As the next round of negotiations to try and keep Greece in the European Union get underway, a tangible solution is still not evident, but the sense of despair locally is palpable.

Looking out from the heart of the Cyclades at the glassily calm, crystal clear Agean Sea it takes some imagination to marry this most popular of tourist destinations with the desperation and turmoil that rocks the entire country - islands and all.

But as we all know, looks can be deceiving, and the economic quagmire facing this nation of 11 million increasingly depressed Greeks is now mind boggling....and let's face it, impossible for Greece to extricate itself from without debt relief.

There is an international editorial battle playing alongside the reality, with economists trying desperately, and often compassionately, to explain that the current medication of years and years of austerity is just not working.

Indeed economics Nobel laureate Joseph Stiglitz describes the demands on Greece as akin to a 19th Century debtor's prison from which the poor can never be released because they can't repay the initial debt because they have no income.

Munich University's economics professor Hans-Werner Sinn can see no way around Greece having to leave the Eurozone. He softens this blow by suggesting for the sake of Greece (and a united Europe), that the exit could be a temporary one. During its time in the drachma wilderness Greece, he suggests should drastically devalue and restructure, buy local, attract tourists, reverse capital flight, turn the trade deficit into a surplus and eventually exercise its option to return to the EU fold.

Sounds so easy and orderly. However it blissfully skips over the politics, not the least of which includes the fact that the people of Greece voted a resounding 'no' to more austerity.

Then their hero capitulated to the troika and subsequently faced a significant party mutiny by MPs who were just sticking to SYRIZA's policies.

In the English edition of the Greek paper Kathimerini, there is, not surprisingly, constant attention given to the face-to-face negotiations with representatives of the country's creditors in a desperate bid to give Greece more money still in order to pay a 3.2 billion-euro instalment to the European Central Bank due by August 20.

The political wallpaper as background is a roiling upheaval within the SYRIZA party and speculation of an early election, both of which naturally appeal to those who consider Alexis Tsipras  and his party to be "dangerous" and responsible for destroying the "economy and credibility ( of Greece) so they could live their revolutionary fairytale".

They are the frenemies he needed to go back on his 'No' word.

Economic doom and a diminishing economic credibility did not however begin with the election of Tsipras, but he and his precious SYRIZA may well end with it.

And then what? 

Talking to locals - store owners, restauranteurs, business owners, hospitality and tourism industry workers - there is overwhelming uncertainty and fear.

Greek businesses are fleeing in increasing numbers. Now a reported 11,000 have moved over this last decade to neighbouring Bulgaria where the wages are low (it is the poorest member of the EU), and the taxation is reliably lower than that of Greece. Of course capital took flight much earlier than this latest Athens crisis, and now that game is well and truly over with restrictions still applying to banks.

Those restrictions are having a ripple effect on the country's tourism. Restauranteurs report the first two weeks of the season (July) were dreadful and very scary.

Hotels are reporting domestic business slashed to half of normal, despite discounts and special offers to try and lure in the locals. Some Island destinations report a "tragic" 80% drop. One camping ground with a capacity of 300 reports only 7 visitors.

International visitor numbers have rebounded, but the locals are limited to around 240 euro withdrawals a week so they are staying at home.

How can you do a family holiday on 240 euros a week?

A Kathimerini editorial slammed the capital controls on the banks as " a major premeditated crime" committed by officials who ignored warnings of the consequences which are now playing out across the entire country's economy.

At least the government and Bank of Greece have moved to ease restrictions on imported goods and raw materials which is some relief for an economy that is 80% reliant on raw materials and finished products.

There may be a clue in that number!

In the meantime, the focus is on the negotiations trying to keep a bankrupt, but not yet bankrupted Greece afloat, and continuing uncertainty about yet another election as early as August which just compounds all the other uncertainties.

Tsipras' tactics in calling on the people  (snap election Janurary, referendum July, possible election August) are, according to local commentator Alexis Papachelas, beginning to look a lot like George Papandreau " who kept asking for elections and had the country explode in his hands as soon as he rose to power".

