Business, Finance & Economics

Greece: "Don't blame us"


Greek flags in Athen on June 21, 2011.


Vladimir Rys

ATHENS, Greece — In the public eye, Greece has slid into the abyss of financial irresponsibility populated by the likes of Lehman Brothers and Bear Stearns. Its seemingly un-payable debts have become a millstone on the global economy.

But unlike the corporate reprobates of the subprime mortgage era, Greece is a country with citizens, schools, businesses and territory. It will exist whether or not it repays its creditors.

And so in addition to struggling for financial survival, its leaders are battling to salvage the country's reputation. They're fighting back against the idea that Greece is to blame for what ails the euro zone and beyond.

From Greece: Feeling Greece's pain

"Greece is not the scapegoat of the euro area or the international economy," Greek Finance Minister Evangelos Venizelos told international bankers during a speech Sunday in Washington. A day earlier, he said they were fighting "negative stereotypes about Greece that have been floating around internationally."

On Tuesday, Prime Minister George Papandreou said it's frustrating that Greeks are scorned despite making "painful sacrifices."

"We are not asking for applause. We are simply asking for respect [for] the facts," Papandreou told business leaders during a speech in Berlin, before a scheduled meeting with German Chancellor Angela Merkel.

Greek pride has taken a beating during the crisis, as politicians carry out European orders to slash spending in exchange for bailout loans. Greece, birthplace of the Olympic Games, even had to beg for international handouts for its athletes to compete next summer in London.

Greece: Throwing Greece under the bus

Greek leaders acknowledge they, or their predecessors at least, wildly overspent and failed to collect taxes. But as global markets fret about possible Greek default and contagion, Greece says don't blame us, a country of 11 million people accounting for just 3 percent of total euro-zone public debt.

The staunch defense comes at a crucial moment, as Greece desperately seeks an $11 billion bailout loan to avert a government shutdown. Global markets are worried Europe won't contain the problem and Greeks themselves are incensed by the government's sweeping cuts to pensions, salaries, and social services.

Meanwhile, average Greeks are finding it difficult to fall in line behind their government. Transportation strikes routinely paralyze the capital. This Sunday, riot police clashed with protesters, as they have before. On Tuesday, the ruling Socialist government was set to vote on an unpopular new property tax that many citizens say will be hard to pay. The tax will be collected via electricity bills, a tactic seen as pragmatic after decades of unpunished tax evasion. This time, evaders will risk having their power cut.

"There is no positive in this, nothing," said 53-year-old postal worker Constantine Drivas, who sold his car and cancelled his cell phone contract after his $1,540 monthly salary was cut by $330. "Greece was not ready for this crisis."

Europe apparently wasn't ready, either, according to most experts. A $150 billion bailout fund created for Greece in May 2010 proved insufficient. A second loan, identical in size, was agreed to in principle in July, but is awaiting final negotiations. It calls for a 21 percent "haircut" on Greek debt.

Reports from weekend meetings at the International Monetary Fund in Washington suggest that Greek bondholders may take a 50 percent loss, while Europe substantially increases its rescue fund to stave off contagion in countries with larger economies like Italy and Spain. Greek officials have consistently denied that they support a 50 percent write-off, insisting that they'll never default.

United States President Barack Obama, facing re-election next year, on Monday blamed the stagnant American economy in part on "what's happening in Europe," and echoed earlier concerns for bolder actions.

"They're going through a financial crisis that is scaring the world," Obama said during a town hall meeting in California. "And they're trying to take responsible actions, but those actions haven't been quite as quick as they need to be."

Greek officials argue that they've done nearly everything that's been asked of them, with some exceptions, like missing targets for privatization revenue.

"There is so much that has transpired over the past 15 months," Venizelos said. "It's not everything, but it is a lot. But light always falls on the delays and the deviations and not on the large picture of accomplishments."

Upon taking office in 2009, Prime Minister Papandreou discovered that his country's debt was far worse than previously disclosed, at $400 billion.

More: Merkozy’s baby steps won’t save Europe

For all of Greece's troubles, no one can accuse the government of inaction. Papandeou slashed spending, cutting $14 billion in 2010. He also reformed an unsustainable pension system, increased work hours, streamlined business licensing, and reduced salaries and severance pay.

New austerity measures were imposed this month after the IMF and other European auditors abruptly left Athens, frustrated with the pace of reforms. The new measures include the property tax, and an expected 20,000 job cuts, as well as up to 70,000 civil servants being placed on a "reserve" list for layoffs after one year.

Another new measure that angers low- and middle-income Greeks is the latest lowering of the "tax-free" income threshold. Initially it was lowered from $16,800 to $11,200. It's now been dropped to $7,000.

"I don't see any way out," said Emmanouel Kountouris, a longtime economics lecturer at the University of Athens, even with a significant write-down of the debt. "In the next five to seven years, our incomes will drop 40 to 50 percent. That's no way out.

"The public sector cuts won't help," he continued. "If you have one million unemployed and you cut wages down, that will eventually affect the private sector."

The unemployment rate has reached 16.3 percent and the IMF projects the jobless rate to reach 18.5 percent in 2012.

Drivas, the postal worker, has noted changes over the past year as he walks his delivery routes.

"I see more people sleeping in the parks," he said, speaking Monday night near a kiosk in Marousi, a northern suburb of Athens.

Drivas estimates that "thousands" of electricity and water bills that he delivers to homes come back — return to sender — unopened. "They're gone," he says of the residents. When asked where they went, Drivas can only shrug his shoulders.

Venizelos says the "radical" changes are for the future of the country, even if they have political costs for his party.

"More than anyone else, we believe that these changes are absolutely necessary for our nation's future," he said. "Greece is a historical and proud country, with citizens who are (making) many sacrifices to save it and see it recover."