Greece About To Enter The Death Spiral

Tensions in Greece are rising to new heights as the EU-imposed austerity measures backfires. The measures that were supposed to fix nation’s problems are instead dragging down the country’s economy. Stores are closing, tax revenues are falling and unemployment has hit an unbelievable 70 percent in some places. Frustrated workers are increasingly making threats to fight back.

“If you take away my family’s bread, I’ll take you down – the government needs to know that. And don’t call us anarchists if that happens! We’re heads of our families and we’re desperate.”

Nikos Meletis


The feast of the Assumption of Mary on August 15th is the high point of summer in the Greek Orthodox world. Believers fall on their knees and pray to the Virgin for mercy. The Greek newspaper Ta Nea recommend that the Greek government adopt the same approach – the country’s leaders have to hope that Mary comes up with a miracle to save them from a serious crisis. Without divine intervention,  it will be a very difficult autumn for the Mediterranean state.

This dire prognosis comes even despite Athens’ massive efforts to sort out the country’s finances.

The government’s draconian austerity measures have managed to reduce the country’s budget deficit by an almost unbelievable 39.7 percent, after previous governments had squandered tax money and falsified statistics for years.

The measures have reduced government spending by a total of 10 percent, 4.5 percent more than the EU and International Monetary Fund (IMF) had required.

The problem is that the austerity measures have in the meantime affected every aspect of the country’s economy.

The Real Austerity Effect

Purchasing power is dropping, consumption is taking a nosedive and the number of bankruptcies and unemployed are on the rise.

The country’s gross domestic product shrank by 1.5 percent in the second quarter of this year.

Tax revenue, desperately needed in order to consolidate the national finances, has dropped off a cliff.

A mixture of fear, hopelessness and anger is brewing in Greek society.

The austerity measures that were supposed to fix Greece’s problems are dragging down the country’s economy.

Stores are closing, tax revenues are falling and unemployment has hit an unbelievable 70 percent in some places.

Frustrated workers are increasingly making threats to strike back.

How the leaders of Greece – and of the EU/IMF – have been able to ignore these signs for so long, is beyond this writers comprehension.

Fear, Hopelessness And Anger

The Greek government’s draconian austerity measures have managed to reduce the country’s budget deficit by an almost unbelievable 39.7 percent, after previous governments had squandered tax money and falsified statistics for years.

The graffiti reads, "IMF out"

The measures have reduced government spending by a total of 10 percent, 4.5 percent more than the EU and International Monetary Fund (IMF) had required.

The problem is that the austerity measures have in the meantime affected every aspect of the country’s economy.

Purchasing power is dropping, consumption is taking a nosedive and the number of bankruptcies and unemployed are on the rise.

The unemployment rates are about 70% in some parts of the country.

The Greek gross domestic product shrank by 1.5 percent in the second quarter of this year. Tax revenue, desperately needed in order to consolidate the national finances, has dropped off a cliff.

A mixture of fear, hopelessness and anger is brewing in Greek society.

Don’t tell me that the economists fancy models haven’t been able to figure this out…

Unemployment: 70%

Nikos Meletis is neatly dressed, and his mid-range car is clean and tidy.

Meletis used to earn a good living at a shipbuilding company in Perama, a port opposite the island of Salamis.

Nikos Meletis

“At the moment, I’m living off my savings,” the 54-year-old welder says, standing in front of a silent harbor full of moored ships.

Meletis is a day laborer who used to work up to 300 days a year; this year he has only managed to scrape together 25 days’ work so far.

That gives him 25 health insurance stamps, when he needs 100 in order to insure himself and his family — including his wife, who has cancer. “How am I supposed to pay for the hospital?” Meletis asks.

Unemployment benefits of at most €460 ($590) per month are available for a maximum of one year — and only if he can produce at least 150 stamps from the past 15 months.

There’s hardly a worker in the shipbuilding district of Perama who could still manage that.

Unemployment in the city hovers between 60 and 70 percent, according to a study conducted by the University of Piraeus. While 77 percent of Greek shipping companies indicate they are satisfied with the quality of work done in Perama, nearly 50 percent still send their ships to be repaired in Turkey, Korea or China.

Perama Shipyard

Costs are too high in Greece, they say. The country, they argue, has too much bureaucracy and too many strikes, with labor disputes often delaying delivery times.

Perama is certainly an unusually extreme case. But the shipyards’ decline provides a telling example of the Greek economy’s increasing inability to compete.

Barely any of the country’s industries can keep up with international competition in terms of productivity, and experts expect the country’s gross domestic product to fall by 4 percent over the course of the entire year.

Germany, by way of comparison, is hoping for growth of up to 3 percent.

Sales Dropping Everywhere

Prime Minister George Papandreou‘s austerity package has seriously shaken the Greek economy.

The package included reducing civil servants’ salaries by up to 20 percent and slashing retirement benefits, while raising numerous taxes. The result is that Greeks have less and less money to spend and sales figures everywhere are dropping, spelling catastrophe for a country where 70 percent of economic output is based on private consumption.

A short walk through Athens’ shopping streets reveals the scale of the decline:

Fully a quarter of the store windows on Stadiou Street bear red signs reading “Enoikiazetai” — for rent. The National Confederation of Hellenic Commerce (ESEE) calculates that 17 percent of all shops in Athens have had to file for bankruptcy.

And things aren’t any better in the smaller towns.

Chalkidona was, until just a few years ago, a hub for trucking traffic in the area around Thessaloniki.

Two main streets, lined with fast food restaurants and stores catering to truckers, intersect in the small, dismal town.

Maria Lialiambidou’s house sits directly on the main trucking route. Rent from a pastry shop on the ground floor of the building used to provide her with €350 per month, an amount that helped considerably in supplementing her widow’s pension of €320.

These days, though, Kostas, the man who ran the pastry shop, who people used to call a “penny-pincher,” can no longer afford the rent. Here too, a huge “Enoikiazetai” banner stretches across the shopfront.

No one wants to rent the store. Neither are there any takers for an empty butcher’s shop a few meters further on.

A sign on the other side of the street advertises “Sakis’ Restaurant.”

The owner, Sakis, is still hanging on, with customers filling one or two of the restaurant’s tables now and then. “There’s really no work for me here anymore,” says one Albanian employee, who goes by the name Eleni in Greece.

“Many others have already gone back to Albania, where it’s not any worse than here. We’ll see when I have to go too.”

The Death Spiral

The entire country is in the grip of a depression.

Everything seems to be going downhill.

The spiral is continuing unabated, and there is no clear way out.

The worse part, however, is the fact that hardly anyone still hopes that things will improve one day.

“Everything is getting more expensive, I’m hardly earning any money, and then I’m supposed to pay more taxes to help save the country? How is that supposed to work?” the shipbuilder  Nikos Meletis asks.

His friends, gathered in a small cafeteria on the pier in Perama. They are all unemployed, desperate and angry at the politicians who got them into this mess.

There is no sympathy here for any of the political parties and no longer any for the unions either.

“They only organize strikes to serve their own interests! The only thing that interests me anymore is my daily wage. A loaf of bread is my political party,” one man shouts.

“If you take away my family’s bread, I’ll take you down – the government needs to know that. And don’t call us anarchists if that happens! We’re heads of our families and we’re desperate,” Nikos Meletis says.

“Things are starting to simmer here,” he says. “And at some point they’re going to explode.”

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But regular readers of the Econotwist’s Blog knows this, and we have seem it coming for quite some time now.

(Source of article: Der Spiegel)


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