'Intelligent discontent is the mainspring of civilization.' -- Eugene V. Debs

Thursday, August 19, 2010

The Masque of the Red Death (Part 3) 

The imposition of austerity measures in Greece has resulted in an economic catastrophe:


The government's draconian austerity measures have managed to reduce the country's budget deficit by an almost unbelievable 39.7 percent, after previous governments had squandered tax money and falsified statistics for years. The measures have reduced government spending by a total of 10 percent, 4.5 percent more than the EU and International Monetary Fund (IMF) had required.

The problem is that the austerity measures have in the meantime affected every aspect of the country's economy. Purchasing power is dropping, consumption is taking a nosedive and the number of bankruptcies and unemployed are on the rise. The country's gross domestic product shrank by 1.5 percent in the second quarter of this year. Tax revenue, desperately needed in order to consolidate the national finances, has dropped off. A mixture of fear, hopelessness and anger is brewing in Greek society.


Prime Minister George Papandreou's austerity package has seriously shaken the Greek economy. The package included reducing civil servants' salaries by up to 20 percent and slashing retirement benefits, while raising numerous taxes. The result is that Greeks have less and less money to spend and sales figures everywhere are dropping, spelling catastrophe for a country where 70 percent of economic output is based on private consumption.

A short jaunt through Athens' shopping streets reveals the scale of the decline. Fully a quarter of the store windows on Stadiou Street bear red signs reading Enoikiazetai -- for rent. The National Confederation of Hellenic Commerce (ESEE) calculates that 17 percent of all shops in Athens have had to file for bankruptcy.

Things aren't any better in the smaller towns. Chalkidona was, until just a few years ago, a hub for trucking traffic in the area around Thessaloniki. Two main streets, lined with fast food restaurants and stores catering to truckers, intersect in the small, dismal town. Maria Lialiambidou's house sits directly on the main trucking route. Rent from a pastry shop on the ground floor of the building used to provide her with €350 per month, an amount that helped considerably in supplementing her widow's pension of €320.

These days, though, Kostas, the man who ran the pastry shop, who people used to call a penny-pincher, can no longer afford the rent. Here too, a huge Enoikiazetai banner stretches across the shopfront. No one wants to rent the store. Neither are there any takers for an empty butcher's shop a few meters further on.

A sign on the other side of the street advertises Sakis' Restaurant. The owner, Sakis, is still hanging on, with customers filling one or two of the restaurant's tables now and then. There's really no work for me here anymore, says one Albanian employee, who goes by the name Eleni in Greece. Many others have already gone back to Albania, where it's not any worse than here. We'll see when I have to go too.

As the author of the article, Corinna Jessen, concludes: The entire country is in the grip of a depression. Not surprisingly, the suicide rate has increased significantly:

According to Aris Violatzis of the NGO Klimaka, the number of suicides have doubled if not tripled over the past year. Violatzis said the rate had increased to more than two suicides per day this year, as compared to one per day in 2009. And these are just the suicides that are recorded, Violatzis said, adding that the real number was likely to be higher as the stigma attached to suicide means they are often not reported.

Klimaka, which operates the 1018 telephone helpline, said it was receiving around 25 calls a day, compared to an average of 10 per day last year. Asked whether the spike in suicides was linked to the financial crisis, Violatzis said he believed it was a contributing factor. Suicide is a multifaceted phenomenon – we cannot link it exclusively to the crisis, he said, noting however that the environment influences our actions. As for the profile of most victims, Klimaka said they are chiefly productive people with responsibilities, financial obligations, families, loans. According to Violatzis, many of the victims are men who are no longer earning enough money to provide for their families and feel they no longer have a role to play – people who are going through an identity crisis. There are also many who take their lives due to deep-seated psychological problems or depression, he added.

For an example of this gruesome phenomenon, consider:

The tragic news was published in a local newspaper of the city of Volos (original article in Greek here) on July 23d, a few days before the strike. According to the article the 67-year old, who had been working as a truck driver for four decades, had tried to sell his truck recently without luck. Early on the morning of July 22nd he hanged himself off a bridge crossing over a motorway, where he was later found by passers-by.

Perhaps, you aren't that concerned about what is happening in Greece. It is a small, faraway place that rarely intrudes into our consciousness. But, then again, maybe you should be. Because there is no certainty that the plague has been contained within Greece. Despite the efforts of our Prince Prospero, President Obama, to protect ourselves from it, the global economy remains sickly:

From the previous quarter, Japan grew 0.1 percent, the slowest expansion among the six biggest economies. The U.S. grew 0.6 percent, the U.K. 1.1 percent, Germany 2.2 percent and France 0.6 percent. While China doesn’t release quarter-on- quarter GDP figures, it expanded 10.3 percent from a year ago.

None of the world's largest economies, with the exception of China, are generating sufficient growth to reduce unemployment. Of course, China, as a developing country, should have a substantially higher growth rate, and even it may now have a growth rate lower than the 10% to 14% range that has characterized peak performance in recent years. While subject to debate, there has been a general consensus that China requires growth rates higher than the more mature economies that have been accepted as members in the Organization for Economic Development and Cooperation, somewhere north of 6%. Finally, observe that the previous quarter, the spring quarter, was a more favorable period for economic growth than this one and upcoming ones.

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