Greece’s Economic and Political Traps

Five years into the Greek crisis, it is becoming increasingly difficult to hope that it will end anytime soon. Perhaps we expected too much: that the largest international bailout in history would help set the economy back on its feet within a couple of years; that we could put the problems that had brought us to the brink of bankruptcy behind us; that our political system would change, with new forces sweeping away incompetence and corruption.

But it would take a revolution to overturn frameworks, mentalities and behaviors developed over decades. What we have had, instead, is a relentless devaluation at every level: Greek society has lost a great deal, and gained little in return. We are caught in two traps — economic and political — that combine to make escape seem impossible.

For the past few years, Greece has been in the hole of austerity and recession. Our gross domestic product contracted by over a quarter between 2008 and 2013, with household wealth dropping by 23 percent since 2007, according to a September report produced by the Julius Baer Group. The percentage of Greeks at risk of poverty or severe deprivation has climbed to 35.7 percent, from 27.6 percent in 2009.

Consequently, more and more people are falling deep into debt, with over a billion euros in nonperforming loans being added each month to the bill (of at least 75 billion euros, or over 34 percent of all loans in August). Tax debts were at €70.16 billion in September. Just as the economy’s contraction has made public debt an unbearable 174.9 percent of G.D.P., the lack of credit and ever higher taxes have ravaged businesses, pushing unemployment up and keeping it high. (After six years of recession, the economy is expected to grow slightly this year.)

The middle class has been devastated; it has borne the brunt of higher taxes but will not be able to do so for much longer. Apart from a small primary surplus (when loans and interest are not counted) and a surge in tourism, investments and production remain low. Greece managed to remain in the eurozone, but the longer austerity continues, the deeper the hole we’re in.

The political trap is even more dangerous. The €240-billion- bailout agreement with our creditors (the troika of the European Commission, the European Central Bank and the International Monetary Fund) did not consider the political and social implications of forcing major change on people while putting them under severe economic pressure. Most citizens tried to keep up but were overwhelmed, and opposition parties, particularly marginal ones on the extreme left and right, benefited from this discontent. Meanwhile, the parties in government were unable to revoke their past behavior and push through all the necessary reforms.

Center-right New Democracy and center-left Pasok, in a coalition since elections in June 2012, have alternated in power for 40 years, and have shouldered the blame for past policies and also for the current, troika-mandated ones. With 155 seats in the 300-seat Parliament, the two have little room to maneuver between the demands of Greece’s creditors and the political cost of further change.

Now they have to face their greatest challenge: President Karolos Papoulias’s second five-year term ends in March and the Constitution demands that a president is elected by at least 180 members of Parliament. Failing this, national elections must be held. Opposition parties have said they will back no candidate proposed by the coalition. If the government cannot marshal enough votes from the Parliament’s 23 independents, and get others to break ranks, elections will have to be held by March.

This prospect prompted Prime Minister Antonis Samaras’s failed bid earlier this month to show that Greece no longer needed supervision and could return to the markets for financing. The Athens Stock Exchange index lost 13.57 percent in three days, while interest on 10-year bonds shot above 9 percent — a result of a lack of faith that Greece can stand on its own, and of the prospect of early elections’ creating further instability.

Concerns over the health of the eurozone as a whole, with tension among Germany, France and Italy over Berlin’s insistence on austerity, have not helped Greece’s cause or comforted citizens that the course we have followed is the right one. Opinion polls — as well as the results of last May’s elections for the European Parliament — suggest that the radical left-wing party Syriza could win elections but would struggle to forge a coalition.

Even if a new round of elections was avoided, a Syriza-led government could waste a lot of time before it got to work; Syriza is a coalition of several fractious groups that may find it difficult to settle on a policy with junior parties that will leverage their support to their greatest benefit. Pressing problems and the fulfillment of promises to undo many of the government’s policies could be on the back burner for a while.

Before the elections, New Democracy and Pasok will focus on the instability that could follow a Syriza victory, while Syriza will try to block any progress before the election. Either way, the economy pays the cost.

More insidious than the economic and political logjam is the people’s feeling of futility and anger. The opposition claims that the government, at the behest of foreigners, has destroyed the country, while the government charges that the opposition’s populist promises and close ties to unions will undo all that was achieved.

Courts overrule laws ordering judges’ pay cuts while taxpayers are squeezed further; judicial officials and opposition parties complain that the government passes laws absolving people of past crimes, while others say this is to protect officials from unfair prosecution; desperate people work for little pay and no social security, often in jobs well below their level of expertise.

In the confusion, what citizens see is that special interest groups are still in a position to influence policy at the expense of everyone else. This sense of injustice is the greatest punishment of all.

Nikos Konstandaras is the managing editor and a columnist at the newspaper Kathimerini.

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