There’s no light at the end of the tunnel for Greece

Almost exactly a year after my previous visit to Greece, urgent business obliged me to return there for a flying visit at the end of August.

In August 2015, when I was last there, Greeks were still trying to come to terms with the Tsipras government’s abrupt capitulation to the EU’s terms for the country’s third bailout.  These terms were actually harsher than those originally offered, which the Greek people had rejected in a referendum just a few weeks before.

The Tsipras government’s abrupt reversal of position, accepting even harsher terms than those it and the Greek people had previously rejected, left many Greeks confused.  I repeatedly heard confident claims that in return for accepting the EU’s terms Tsipras  “must have” obtained private assurances of a haircut on Greece’s debt, which for “political reasons” could not be announced publicly. 

The fact that the IMF was known to be unhappy with the deal and was known to want a haircut was seized on by many people as “proof” that such private assurances had been given.

I repeatedly pointed out that this was definitely wrong and that far from having obtained any “private assurances” of a future haircut, the Memorandum of Understanding the Tsipras government signed last year expressly excluded it.  I encountered general incomprehension, and even some criticism.

A year later and all talk of a haircut has gone.  The economic situation, which looked grim in August 2015, in August 2016 if possible looked even grimmer.  In the part of Athens where I stayed – the wealthy suburb of Kolonaki – more shops and businesses had closed, more shop and business premises were empty, none of the shop and business premises that I saw empty a year before appeared to have been relet or sold and all of them were still empty, and there were visibly even more beggars around. 

Alarmingly many of these beggars seemed to be either high or low on various drugs, with a drugs scene proliferating and becoming increasingly and publicly visible.

The cause of the economic distress was not difficult to see.  The country is being strangled by taxes.  Though one of the major memes in the European media is that Greece got itself into its mess because of widespread tax evasion, the effect of the bailout has been to increase tax evasion even more. 

As I was told repeatedly, people feel they have no choice because taxes have become so unsupportably high.  One businessman told me that he has to pay 78% of any income he declares in taxes, which if he traded honestly, declared all his income and paid all his taxes would mean he would soon be out of business. 

The result has been to increase exponentially the “under-the-counter” cash economy beyond anything which had existed before – which is saying something – with honest hardworking middle class people now forced against their will to engage in a practice they abhor.

Moreover since the universal perception is that the taxes are being used to pay the debt rather than to invest in Greece – with social, education and health spending all being cut and public salaries regularly left unpaid – there is anyway a major disincentive to pay the taxes.

The result is that the economy is struggling as people avoid using bank transfers – despite the continuing restrictions on cash withdrawals – and struggle to work with and conceal their cash, whilst despite the massive tax burden, the government finds itself perennially short of money.

August is a quiet time in Greece, with much of the population of Athens on holiday in the country.  However it was difficult to miss the signs of disaffection.  The nature of my visit meant that I was obliged to travel a lot by taxi. 

During each and every one of these taxi rides I had to listen to a stream of complaints about the situation from the drivers.  In fact it was impossible to meet anyone in Greece without the subject of the crisis coming up.

The one thing I did not get however was the slightest indication that this stream of disaffection is translating into political action.  If anything the protest mood seemed more subdued than it was last year, with all illusions gone and a feeling that the country is caught in a trap it cannot escape.   

Confidence in Tsipras appears to have completely collapsed – indeed I couldn’t find anyone who takes him seriously – but there is no obvious alternative to him.  If an election were held tomorrow the likely winners would be the centre-right establishment New Democracy party led by the political dynast Kyriakos Mitsotakis, but this would be a victory by default since there is a complete lack of enthusiasm for them or him. 

I heard alarming suggestions of a big vote for the neo-Nazi Golden Dawn party, with some even predicting that it might come second (ahead of Tsipras and the Left) – in which case it would be the official opposition – but in the very short time I was there I have to say that I saw no visible sign of this. 

As for the various anti-Euro left wing splinter groups that broke away from Syriza last summer led by such people as Panagiotis Lafazanis and Zoe Konstantopoulou, they appear to be making no impact, having descended into typically Greek factional infighting and personal feuding.   

The traditional party of the Greek Left, the Communist KKE, meanwhile is still there, but aside from its sterile Stalinist dogmatism (off-putting to many Greeks) it seems more motivated to block the emergence of left wing alternatives to itself than to offer anything constructive.

One important change is that belief in the EU – once almost universal in Greece and moreover passionately held – appears to be draining away.  I am no longer sure that in a genuinely free vote a majority of Greeks would vote to keep the Euro. 

Perhaps the tipping point in the popular mood on this issue has not yet quite been reached, but Greece does seem to be approaching it. 

However even if that tipping point is reached, given the Greek establishment’s determination to hold on to the Euro at any cost, and the lack of an alternative, it does not follow that a Grexit would happen.  In the absence of any political force able or willing to argue for a Grexit effectively, it is difficult to see how it can happen.

The unhappy truth is that despite a situation in Greece that for many people has become completely intolerable, and despite all the indications pointing to the economy being once again in recession, I heard people talking of leaving the country and making their lives elsewhere, not of them protesting or fighting to change the situation. 

Quite simply, the people I spoke to did not believe that protesting or fighting – or indeed voting – would change anything.  In saying this I of course accept that the sample of people I spoke to may not be representative.

Having said this, in my opinion Greece’s deliverance from its Euro nightmare is not going to come from political or popular opposition within Greece itself. 

If it comes at all it will come if or rather when the EU leadership and the EU public – especially the public in Germany – finally recognises that the policy structure the EU has imposed on Greece has failed, and realises that more money thrown at Greece to sustain an unworkable policy is simply money thrown away. 

At that point economically rational policies – which may include Grexit – will at last become possible.  Judging from the way the mood in Germany is going sour, we may be closer to that point than many think.  For the sake of Greece I hope so.