Greece's financial plight

[Mike from Sussex]

My two drachma worth, if anyone is intersted.

The Euro was always a political project, aimed at making the European Union exactly that – a federal organisation with a central government. This was unlikely to be accomplished within a generation or two by persuasion of the various populations, so, since a currency cannot succeed without a single fiscal policy, the Euro was introduced with the intention that central government would become the compelling result. 

This may have had a chance of success if the project was developed over 30 to 40 years, but this would not meet the short term political aim. Hence the conniving at fudged entry criteria and the requirement of entry to the Euro as a condition of EU membership for new entrants.

Why did Greece want to join the Euro? The promise of cheap borrowing rates and the theory that the weaker members would be pulled up to the economic performance of e.g. Germany. The cheaper borrowing lasted for a while, helped by some considerable insanity in the international banking system, but resulted in the government over borrowing. Economically, consumer prices rose towards the Eurozone average, driving up wage rates, without the productivity of the North European countries.

This all resulted in an unsustainable level of government debt and private incomes at excessive levels within the Greek economy suffering “stagflation”, even whilst the Eurozone economy as a whole was in growth. It is difficult to see the imposed solution of the Euro finance ministers leading to any improvement in the position of Greece, so the status quo is unlikely to endure.

[John R]

Well said Mike - I think that sums it up very well - the fudging of Greece's entry criteria also adding to the list of problems you highlight above - and the Greeks were aided by other over enthusiastic EU states in this fudging - they were not entirely to blame.

[Mike from Sussex]

John,

Fudged entry criteria applied to other countries also. Greece started with about the weakest economy, so the problems became critical there first, but look at the list now!

The problem for Greece is that the EU "bailout" is to stop a collapse of many banks, or rather the massive government supoort which would be required to stop the collapse of the critical ones (including many French major banks, who were lending into Greece like it was going out of fashion), not to revive the Greek economy. I don't know what will happen, but the present situation cannot be sustained by the populace for too long before there must be major political upheaval, which has been quite common in Greece over the years.

Mike

[John R]

Well yes - you have hit the nail again. The imminent Greek elections may be very interesting indeed on their influence on the current problem. I suspect that at that point politics will overtake any recent financial agreements to date. I feel that is the point when things will boil over - perhaps for the short term bad but maybe even the  long term good for Greece.

[Voloudakis]

If Britain were Greece.
See how tough it really is.
http://www.bbc.co.uk/news/magazine-17202274

[Voloudakis]

Poor Greeks are being hit hard again. When will it ever end for them?
Drastic cuts in unemployment and other benefits go into effect this week, despite a government pledge to protect the jobless.

The 22 percent cut in the minimum wage was approved by parliament last month, resulted in corresponding benefit cuts at the state employment agency (OAED), with monthly unemployment pay dropping from 461 to 360 euros, and payment for the long-term unemployed being reduced from 200 to 156 euros. Family support for low-income households dropped from 98 to 77 euros.

The measure has worsened hardship for hundreds of thousands of people on benefits, with unemployment at 21 percent in December, with 1,033,507 officially out of work that month.

The government had promised compensatory measures for the unemployed after the minimum wage cut, a pledge that was swiftly abandoned.

The head of the country's largest public insurance fund, the Social Insurance Foundation (IKA), meanwhile, said pension and Easter bonus payouts will not be affected by a bond write-down deal that will see public insurers lose billions from their Greek government bond holdings.

Rovertos Spyropoulos also promised to intensify a crackdown on fraud following the news of a 6 million euro embezzlement scam at IKA's branch in Kallithea, mostly involving bogus birth and hospital fees. (Athens News/gw) http://www.athensnews.gr/portal/1/53994

[Voloudakis]

Despite the contraction of the economy, consumer prices keep rising at a level that exceeds 2 percent on an annual basis, as inflation came to 2.1 percent in February according to a Hellenic Statistical Authority (ELSTAT) report on Friday.

The increase in the prices of fuel, fresh fruit and vegetables, and food served in restaurants and bars (due to the increase in value-added tax) compared with February 2011 resulted in a relatively high inflation level, given the recession.

