidis, who publishes Economic Monthly, warns: "In an almost detached way people have just watched the catastrophe happening to them. They were very displeased but they did not erupt. They became withdrawn and they are still withdrawn. But it could erupt very quickly, because the feeling of helplessness is very intense right now - in a way that makes the petrol bombs and barricades of June look pathetic."
The economics of the crisis are brutally simple: Greece has been bailed out twice and cannot be saved again. Either the third round of shock measures announced last week locks the EU into the long-term bailout payments already agreed, or Greece defaults.
Any default would sink the country's own banks – their debt was downgraded on Friday, and 12 per cent of their deposits have been withdrawn over the past year.
Greek default would rip through the French banking system– SocGen and Credit Agricole were downgraded this month over their exposure to Greek debt. It would leave Spain and Italy totally dependent on a lifeline from the European Central Bank.
And it would then pose the question everybody wants to avoid: can Greece stay in the euro?
For the Andreous, it is hard to see how things get better in the short-term. They face four more years of austerity, their savings are gone, and the chances of a university education for their daughters Phaedra, 16, and Ira, 12, are evaporating.
Right now though, they have more pressing problems. At the two girls' secondary school, the autumn term has started without textbooks. The pupils have been handed CDs instead.
"It feels like we're in a post-war situation," says Mary. "There's no optimism; we don't know what happens next. We just try to survive."
Over the past six months I've stood in the middle of Athenian crowds so furious that they will withstand tear gas and endure near-lethal stampedes to make their point.
What's been obvious, each time, is the ordinariness of the people involved – bank clerks, interior designers, even a concert pianist once, their faces painted with alkaline liquid against the sting of the gas.
But it is this seething anger of those who have never been on a demo that is really frightening - because we have no model for what happens if the middle class of a developed country simply switches off from politics and gives up hope.
Not since the 1930s, anyway.
The Greek tragedy: no money, no hope - Telegraph
The Greek tragedy: no money, no hope
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