Greece: reeling from austerity and a broken economy | Business| Economy and finance news from a German perspective | DW | 27.10.2017
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Greece: reeling from austerity and a broken economy

Greece's creditors have concluded a first round of fresh bailout inspections to assess reforms. Even if deadlines are met, a shattered economy and battered public trust will linger behind, says Anthee Carassava.

Strangled by the worst economic crisis to ever hit a European Union member state, Greece is suddenly humming with optimism. The belief that an escape from seven years of brutal budget cuts seems finally possible. In fact, Alexis Tsipras, the once firebrand leftist prime minister, is already trumpeting a marching Greek comeback.

The numbers look promising. Much-needed growth is expected to top 2.4 percent, up from about zero last year. And the primary surplus, which excludes the cost of financing debt, is also forecast to soar, reaching an ambitious 3.6-percent target, helping pay down the country's crippling debts.

But behind the veneer of a budding Greek recovery, the economy remains shattered. Business confidence is continuing to fall as public discontent grows over the government's failed pledge to end austerity and brutal budget cuts that have squeezed household incomes by 27 percent, left one in four Greeks jobless and one in three businesses bankrupt.

"Tsipras and his Syriza party represented the first real hope in years that we as a proud nation could claw out of the crisis," says Leonidas, an unemployed retail manager. "But now," he adds, refusing to divulge his surname, "they have all proven to be the worst liars and cheaters of all, pushing Greeks to a state of financial devastation which little will be able to overcome."

Massive discontent

"I can't stand hearing him [Tsipras] harp on about the country's financial turnaround. He's either mad or oblivious to the cruel truth and reality gripping Greece."

Indeed, high taxes, byzantine bureaucracy, policy inconsistence and corruption are among the top reasons keeping investors away, pushing Greece down to 87th place on the World Bank's business-friendly listing. The country's 2017 ranking is on a par with Algeria, Sri Lanka, Guatemala, Trinidad and Tobago.

With unemployment at over 21 percent, nearly 50 percent for under 25 year-olds, pensioners earning a steady pay cheque have become the backbone of most Greek households, during the financial crisis here.

Greek shopper (picture-alliance/AP Photo/G. Papanikos)

Many Greeks find it hard to meet ends as auterity measures take their toll

Still, successive governments have repeatedly targeted the country's ailing pension system, sheering retirement payments and benefits by as much as 40 percent since the start of the crisis in 2010.

Fotis would know. The 70-year-old, retired welder and father of four is struggling to retain the once thriving business he built on the edges of Athens, 46 years ago.

"Every other welder within a radius of about 20 miles[32 kilometers] has gone bust, crushed by the crisis," he says. "If it weren't for some savings that I collected through the years, plus a house I managed to build without taking out any loans, I'd probably be on the bread line also."

"I used to come into my workshop everyday, taking non-stop deliveries from dawn to dusk," he recalls, sipping on a soda. "Now, there are days when the phone never rings and a customer never walks in."

"The only thing keeping my family afloat is my pension — even as it is, chopped by 30 percent."

Pensioners hit hard

EU statistics say 22.2 percent of Greece's population are "severely materially deprived " — unable to pay a mortgage or rent, falling behind on utility bills, unable to afford heating, to buy a color television or washing machine and cover unexpected expenses.

Most of the "materially deprived," according to an EU poll, include pensioner like Mr. Fotis.

"I can't remember the last time I paid my electricity bill and other utilities, in full," he admits. "Every couple of months I show up with whatever money I have left, some 20 or 30 euros, [$23-35] to pay just a portion of the outstanding bills.

"It is a moment of humiliation I never expected to live," Fotis concedes. "It is what our lives have been reduced to for the sake of getting the national numbers right."

Since the start of the crisis, average family incomes have plunged to 2003 levels, and 40 percent of Greek children now live below the poverty line.

Not surprisingly, the black market is thriving.

With government levies accounting for nearly 50 percent of labor costs, more than double the average of prosperous EU states, Greeks have plenty of incentive to dodge the taxman.

"It's simple," says Fotini Dagou, the owner of a tiny nail salon in northern Athens. "Whatever semblance of business is left out there, it's happening under the table, behind the counter. It's the only way we can break even."

"Greece," she says, taking a deep drag from her cigarette, "is not an economy founded on big companies and big money. It's a honeycomb of small, mama-and-pappa shops that have owners resorting to whatever it takes to stay afloat, feed their families and keep their businesses alive, to hand down to their children."

According to a recent survey, nearly a quarter of all economic activity goes undeclared. What's more, tax cheats cost the state some 16 billion euros in undeclared revenue each year, about 9 percent of the country's gross domestic product.

Tsipras surged to power in 2015, serenading crisis-crippled Greeks with a promise to scrap the country's bailout deals and challenge lenders, mainly Germany, for their prescription of unrelenting austerity.

Despite his insistence for months, Mr. Tsipras caved in to international pressure, accepting an emergency financial rescue with terms even more stringent than those he was initially offered.

He has since then agreed to creditors' additional demands. "Ultimately, Europe does not care about Greece and the Greeks," said Babis Papapanagiotou, a financial analyst in Athens. "Member states simply want to put this affair behind them, and in that sense they are prepared to help the Tsipras government clear its bailout review."

"If anything," he quipped, "he has been helpful."

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