Thursday, March 14, 2013

No Exit? Greece's Ongoing Crisis

by Mark Mazower


April 1, 2013

When the New Year kicked off in Athens, a pall of smoke hung over the city. Steep hikes in fuel prices had pushed people to burn wood to stay warm, and even discarded Christmas trees were being fed into the fires. At the same time, a series of small explosions targeted the offices of the two major parties, New Democracy and Pasok, as well as the residences of several prominent journalists. Most shocking of all was a series of brutal beheadings across the capital that quickly became fodder for headlines, with the victims including a former central banker, a Dutch credit ratings executive and the CEO of a small debt collection agency. Well, not quite—the beheadings are described in Lixiprothesma daneia (Expiring Loans), the first novel in a new crisis trilogy by the leading Greek crime writer, Petros Markaris, whose detective hero, Inspector Costas Haritos, is as shrewd a reader of the mood in Athens as anyone. Greece is now sunk in its sixth straight year of recession, and with social and political disintegration reaching extremes not seen since World War II, it is no longer easy to separate fact from fiction.

Hard though it is to believe, around four years ago commentators and politicians were expressing relief that Greece, like the rest of Europe, had managed to escape the worst of the financial crisis. There were good reasons to be cautiously optimistic: the country’s ratio of debt to GDP had worsened a bit but not substantially, and levels of personal indebtedness were relatively low by international standards. There was no looming mortgage crisis on an American or even a Dutch or Irish scale. (The growth in housing prices in Greece between 1996 and 2008 was only 80 percent compared with 170 percent in Ireland, for instance.) Yet in the six months following the summer of 2009, everything unraveled with bewildering speed, catching the Greeks—and the rest of the world—by surprise. Following the elections that autumn, the incoming government of George Papandreou’s socialist Pasok party announced that the books had been cooked and the country’s plight far worse than anyone had foreseen. Then the credit ratings agencies piled in, downgrading Greek bonds and helping to send the government’s borrowing costs through the roof. As the panic spread, negotiations got under way among Greece, the European Union and the IMF, and the first in a series of bailouts was negotiated in exchange for the imposition of austerity.

Since then, Pasok has fallen from power and all but imploded. The government is now headed by the center-right party New Democracy; meanwhile Syriza, a coalition grouped around the old Euro-communist left (and once a happy member of the radical fringe), finds itself occupying the unaccustomed role of official opposition, and a thuggish neo-Nazi party called Golden Dawn sits third in the polls. Greece remains a member of the eurozone, but at an exorbitant cost: three years into the austerity regimen, the country’s unemployment is likely the highest in the EU at 27 percent, with youth unemployment exceeding 60 percent. Reports suggest that one out of three Greek households is living in poverty. Greece has become the epicenter of the worst crisis of capitalism since the interwar depression.


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