Greece: A debt colony, shackled to its lenders

A new agreement between cash-strapped Greece and its eurozone lenders is bad for the Greek people and bad for democracy.

German finance minister Wolfgang Schauble has compared Greece's situation to eastern Europe in the 1990s [Reuters]

The Greek government has hailed the eurozone finance ministers’ latest decision on Greece, requiring the country to lower its debt in return for bailout funds, as yet another political victory. This was not surprising at all to Greeks, who have often seen their government celebrating decisions that have made life miserable for its citizens.

But this time, Greek Prime Minister Antonis Samaras went so far as to call the agreement a “landmark for the country’s rebirth”, releasing a video on YouTube entitled “Greece starts now”.

Viewers of the video pointed out the irony of propagating national unity and hope to Greeks, who have meanwhile been devastated by the government’s harsh austerity measures. This simplistic piece of propaganda elicited comments reflecting the genuine bitterness and disenchantment of the Greek people.

A boy aged 14 wrote: “The present is uncertain, the future looks nonexistent. When a country dies, so do its inhabitants.” A low-income woman then asked: “What will you do for those who have to live on 5,000 and 10,000 euro per year? Thank you for your valuable time and your earnest contribution in the common affairs of our occupied land”.

Dazed and confused

Greeks know well that calls for “national unity” are nothing but dust in the eyes of a dazed and confused people. They are represented by a weak government that has endorsed all its lenders’ claims, leaving its population practically undefended at the negotiating table. 


 Counting the Cost – In debt but building the future

According to the latest data from Eurostat, the EU’s statistics agency, about 30 percent of the Greek population now lives below the poverty line – with 15 percent living in conditions of extreme poverty. These figures are for the first time comparable to those of former Soviet-bloc countries such as Bulgaria, Romania and Latvia.

Austerity is shredding the social fabric of Greece. About 1,000 more people lose their jobs every day, and long-term poverty is knocking at the door of a new class of low-paid workers. According to Greece’s Institute of Labour, the average salary in the country is just 74 percent of the European average – and, what’s more, Greeks’ purchasing power has fallen by half since 2010. Many workers now have to live on as little as 4,500 euro per year, while the poverty line is set at 7,100 euro per year.

Although wages and pensions have been slashed, the public healthcare system is being destroyed and spending on public education has fallen to levels last seen in the 1980s, the cost of living in the country remains high – confirming the words of one Greek housewife who said that Greeks are “going to have to live on a Bulgarian salary with London prices”.

But there is no such thing as “national unity” in despair. According to a recent bank report, despite the recession (25 percent of Greek GDP has vanished since 2009), the wealthiest 500 Greek companies saw their profits increase by 18.2 percent in 2011. Several reports have found that Greece’s shipping industry, traditionally part of the country’s political and economic elite, who hold 16 percent of the world’s maritime fleet, pay very little in taxes.

‘Death spiral’

But Greece’s problems are not only economic in nature. Political malfunctions have reinforced the country’s economic woes, which in turn have exacerbated social decay. Greeks term it a death spiral.

At the latest meeting of European finance ministers in Brussels, the interest rates Greece has to pay on its debt were lowered, the maturities of these loans were extended, and a plan was made for Greece to buy back some of its discounted bonds. If Greece follows this path consistently, then by 2020 public debt will be about 124 percent of its GDP, which the troika says is a sustainable figure.

But the deal comes with one condition: that Greece remain on the same route of austerity for at least the next 10 years.

This will cause the country’s social and economic situation to rapidly deteriorate in the near future. The recession will continue, new austerity measures will be introduced and debt repayments will become even more difficult to maintain, while another recapitalisation of the Greek banks will probably be needed shortly. As the leader of the opposition party SYRIZA said in a recent interview with the Guardian, if these policies continue then in ten years, Greece “will have become a no-man’s land”.

It is not an exaggeration to claim that Greece is a debt colony now, shackled to its lenders.

In order to impose austerity measures, the government is already using undemocratic methods like legislative ordinances that bypass parliamentary control. But even that is not enough for Greece’s saviours, who demand a further narrowing of democracy.

The Greek government has agreed not only to transfer all of the revenues from privatising public assets to a special account for servicing its debt. It has also agreed to transfer all of its budget surpluses up to 4.5 percent of GDP, and an additional 30 percent of any surplus beyond that! So even in the best-case scenario, in which Greece would have the fiscal resources to raise pensions and boost funding for the public healthcare system and public education, it will simply not be permitted to do so. There is no room for political decisions anymore.

It is not an exaggeration to claim that Greece is a debt colony now, shackled to its lenders. It is subservient to a trust of bankers, bureaucrats and neoliberal fundamentalist politicians in northern Europe (and within Greece, too) who aim to impose their doctrine regardless of its apparent failure and the will of the Greek people.

By accepting all of these demands, the Greek government will not only hurt its own people, but also destabilise Greece’s position within the eurozone – and put forth a dangerous model for other countries in similar situations.

German finance minister Wolfgang Schauble was right to characterise Greece’s situation as similar to that which eastern Europe went through during the 1990s in his recent speech at the German parliament. Just as some countries in eastern Europe never reached western European standards of living, so a similar process is happening now in the south.

But “the enemy” now is not a state-planned economy. Rather, “the enemy” is – in the eyes of the Greek government and its lenders – the very social welfare system Europe has guaranteed to its people for almost a century.

Matthaios Tsimitakis is a journalist based in Athens.