There was still a decline in the prices of apparel, homeware products, telecommunications and drugs.

The average inflation rate for the 12 months to February 2012 came to 2.9 percent from the year before, compared to 5.1 percent in the previous 12 months.

The commodities with the biggest annual rise last month were heating oil (25.1 percent), natural gas (23.6 percent), electricity (13.9 percent), road toll rates (9.7 percent), gasoline (8.6 percent) and fresh fruit (7.8 percent).
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_09/03/2012_432207

[Voloudakis]

Greece’s relief at having its new bailout approved by eurozone finance ministers was tempered on Tuesday by the publication of a confidential European Commission report on the Greek economy, which foresees Athens having to adopt almost 12 billion euros of austerity measures in 2013 and 2014.

Elections are likely to be held in early May so one of the next government’s first tasks will be to find 7.6 billion euros of savings in 2013 and another 4.1 billion in 2014 to stay on track with the fiscal program agreed with the Commission, the European Central Bank and the International Monetary Fund, collectively known as the troika. The savings are likely to come from fresh cuts to pensions, new reductions in social transfers, the further slashing of pharmaceutical and healthcare spending, another round of cuts to defence spending and a restructuring of central and local administration.
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_13/03/2012_432826

[Voloudakis]

British tour operators have called on Athens and its creditors to improve Greece’s image abroad or face the risk of having bookings canceled due to low demand.
In an open letter to the ministers of finance and culture, as well as the representatives of the European Commission, the European Central Bank and the International Monetary Fund, three major tourism and travel associations representing 844 tour operators and 3,547 travel agencies in the United Kingdom warn that unless the Greek state makes moves that will help the promotion of the country’s tourism product in Britain, they will not be able to sell their prebooked packages.

over the last few weeks Britain has been bombarded with negative statements and messages about Greece... as a result Britons are opting for alternative holiday destinations.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_20/03/2012_433952

Personally every Year we look round Europe for our Summer break. The criteria. Smaller accommodation (hate big hotels), reasonable price, laid back, beautiful, friendly, good food and little places to eat and drink over the beach. Spain, only a very few. France, nope or very expensive. Italy, nope and expensive. The Greek Islands are the only place that tick all the boxes. Greece is beautiful and Her Islands diverse. We find there is nowhere in Europe to compare. So Greece is where we spend our money (not that we have much).

[Mike G]

Hello Lampyland,

It sounds as if you are a "Plakiasophile" or even a "Greekophile" (as I and many other forum members are). Many Brits are not and some have different requirements to us (e.g. the popularity of all inclusive; in fact First Choice, who featured Plakias for many years and provided much needed competition to Olympic, do nothing else now).

I agree with the thrust of the article you quote. Greece has to face up to the realities of life. That said it is clear that in Greece everyone is not in it together and the gap between rich and poor is much greater than in most western European nations.

Mike

[Voloudakis]

Hello Lampyland,

It sounds as if you are a "Plakiasophile" or even a "Greekophile" (as I and many other forum members are). Many Brits are not and some have different requirements to us (e.g. the popularity of all inclusive; in fact First Choice, who featured Plakias for many years and provided much needed competition to Olympic, do nothing else now).

I agree with the thrust of the article you quote. Greece has to face up to the realities of life. That said it is clear that in Greece everyone is not in it together and the gap between rich and poor is much greater than in most western European nations.

Mike

I am a Greekophile and have converted my other half :-).
My Father was a Cretan and came from a village just under an hours drive from Plakias. I lived on the North coast for many years during the 1980's.
Sadly my Greek is terrible..
I think I may Know Rog and Jean on this site, but only in passing and spotting them on campus.

[Voloudakis]

The financial disaster continues and claims another victim.
The suicide of a 77-year-old pensioner in central Syntagma Square on Wednesday, apparently fueled by financial and health problems, prompted a wave of reactions from politicians and the public.

