Thursday 27 October 2016

It's time for Greece to face reality about leaving the euro

A Grexit would have painful consequences for good people who played by the rules, but the birthplace of democracy is being strangled by membership of the currency

Ian Birrell

Published 07/06/2015 | 02:30

'One curious aspect of this crisis, incidentally, is how a project designed to bring Europe closer together has ended up exacerbating divisions and encouraging nationalism'
'One curious aspect of this crisis, incidentally, is how a project designed to bring Europe closer together has ended up exacerbating divisions and encouraging nationalism'

Omonia Square used to be the thriving commercial heart of the Greek capital.

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But when I was there, I saw only depressing scenes: scores of shops closed down, banks with steel shutters covered in angry graffiti and chaos on the roads since traffic lights had been destroyed in recent riots.

I passed a junkie openly injecting in a disused doorway, then heard an old woman say to her husband that they needed a lemon to go with their pork but didn't have the money for one. Starvation Recipes, a collection of wartime dishes, was a bestselling book, while gold shops were among the few places that were thriving, as women sold off precious jewellery and family heirlooms.

There was a crowd ahead of me looking up at an office block, which I later learnt housed a co-operative providing cheap mortgages for workers. On the third storey was a red-haired woman threatening to jump, after being warned both she and her husband might lose their jobs.

This was soon after the crisis hit. But life has got worse, much worse, for many Greeks. Suicide rates rose alongside higher levels of mental health problems, disease, hunger, poverty, emigration and unemployment, as the country seemed stuck in a nightmare with no end.

I have been back to report on middle-class parents so desperate, they were placing their children into the care of orphanages; and, most recently, I visited police cells crammed with migrants and refugees who had been locked up by a broken state that found itself on the frontline of Europe's immigration crisis. As was reported recently, the beaches of Greece's islands are as likely to be filled with Syrians, Ethiopians and Eritreans making the journey from North Africa as sun-seeking tourists from other parts of Europe.

Many Greeks admit they brought this tragedy on themselves with their corrupt political class and bloated public sector, joining the euro based on false data about their nation's finances. The wage bill of the Greek state doubled in the decade before they signed up, with average pay in government jobs three times higher than in the private sector. As one finance minister famously complained, the state was so inefficient it would have been cheaper to put passengers in taxis than run its rail system. Hairdressing - among 600 jobs deemed "arduous" - allowed stylists to pick up pensions at the age of 50.

Yet, since then, the nation has suffered deeply, clinging to the euro amid the worst modern recession in a developed economy. In return for bailouts, the Eurocrats and international lenders have imposed crushing austerity, despite the depth of depression. There was a flicker of growth last year from its shrunken economic base, and you can still find cafes and restaurants filled with the smart set. But some dawdle over a solitary iced coffee.

For the economy is shackled with seemingly insurmountable debts in a collapse so severe that it is comparable to the Great Depression.

Little wonder despairing Greeks elected an anti-austerity government run by a hard-Left party promising to restore national dignity, protect pensions and boost the minimum wage at the start of this year. But the posturing leftists of Syriza seem no more of a match for the crisis than their lame predecessors. In recent days, they have resorted to scrabbling around for cash to continue paying off the nation's debts, sparking panic over the safety of bank deposits after ordering hospitals and local authorities to hand over any remaining reserves.

Now there is another tense stand-off between the Greek government and its creditors as Athens resists further VAT increases, benefit reductions and pension cuts to trim its debt mountain. Finally, Greece, in a show of defiance, refused to make the €305m payment to the International Monetary Fund (IMF) due on Friday.

And it is supposed to repay another €10bn to its creditors over the next three months, while still finding the cash to pay its pensions, public-sector salaries and social security payments.

Surely it is time to face reality and accept the futility of Greece remaining in the euro? This is not something to suggest lightly, given the painful consequences for all concerned. Good people who have played by the rules, worked hard all their lives and put aside savings would suffer in a Grexit as a revived drachma would inevitably slump in value - unlike some feather-bedded public sector workers. And never believe those myths about Greeks being feckless - they work much longer hours than the Germans do and have more entrepreneurs per head than any other European nation.

But there is no point in avoiding the drastic disruption of abandoning the euro if the alternative is many more years of this dismal slow-drag stagnation, inflamed by "structural reforms" imposed by zealots determined to protect the single currency.

One curious aspect of this crisis, incidentally, is how a project designed to bring Europe closer together has ended up exacerbating divisions and encouraging nationalism. Not just in the obvious way, with the rise of extremist far-Right organisations such as Golden Dawn in Greece. But look at how the German tabloids scream about greedy Greeks soaking up their hard-earned cash. Or at the Nazi jibes abounding in the Greek media and Syriza's showboating leader reviving claims for reparations over wartime atrocities during a trip to Berlin.

The short-term impact of Grexit would be intense pain for a population that has endured enough agony in recent years. There are fears of civil unrest.

But the sharp devaluation and spike in prices might be just temporary, which is why many analysts think it would be beneficial in the longer run.

Capital Economics predicted that a well-managed exit "could even end up as a favourable economic development for both Greece and the rest of the eurozone".

Meanwhile, the risk of contagion spreading across southern Europe seems less likely than it did in the earlier stages of the financial meltdown.

One impressive aspect of the Greek reaction to the crisis has been the way families and communities have rallied round to help those hit hard. These are most obvious with the soup kitchens, the clothes banks, the scavenging for food at street markets.

But it is also there in the quiet desperation you hear from speaking to people such as the solitary family member in work sharing her income with relatives, or the teacher taking food in to school to stop pupils fainting.

"I feel ashamed and angry at the Greek politicians and the dictatorship of the mediocrities in Europe," one young woman at a soup kitchen told me.

"This is not the Europe of solidarity they talk about."

As Greece's leaders bicker once again with their paymasters over the terms of their latest bailout, it is hard to argue with such angry sentiments as the country that gave birth to democracy is slowly strangled by the currency meant to be its modern salvation.

Deal or no deal, surely it is time for the Greeks to confront their modern-day chimera.

© Telegraph

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