It is glaringly evident that the symptoms generated domestically by Tsipras' non/actions are uncertainty, confusion, suspicion, mistrust and anger.

Internationally the horizon on the Greek issue appears just as uncertain, confusing and angry.

Germany is adamant Greece will receive no debt relief.

However, as Stiglitz explains, the new programme facing Greece makes no sense for the country or its creditors, because it will lead to unsustainable levels of debt a la Argentina, and the IMF cannot participate in a programme that leads to unsustainable debt.

Under the hot sun of the Greek summer it would appear then that the dog continues to chase its tail - a futile and ultimately unsustainable exercise in going nowhere fast.

 

 

 




 

Comments (5)

by Wayne Mapp on July 28, 2015
Wayne Mapp

Jane,

Almost all the current problems of Greece can be laid at the door of Syriza. It is hard to imagine a worse government in a modern democratic state with his false promises and 6 months of absurd negotiation. Yes, Greece does need some debt write off, but it also needs to accept realistic policies to get the economy moving. The actions of the Greek government have hugely damaged the Greek economy and Greek confidence. Either the Greek government buckles down and actually governs for the benefit of Greece or they should resign in disgrace.

by Fentex on July 29, 2015
Fentex

Greece has buckled down and over the last five years of increasing auster policies has developed a primary surplus. Claims they are trying to live on borrowings without putting their house in order are lies.

The recent negotiations have been over demands for increased austerity which no credible person thinks will increase Greece's ability to repay debt.

If more debt relief is going to happen now was the time to provide it so that any negotiations would happen with that carrot. Waving nothing but a stick should not have worked and leaves me wondering if Greece has decided to leave the Euro but just hasn't told anyone yet.

German driven pressure on Greece has become irrational as Greece's presence in the Euro is in Germany's long term interest, but only Greeces short term. They are shooting themselves in the foot.

by Murray Grimwood on July 29, 2015
Murray Grimwood

Actually, all nations including Greece, are living beyond their means. And at the expense of future generations. Every litre of finite fossil fuel burnt, is a litre nobody can ever use again. Every ton of CO2 from that burning not fully sequestered, is being left to the future to deal with - but they won't have the energy to do the dealing-with. It can be argued that it's fraud, it is certainly unsustainable, and therefore won't be sustained.

http://www.peterevansphotography.co.nz/writing/zealandia.html

(figure 3 shows what we are doing, energy-wise. Other finite resources are being depleted at exponential rates, renewable ones at more than the sustainable rate, pollution is increasing exponentially, unmitigated). But all other everything depends on available, compact, usable energy.

Greece is just first cab off the rank, having been resource-depleted longer than most vi a previous rise-Empire-fall sequence. 

Politics and money-marking are artificial constructs. While game-playing may decide who gets to sit on the chairs every time the music stops, the two can do nothing about the reduction in the number of chairs.

Greece was left standing this time. Who is next, and how long before it cascades/dominoes?

Others......

http://www.sciencemag.org/content/281/5375/336.full

........have known what is coming for some time (and therefore grabbed a chair?)

by Rich on July 29, 2015
Rich

One option for Greece is to decentralise such that services are provided and tax collected by local communities rather than central government. Give such communities the right to self-organise and have first dibs on taxes. Then the central exchequer, which is under EU control, will gradual disappear and you'll have a nation of autonomous collectives, a bit like revolutionary Spain. (But minus the Nazis and Stalinists).

by Fentex on July 29, 2015
Fentex

a bit like revolutionary Spain. (But minus the Nazis and Stalinists).

Not for long, and Greece won't have to import it's Nazis, they're already there and waiting and being primed by increasing austerity increasing anger and division.

Greece should leave the Euro, reissue the Drachma, let it float, be prepared (as if they have a choice) to default on debts, and while exploiting the tourism it is well situated to profit from encourage whatever business it's undoubtedly favourable currency exchange may encourage.

And then we'll see if Germany's irrational hatred will overflow from the Euro to the EU when, as I'm sure they would, they demand Greece be expelled from the EU for daring to defy them, er, the ECB.

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