Austerity has left Greeks so poor that recovery is a distant dream

Greece Letter: Downward spiral of recession has hit consumer spending and tax yields

While the Greek government waits for the latest developments on both the Macedonian front and its war of words with Turkey, the fallout from the economic crisis persistently presents more disturbing domestic problems.

On one hand, the post-bailout surveillance by the EU will continue as long as Greece’s economy remains unstable, and its position in the international marketplace is uncertain and vulnerable.

On the other, the long-term effects of the austerity programmes over the past eight years are so deep-rooted that poverty as a way of life (“queueing for a living”) is the real prospect for a huge percentage of the population.

The two factors – the macro level of international finance and diplomacy and the micro level of household misery – meet at the embarrassing point where we hear increasingly explicit admissions, by both the EU and the IMF, that their solutions to the crisis have exacerbated, rather than ameliorated, the economic hardships of the man in the street.


The inescapable fact is that Greek recovery depends on creating budget surpluses which cannot in fact be achieved because the downward spiral of recession has reduced incomes and, therefore, consumer spending and tax yields. The estimated targets were never more than aspirational, because they presuppose that the politicians who sign up to them can actually deliver on their commitments.

Pension cuts

Prime minister Alexis Tsipras is between a rock and a hard place. In September, anticipating elections, he made promises which, the EU tells him, can only be kept if he cuts pensions – something he has agreed with the EU but would represent political suicide at home, where 30 per cent of all households depend on pensions which have already been cut by up to 40 per cent in the past eight years.

Tsipras promised to reduce corporate tax, because Greece's tax rate is far higher than that in Ireland, Spain, Portugal and Italy. A one-stop shop for foreign businesses has been promised as long as I have lived in Greece, but the fact that it is considerably easier to do business in Bulgaria, Romania or Cyprus doesn't seem to register with the bureaucrats.

Jeroen Dijsselbloem, the former president of the euro zone group, recently acknowledged the colossal damage done through austerity measures. He didn't, of course, admit that his role in the euro zone group had contributed hugely to the failure of the austerity programme. But he also argued that, without reforms in the public service, privatisation, sale of assets and a war on clientelism, international investors will not regard Greece as a safe place for their money – and without foreign investment the economy cannot revive.

A basic fact of life is that the lowest-income groups cannot pay their taxes, and 14 per cent of the population are at risk of “food poverty” – you either eat or you pay your utility bills. You certainly don’t pay your property tax or income tax, so the national exchequer is depleted.

The plumber spends two hours unblocking my drain. The charge? €30

Another fact is that bank borrowing is impossible because the banks have no money to lend and are afflicted by a record high of non-performing loans. Business start-up is almost unknown. Cars are being taken off the road in their thousands. Tax evasion is rampant at every level. Except in supermarkets, giving receipts is almost unknown, as shopkeepers offer cash discounts of 10 to 20 per cent even on minor purchases.

Below the radar

These are the daily, home-based realities which are apparently below the radar of EU officials who cannot equate harsh economic measures with the human hardship into which they translate.

And yet, no one I know is “on the make”. I get a blow-out tyre from a particularly aggressive pot-hole. I think the mechanic asks for €50, for an hour’s work and a replacement tyre. I hand him a €50 note and he gives me €35 change. The plumber spends two hours unblocking my drain. The charge? €30. He has never heard of a call-out fee, he says. “It wouldn’t work here.”

My fuse box blows and the electrician, together with his apprentice, spends two hours and charges me €25. It blows again next day and he returns without charge. My landline connection breaks and my neighbour, a retired telephone engineer, is insulted because I offer him payment for fixing it. The right people are in the wrong place and the right places are held by indecisive and frightened politicians.

Earlier this year the OECD reported that Greece "resembles a Scandinavian country in terms of taxation while remaining firmly in the Balkans as far as benefits and education are concerned". This highlights the perennial Greek dilemma: how to westernise and become modern when social cohesion, the physical climate and environment, and local loyalties insist on more traditional mores and ways of living. Greeks are asking themselves "Are we right or are we wrong?"