The Greek crisis: The sad end of the party

THE headlines this week were about riots, petrol bombs, tear gas and strikes. In Athens demonstrators stormed up to the steps of the parliament building, where an austerity plan was about to be debated, calling on the parliamentary “thieves” to come out. Three people were killed when protesters set fire to a bank. Hours later, with tear gas drifting over the adjacent square, parliamentary leaders held a brief, sombre exchange on the significance of the deaths, vowing to sustain the principle that protest must be peaceful. Many citizens agreed that it was a sad moment for the birthplace of democracy.

Yet Athenians were also saying, with wistful smiles, that, for the past ten years or so, it had been a good party. For the backdrop to the riots was that, in a mixed mood of resignation, black humour and bitterness, Greeks were bidding farewell to a decade in which everything good and bad about their country grew feverishly as money washed over it. There were sporting and cultural extravaganzas, starting with the 2004 Olympics. Archaeological sites were spruced up, spanking new buildings erected. The middle class grew larger and more sophisticated. And many people at the bottom of the pile breathed a bit easier, if only because immigrants from poorer places came to harvest their olives and work in their restaurants.

At the same time Greece’s worst habits—the plundering of state coffers, the hiring of cronies, the abuse of public office, impunity for the powerful—were multiplying. A handful of Cassandras said it would all end in tears but, while the party lasted, nobody listened. Now, with the news on May 2nd of loans from the IMF and the European Union worth a total of €110 billion ($145 billion), plus an austerity plan, the party is well and truly over.

Indeed, this week’s riots will usher in what promises to be the rockiest period in the recent history of Greece. By slashing pay in the public sector, raising taxes and (hesitantly) starting to reform the labour market, the plan is to cut the budget deficit from 13.6% of GDP in 2009 to less than 3% by 2014. But it will deepen the recession that is already hitting Greece, with the drop in GDP in 2010 now expected to be at least 4% and a further fall forecast for 2011 (see chart).

George Papandreou, Greece’s Socialist prime minister, can count on a degree of understanding from half the electorate (not all of them voters for his party) that the country faces a make-or-break moment in which wrenching change is the only alternative to outright disaster. He can also take comfort because the centre-right opposition, New Democracy, is in quarrelsome disarray as the full extent of its mismanagement in 2004-09 becomes obvious. But will that be enough? Even those who accept that Greece’s problems are largely self-made are depressed by an austerity plan that seems to offer so little hope for the medium term, and will punish many hard-working and modestly paid ordinary Greeks.

And there is a hotheaded minority, at least, that does not believe the government when it says it had no choice. Mikis Theodorakis, Greece’s most famous composer, expressed the visceral reaction of many when he said the crisis was probably a plot by dark forces in America and other capitalist centres to subdue proud, independent nations. Crazy as such talk may sound to euro-zone governments that believe they have strained every muscle to save Greece from collapse, it will convince some people in a country where conspiracy theories (and, indeed, conspiracies) have a long history.

Greek politics still includes a Communist Party that is rigorously Stalinist (it damns Khrushchev as a liberal backslider) and commands some 8% of the vote. There is an emerging party of religious-nationalist far-rightists under the acronym LAOS (the Greek word for people), which has tried to gain respectability by accepting the need for tough measures, but still stands to gain from the ferment. So do groups of malcontents even further removed from the political mainstream.

Not for the first time, the IMF and the EU will be cast as lightning-rods for xenophobic anger. In the radical press and on the internet, the IMF is already being called a junta, comparable to the colonels who took power in 1967 with the connivance (most Greeks believe) of the United States. That Greece invoked IMF help in late April, just after the anniversary of the April 21st 1967 coup, is seen by some in the Helleno-blogosphere as confirmation that the country faces a new period of foreign-backed despotism.

Such talk resonates in Greece. Throughout its 200-year history, the role of foreign powers has generated red-hot passion. Protagonists in Greece’s internal quarrels have long invoked external assistance, while furiously denouncing any foreign help given to their rivals. During the right-left civil war of 1946-49, each side reserved particular loathing for its foe’s foreign backers, American or Soviet. Dimitris Livanios, a historian, says that the idea of a manipulating “foreign finger” is a recurring motif in Greek affairs.

The unprecedented prosperity enjoyed by most Greeks during the past decade helped to disguise some sentiments that were never far below the surface: ultra-leftism (including the violent sort which spills over into terrorism), ultra-nationalism and xenophobia. Such feelings may now be unleashed. The government claims some successes in rounding up a small ultra-leftist group of urban guerrillas called “Revolutionary Struggle”. But there are palpable fears that austerity and riots will now spawn a new generation of self-styled Robin Hoods practising both political and criminal violence.

Meanwhile, cooler-headed Greeks are racking their brains for ways to regain the economy’s lost competitiveness and make better use of Greece’s abundant human and natural assets. Much of the growth over the past decade reflected the windfall of cheap euro interest rates, which stoked an exuberant consumer market, complete with smart cars, foreign travel and personal trainers. All this will contract sharply now.

What about tourism, Greece’s mainstay? Some Greek islands have been overbuilt by Athenians taking advantage of corrupt planning laws, but all over the mainland there are villages in beautiful settings that are decaying for want of anybody ready to refit handsome stone houses and attract year-round visitors. There, at least, is an opportunity. But there can be no devaluation to make Greece a newly cheap destination, and harsh new taxes on business included in the government’s austerity plan may kill the entrepreneurial spirit of those bold enough to try new things. New taxes on business and property will also limit the attractiveness of state assets that the government may want to sell to raise revenue, notes Stefanos Manos, a former finance minister.

There is also a well-founded suspicion that light-fingered bureaucrats and greedy politicians, the very people who caused the crisis, should be held to account but won’t be. President Carolos Papoulias, a soft-spoken leftist whose office is meant to be above politics, reacted to the austerity plan with a one-sentence call for people who robbed the state coffers to be punished. Many agreed. “The wage and spending cuts will be implemented with great efficiency, but with our chaotic justice system, the pursuit of tax-dodgers and bribe-takers will just run into the sand,” predicted an Athenian architect.

“It’s all very well for Papandreou to compare himself to Odysseus making a long, heroic voyage,” read one electronic message doing the rounds between Athenian offices this week. “But Odysseus had a miserable journey and lost all his companions. And he washed up on Ithaca without any clothes on.” At street level, sentiments are even less poetic. “We do not recognise this debt,” was the slogan of the militant trade unions, from teachers to dockers, that went on strike this week. The number of Greeks who believe in Bolshevik-style autarky may be small. But the idea of working hard for years just to win an IMF/EU certificate of good behaviour holds little appeal.

Either in fear or in hope, many Greeks detect a breakdown of a political system, over a century old, in which two political groups (notionally of the centre-left and the centre-right, but both given to patronage and graft) progressively exhaust the national exchequer by outbidding each other. After the post-party riots, it is anybody’s guess what might take its place.