Greece: democracy under threat in the turmoil

The Lehman Legacy

Greece’s economy has been on the slide since mid-2008, when years of political and economic mismanagement left the country badly exposed to the forces unleashed by the global financial crisis. Gross national product has shrunk by a quarter and its debt continues to grow, with the effects of two austerity memorandums with the troika exacting a heavy toll.

Tens of thousands of businesses have already shut down and a recent survey by a business federation found that two in five business people believe that they will be joining them in the near future.

After a boom in the last decade, building activity has almost come to a standstill, as a result of a massive fall in demand and an estimated 150,000 unsold homes across the country. Although 30 per cent of mortgages are non-performing, Greek mortgage holders have been protected from bank foreclosures since 2009 under a government blanket ban, that will be lifted for most borrowers at the end of the year.

The unemployment rate has rocketed. From September 2008 to May this year, joblessness has gone from 7.4 to 27.6 per cent, a change that translates into a million more people out of work.

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The crisis is widely viewed as heralding a break with the post-dictatorship period, evident in the marked decline in popularity of the once-dominant conservative New Democracy and socialist Pasok parties.

Presenting a real threat to democracy, a neo-Nazi party has also entered parliament. Embattled, New Democracy and Pasok formed a coalition last year under Antonis Samaras.

Pointing to signs that Greece is on its way to producing a primary surplus this year, the government insists that Greece could return to the markets and growth by next year. But the current debate at European level on whether Greece will need financial aid beyond 2014 – be it in the form of a third bailout, a debt haircut or both – has cast doubt on that. Furthermore, labour experts believe unemployment could reach 33 per cent next year.