A Tale of Two Sides of the Same (Borrowed) Coin

Jeff—Saturday

Many things have happened this week, randomly striking notes up and down that emotional keyboard we call life.

I finished the first draft of my new book—a distinct high note; my shoulder is back in tune—a very pleasant sound; Mykonos traffic in August makes Mad Max seem like Mary Poppins—cue the screeching coronets; Barbara is in New York until September (see Mad Max reference for reason), calling up a lonely, solitary note; and yesterday was the 40-day memorial service for the passing at twenty-four of Nikolaos Andreas Fiorentinos, the pride of Mykonos and a universal joy to all blessed enough to know him—a chord I’ve not yet come to understand or process.

But, this isn’t about any of that. 

I read through the newspapers looking for a topic conveying the mood I’ve picked up on among many living in Greece. A mood I think shared by some living in other Western nations. There’s a smorgasbord of topics to choose from, what with Turkey and Greece rattling sabers at one another, Greece and Russia in diplomatic tiffs, Greece and FYROM in a blood-feud over its name, officials engaged in raging finger-pointing stemming from Greece’s tragic wildfire catastrophe, and Greece about to exit its third and final (?) financial bailout on August 20^th. 

But none seemed to properly express the mood I sensed: a resigned melancholic acceptance of whatever fate may bring.

That’s when fate’s fickle finger brought me a surprise. Two Reuters articles published in Greece’s paper of record, Ekathimerini, that I’d read back-to-back. Voila, in that combination of stories, I’d found what I was looking for.

To make my point more clearly, I’ve combined the two as one, with alternating paragraphs taken in order from the two articles.  The article titled, “For Greece’s austerity-hit elderly, bailout ‘will never end,’” written by Phoebe Fronista, is reproduced in the same typeface as I’m using now.  The second article, “Greece faces daunting post-bailout challenges,” by George Georgiopoulos and Lefteris Papadimas, is reproduced using a bold-italic typeface. 

Standing united I think makes my point, in many ways.  Here we go….

*****

With two euros in his pocket, Yiorgos Vagelakos, an 81-year-old retired factory worker, scouts the farmer’s market in his working-class Athens neighborhood for anything he can afford.

Greece exits the last of its three bailouts on August 20 and hopes to be able to borrow again in international markets after a nearly nine-year debt crisis that shrank the economy by a quarter and forced it to implement painful austerity measures.

Like most pensioners, he was hit hard by Greece’s economic crisis. Over eight years, the country’s international bailouts took aim at its pension system and more than a dozen rounds of cuts pushed nearly half its elderly below the poverty line.

The crisis has proven deeply traumatic for Greeks who had enthusiastically swapped drachmas for euros in 2001. Adoption of the single currency ushered in an era of cheap credit that funded a splurge in private consumption and public spending that sent Greece’s budget and current deficits ballooning.

Since the debt crisis exploded in early 2010, four successive governments have fought to keep bankruptcy at bay, relying on the biggest bailout in economic history, more than 260 billion euros lent by Greece’s euro zone partners and the IMF.

Now, the country is looking to the end of its third and final rescue package next week, but for Vagelakos, there is little to cheer about.

As Athens now eyes a return to normality and reclaiming its economic sovereignty, the scars remain – banks are saddled with huge bad loan portfolios and Greece’s public debt load is still the highest in the euro zone, at 180 percent of national output.

“For the oranges I’m going to buy I’ll pay you next week,” he tells a vendor at the market. Half his money has already gone to a few bunches of grapes.

But sunshine is breaking through the clouds. The economy, which shrank by 26 percent in the crisis years, has started to grow, tourism is booming and unemployment is slowly coming down – to 19.5 percent from a peak of almost 28 percent.

“Two euros next week. Will you be here?” he asks, picking up his bag of fruit. The response is affirmative, and he jokes:

“If there is a lesson that we learned from the crisis it is that, under any circumstances, you must try to protect macroeconomic stability,” said Panos Tsakloglou, chief economist of the previous coalition government.

“Well then I won’t come so I won’t have to pay you!”

“Populist policies that may win some votes today and have disastrous effects some years down the road must be avoided at all costs. Otherwise, sooner or later we will end up in the situation we are in now,” he said.

Reuters first interviewed Vagelakos in 2012, when Greece signed up to a second bailout that saved it from bankruptcy and a eurozone exit. Back then, he was going to the market with 20 euros in his pocket. His monthly income, including his pension and benefits, had been cut to about 900 from 1,250 euros.

Greece’s economy grew for a fifth straight quarter in January-to-March, the expansion picking up pace to a yearly 2.3 percent, a sign the recovery is gaining traction, helped by net exports. The EU Commission sees 1.9 percent growth this year.

Today it is down to 685 euros and debts are growing, he said.

But skepticism remains, including at the International Monetary Fund which sees the recovery strengthening and growth reaching 2 percent this year and 2.4 percent in 2019, but says that “external and domestic risks are tilted to the downside.”

With unemployment reaching almost 28 percent at its peak, a quarter of children living in poverty and benefits slashed, many families grew dependent on grandparents for handouts during the downturn. Vagelakos can no longer support the families of his two sons and can barely cover his and his wife’s needs.

Post-bailout, Athens has committed to attain primary budget surpluses – excluding debt servicing outlays – of 3.5 percent of GDP until 2022, and 2.2 percent until 2060.

 “I wake up in the morning to a nightmare,” he said. “How will I manage my finances and my responsibilities? This is what I wake up to every morning.”

Debt relief agreed with Greece’s euro zone partners in June, which extends maturities on some loans and softens the interest rate burden on others, will help cushion the country’s return to markets.

Sitting at the kitchen table of his modest home, he goes through a notebook listing debts to the pharmacy and others: “36.80 (euros), 47.50 plus 13... If we add to this the rest of the debt that we have to pay, what is left for us to live on?”

These debt relief measures, coupled with a 24-billion-euro cash buffer, will help to improve debt sustainability over the medium term, facilitating Greece’s access to markets.

Pensioners have staged numerous protests against the austerity measures imposed by the bailouts, but although the Greek economy is finally starting to grow again, albeit modestly, they may face yet more pain. Changes to pension regulations mean more cuts are expected in 2019.

But the IMF says long-term sustainability remains uncertain and a “realistic” rethink is needed on assumptions for primary balance targets and economic growth.

“The memorandum (bailout) will never end,” Vagelakos said. Referring to a plan by Greece’s European partners to closely monitor its finances after the bailout ends on August 20, he said:

“I don’t see a reason for jubilation concerning our exiting the memorandum (bailout) because ... you may be jumping out of the frying pan into the fire,” said Thanos Veremis, emeritus professor of history at Athens University.

 “Even if they end in August, we have the permanent surveillance, which is not a memorandum but a continuous memorial service for us.” [Reuters]

“Most people have been taxed dry, people are completely immersed in paying the tax man, with little money left on the side to put into your business and therefore improve and grow.” [Reuters]

—Jeff