THEORY: Greece Is Ungovernable

Greece Protest Riot Broken Windows

Photo: Thanassis Stavrakis / AP Photo

Life should seem much better here after European leaders agreed on yet another rescue deal early Thursday morning.By coaxing private banks to eat half the value of their Greek bonds, Europe’s new bailout package essentially decrees Greece $140 billion richer (or less poor, at least).

That’s a major windfall for a nation of 11 million people, with a gross domestic product of $330 billion.

The latest rescue arrived just one day before Greece celebrates “Oxi Day,” honouring the Oct. 28, 1940 rejection of Mussolini’s ultimatum of war if Greece resisted an immediate Italian occupation. Greece said “no,” or “oxi,” (pronounced “OH-he”) and joined the Allies in World War II.

It was a valiant moment — Winston Churchill famously said that Greeks don’t fight like heroes but that “heroes fight like Greeks” — and the holiday is meant to showcase national pride, with parades and flag waving.

This year Oxi day is merely highlighting the fractured state of Greek society. Despite the massive debt relief, Greece remains in a deep state of malaise.

The trouble is, there’s still the matter of governing this embattled Mediterranean country, and rebuilding an economy decimated by years of deep recession and austerity.

No one is optimistic.

Given the number of top European banks that have been burned by debt relief — the $150 billion comes out of their pockets — Greece can’t expect a warm welcome from the open markets any time soon; the International Monetary Fund predicts 10 years.

From the government’s viewpoint, unions and opposition parties have tried to block reforms at the worst possible moment — as Greece faced financial collapse from unsustainable debt that also poses threats to Europe.

Meanwhile, average Greeks feel unfairly targeted by austerity measures imposed by a government they say is more concerned about serving foreign lenders than its own people.

Prime Minister George Papandreou hopes the new bailout package — including another $180 billion in loans in addition to the 50 per cent loan write-down — will bring the country together. He said it’s a “new dawn.” Others say this is wishful thinking.

“We are fighting for the country,” Papandreou said Thursday in a news conference during which he called on Greeks to set aside differences. “Let’s stop eating our [own] flesh.”

A parliamentary vote on the agreement is expected by the end of the year, after details are negotiated. The deal will cut Greece’s debt to 120 per cent of its GDP by 2020, compared to a projected 180 per cent without the deal.

But consensus may be impossible. Main opposition leader Antonis Samaras of the conservative New Democracy party said Papandreou and his socialist PASOK party signed away national sovereignty. He said Greece faces “another nine years of poverty and collapse.”

How divisive has it become? Papandreou and Samaras rarely agree on anything, despite being good friends who shared the same dormitory at Amherst College in the early 1970s.

When Ireland and Portugal needed bailout loans, their respective political parties came together on austerity measures. Not Greece. Here, the ruling socialist party passes controversial measures by a slim — and shrinking — majority.

Angry at salary and pension cuts, unions call strikes that paralyze the country, leaving garbage uncollected in the streets. Molotov cocktails are thrown at police during demonstrations. And recently, hooded youths attacked not police, but fellow protesters.

Ruling party officials appear in public at their peril. Students threw yogurt at Papandreou’s interior minister while he was watching a movie in a cinema recently.

Unemployment, crime and suicides are up. Morale is down.

“There is no trust. You pass a law to raise my taxes, but you don’t convince me that the taxes go to a program or for something good,” said George Alatsakis, who owns a hardware store in a northern Athens suburb.

“There is not one single member of Parliament who is a patriot, who cares for this country,” he said. “They should come out to the public. No one tells us about the facts. The facts are a big secret.”

Greece has stayed afloat with a $150 billion bailout from the European Commission, the European Central Bank and the International Monetary Fund, negotiated in May 2010. Papandreou had inherited a $400 billion debt when he took office two years ago.

Despite the turmoil, politicians and citizens are stuck in their same old habits, said sociologist Gregory Katsas of the American College of Greece. Opposition parties oppose the ruling party, no matter the circumstance, he said, and people expect patronage.

“This has been going on for generations now,” Katsas said. “Parents, grandparents have operated in this manner. It’s very hard to change that in a year. It’s hard to teach Greeks that you cannot go to the politician to ask for a job. We have not learned to live rationally. We will, but it will take time.”

But time may be running out. A major restructuring of the Greek government is urgently needed, argues one group of leading academics.

The trio — Michael Jacobides and Richard Portes of the London Business School, and Dimitri Vayanos of London School of Economics and Political Science — said Greece’s task is “nothing less than rebuilding a nation.”

Their Oct. 21 white paper, published a week after hosting a summit of Greek business and government leaders, asserted that: “In these extremely dangerous circumstances, it remains truly troubling that there is no consensus from the political parties on overhauling the state, in order to avoid collapse.”

They proposed abolishing Greece’s dysfunctional tax structure and replacing it with an independent authority, as well as creating authorities to manage healthcare, implement government-wide reforms, and root out corruption. By some estimates, Greece loses up to $30 billion per year to tax evasion and corruption.

Implementation of reforms is just as important as passing a law, they said, claiming for example that the tax collectors’ union is deliberately blocking reforms to protect its turf.

In Berlin this week, German Chancellor Angela Merkel raised the idea of “permanent surveillance” of reform efforts in Greece.

The Greek government has drastically reduced spending in the past year, but that alone won’t solve the problem, the trio said. reorganising and cutting jobs in the bloated public sector is vital.

“A flawed system will simply devour itself,” they wrote.

During recent protests, many angry Greeks called for new elections, and even some PASOK lawmakers have encouraged Papandreou to seek a coalition government. But the prime minister said on Thursday that “people want changes, not elections.”

Stratos Georgoulas, a sociology professor at the University of the Aegean, said Greeks “are looking for a new leader or a new party that can govern.”

He said he’s among leftists who are saying “oxi” to capitalism. “We have to say no to an economic system that governs us like this. There are many leftists that believe the state has to rule the economic system.”

The prospect of greater European oversight of Greece annoys most Greeks, whose ancestors suffered Nazi occupation during World War II, and more than 300 years of Turkish occupation during the Ottoman Empire.

“Greeks say historically that foreigners are responsible for all the problems, but also it’s an alibi for not doing things for ourselves,” said Costas Karategos, a computer programmer who attended a recent protest in Syntagma Square. “For Greeks, government must solve all the problems of the people.”

This post originally appeared at GlobalPost.

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