The incident occurred shortly before 9 a.m. when the square was full of commuters using the nearby metro station. Witnesses told reporters that the man stood under a tree, pulled out a gun and shouted, “I don’t want to leave debts to my children,” before taking his life.

The 77-year-old, who was identified by the media as Dimitris Christoulas and is survived by his wife and daughter, reportedly had a serious health problem and was struggling to pay for medicines.

In a note found near the scene, the man said he could not face the idea “of searching through garbage bins for food and becoming a burden to my child.” The note also blamed “the occupation government of Tsolakoglou for taking away any chance for my survival.” The reference to Georgios Tsolakoglou, the first collaborationist prime minister during Germany’s occupation of Greece in the Second World War, is an apparent dig at Germany’s role in determining the austerity measures imposed on Greeks.

The suicide prompted statements from several politicians. Prime Minister Lucas Papademos said, “In these difficult times for our country we must all -- the state and its citizens -- support those next to us who are in despair.” The leader of conservative New Democracy, Antonis Samaras, said, “Death isn’t just to die; it’s also to live in despair.” The leader of socialist PASOK, Evangelos Venizelos, said the incident was “so shocking that any political comment would be mistargeted and cheap.”

Later Wednesday, some 2,000 people staged a peaceful protest and candlelit vigil in Syntagma Square.

The incident comes amid a sharp rise in suicides in recent years, with 149 reported so far this year. On the eastern Aegean island of Chios Wednesday, a 31-year-old man shot himself in the neck in what appeared to be a thwarted suicide attempt. He was hospitalized in serious condition. In the Cypriot port of Limassol, meanwhile, a 50-year-old father of three set fire to himself in his car, reportedly due to money worries.
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_3_04/04/2012_436531
 

[Voloudakis]

Do tourists genuinely care about the plight of the Greek people in the resorts and places they visit?
Yet more distressing news in the media about the crisis in Greece. The poorest and the middle classes are being hit the hardest of course.
I visit a number of forum sites for many of the Greek Islands we visit. Some of the forums are full of News of the Greek crisis and others give barely a mention and mostly enquire about Beer, the cheapest sunbeds and where they can watch the football, get an English Breakfast or buy a British paper.
We have very modest means but only use cash when in Greece so Local Tavernas, bars and businesses can use their discretion when it comes to Taxes.
Greece got into this crisis by avoiding their taxes say most people. The Answer is more complicated than that. Germany and France were complicit in cooking the books so that Greece could join the Euro. Massive loans were arranged that Greece could not possibly pay back. In hindsight I believe that Greece should have never joined the single currency, I do not believe it would be in the Mess it is in if it had remained with the Drachma.
Like in the UK it is the poor, the pensioners, the lower paid and now the middle classes that are doing all of the suffering whilst the rich and the Government still use the loopholes and avoid paying tax.
The only way tourists can directly assist local economies is by not using all inclusives and by paying in hard cash. I know it is wrong for a small business not to declare all income but I see no other way that they can have a livelihood and survive the off-season.

People on this forum seem to genuinely care about the people who live and work in Plakias and many have been visiting for many years. What do you think we should do with our Cash however small or large it may be?

Real incomes in Greece dropped by a massive 25.3 percent in 2011 from the year before, according to an annual report by the Organization for Economic Cooperation and Development (OECD) which uses data forwarded by the Greek Finance Ministry. It adds that Greek salary workers pay relatively low taxes but high social security contributions.

   
Source http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_25/04/2012_439333

Greeks seek austerity trial at The Hague. It is rare for citizens to try to take their government to court, and even more so for a Western European government to be taken to the International Criminal Court (ICC) in The Hague.

Source http://www.bbc.co.uk/news/world-europe-17811153

[Mike G]

You are quite right that Greece should never have been allowed to join the € but even if they hadn't they would probably be in (less of) a financial mess owing to their over spending and under taxing.

As you say the best we can do is to continue to visit and spend.

I'm looking forward to reading the first reports of the 2012 season soon.

Mike

[Dave&Les]

Just leaving for Plakias for 4 weeks...will report what's going on when we get back.

Dave&Les