After 400 years of Ottoman rule and a recent history spent buffeted by bigger powers, Greeks are sensitive to the suggestion of foreign domination. But with the country on the verge of bankruptcy, leaders have had little choice but to put themselves in the hands of Europe and the International Monetary Fund.
After three months of tense negotiations, Greece’s eurozone partners and the IMF this weekend agreed to a $146 billion bailout to prevent the Greek crisis from crippling economies throughout Europe. But in return, the country’s leaders have been forced to implement a harsh austerity program that will include deep cuts to pensions and civil servant pay, as well as increased taxes.
“I would like to make it absolutely clear to everybody. I have done and will always do whatever it takes for the country not to go bankrupt,” Greece’s Prime Minister George Papandreou told an emergency meeting of the cabinet Sunday, calling on the Greek people to make sacrifices in order to preserve the country’s future.
Europe's cultural differences highlighted
European nations agreed to the rescue as much to save the euro as to save Greece. But the crisis has highlighted deep cultural differences among the eurozone’s members and shaken faith in the common currency, used by 16 of the European Union’s members. Frugal Germans initially balked at bailing out what they see as spendthrift Greeks.
“This is also in Germany’s self-interest to come to the assistance of Greece, in the wider interest of assisting security in the eurozone,” says Jens Bastian, a German political economist with the Hellenic Foundation for European and Foreign Policy (ELIAMEP), who was in Berlin last week when the German government was debating whether to go ahead with the bailout. But he says the program’s success depends on Greece. “The package is conditional on whether Greece can deliver on the home front over the coming three years.”
The problems that brought Greece to the edge of this precipice are not new. The country’s culture of corruption and nepotism, its bloated state and its faulty statistics are the work of decades. But during the boom times, when European economies were growing, little attention was paid to the structural deficiencies of Greece and other eurozone countries.
This rescue package may give Greece some space to tackle its problems, but success is not assured.
The bailout will allow Greece to repay about $11.3 billion worth of debt due by May 19. Additionally, cuts to state spending will help bring Greece's deficit under control, but the country’s long-term future depends on whether the government can reduce waste, improve bureaucratic efficiency, and clean up its culture of corruption. As part of the deal with the IMF, Greece has pledged reform, but making good on those promises will require a dramatic shift in state culture.
Some fear the austerity measures could exacerbate the country’s problems by sending it spiraling deeper into recession.
“We know these measures won’t work because the crisis is global,” says Costas Sarris, a financial journalist for the left-leaning newspaper Eleftherotypia. “The only thing this will do is cause a deep, deep recession.”
Will Greeks accept the measures?
A looming question, too, is whether the Greek people will accept the measures.
The country’s unions are powerful, well organized, and resistant to change. Calling the measures “savage,” the unions pledged to ignite a social storm on Greece’s streets and called for a series of protests against the measures.
“We’re going to go back to 1968,” says Evi Stamkopoulou, a 38-year-old lab assistant in a public hospital, referring to the wave of popular protests that swept Europe, as she marched Saturday during Greece’s traditional May Day celebrations. “We’re angry because things are already difficult for workers. We didn’t cause this crisis.”
Greeks chafe at being portrayed across Europe as lazy, early-retiring tax dodgers, but many acknowledge deep problems in their own society. This may be why, so far, Greeks have swallowed the bitter pill of austerity with less-than-usual agitation.
Demonstrations and marches have repeatedly broken out over the past few months, with protesters on Saturday lobbing petrol bombs at police, who responded by firing tear gas. But the scale of dissent so far still pales in comparison to the December 2008 riots that rocked Athens, or even protests against previous austerity measures in the early 1990s.
In both those cases, Greece had center-right governments. The fact that it’s now a socialist government imposing these measures has likely helped to blunt the anger, but the sheer scale of this round – and the fact that it is being imposed by the IMF, which is seen by the Greek left as an imperialist, capitalist force – could shift popular sentiment.
What austerity will look like
The government says it will cut $38 billion from state spending over the next three years – that’s equivalent to 13 percent of gross domestic product. Workers in the state sector will be hit hardest and will face sharp pay cuts in the form of reductions to bonuses and holiday pay – the 13th and 14th months of salary that Greeks in both the public and private sector get at Easter, Christmas, and in the summer.
But everyone will feel the impact. The sale tax will also be increased, to 23 percent. Pensions for everyone will be frozen and the retirement age for women raised.
Greece’s finance minister, George Papaconstantinou, who announced the details of the package Sunday before jetting to Brussels to get the deal rubber stamped by European finance ministers, acknowledged the negotiations were tough but said the government had won some battles, most aimed at protecting poorer Greeks. The pensions and salaries of higher-earning civil servants will be cut more deeply than those of poorer ones.
“We will follow this road because this is the only road to be able to save the country and we are absolutely convinced that in doing so we will have the vast majority of Greek citizens behinds us,” he said at a press conference Sunday.
But many Greeks remain skeptical that their government can change things.
“Not Papandreou himself, but part of the government is corrupt,” says George Kalapodas, a computer engineer who voted for the governing Socialists. “Part of the government is trying to help, but part is corrupt and doesn’t care.”