Talk of recovery in Greece is premature – and all about justifying austerity
Bank bosses and politicians are trying to convince the world that Greece is on the mend – but this boosterism is all about justifying the shock therapy imposed on the eurozone
Perhaps you remember reading about a basket case called Greece. The first domino to fall in the eurozone crisis, it was officially broke and only kept afloat by hundreds of billions in euros from Europe and the IMF. To secure the loans, Athens had to slash spending, lay off or cut pay for thousands of public servants and flog state assets. The result was social uproar, political turmoil and economic collapse. Hundreds of thousands of Greeks took to the streets. The country faced ejection from the euro, what economists drolly dubbed a “Grexit”. In short, it was in a deep hole. But if that’s your image of Greece then you need to update it: that’s so spring/summer 2012.
Over the past few weeks, Athens’ top brass have been trying to convince the world that happy days are here again. Prime minister Antonis Samaras now talks of the Greek “success story”. The boss of the central bank and the finance minister say Greece has turned a corner. Editorialists in the national press and parts of the international financial press dutifully nod their assent. And those with Greek or European assets to sell clap along: “Forget Grexit – it could be Greecovery instead,” ran one particularly bone-headed “research” note I received on Friday.
What’s at stake here is a much bigger prize than whether an economy worth 2% of Europe’s annual GDP really is on the mend. It’s about justifying the shock therapy imposed on distressed members of the eurozone.
This was frankly put by Maria Paola Toschi, a market strategist at JP Morgan, in the FT last week. “If Greece can present itself as a recovering economy, having taken the medicine of fiscal austerity and supply-side reform, then the reform agenda of the European Central Bank and International Monetary Fund will be given a further boost.”
If the elites of Europe and Washington can claim to have “healed” Greece, then they can shrug off criticisms of eurozone austerity. And they can also defend an economic model that just three years ago looked as if it had crashed into a wall.
Yet the exhibits the boosters are using do not a case make. Athens shares doubled in the past year? Cheap money from central banks and investors desperate for returns can play funny tricks. Wages have fallen? Yes, but the business investment that was meant to follow on from that hasn’t materialised. The public finances are back in some kind of order? Taking an axe to the welfare state and public services will do that; still, few think Athens could go a day outside the sovereign version of debtor’s jail.
And no one is seriously disputing that the economy remains badly sick; the OECD predicts Greece will face its seventh year of recession in a row in 2014. More than one in four Greeks are out of a job; of young Greeks, nearly two in three. Around 60% of those out of work haven’t been employed in more than a year. According to a recent piece by Nick Malkoutzis and Yiannis Mouzakis for Ekathimerini, there are 400,000 families in Greece without a single breadwinner.
Although I was one of those who opposed the austerity imposed in Greece from the outset, I would far rather have been proved wrong. As someone who reported from Athens on a few occasions in 2011, and who has a number of Greek friends, I’d like to see them flourishing.
As it is, the most that can be said for the elusive recovery is that Germany and the rest of Europe have decided to keep Athens in the single currency and to keep supplying it with euros. From that has come a measure of financial stability which has attracted investors. The silent run on the banks, with savers pulling out their money, has stopped; but the financial institutions now function more like deposit vaults than dispensers of credit. And there have been some important cultural and institutional changes, as fund manager Jason Manolopoulos points out. Before the crisis, the government didn’t know how many civil servants it employed; now it does. And, should you wish to trade in the middle of a depression, it has got easier and cheaper to set up a business.
But pit those gains against the near-collapse of the health system, the rise of the neo-Nazi Golden Dawn and the clampdown on investigative journalists such as Kostas Vaxevanis, persecuted for publishing a list of super-rich tax dodgers.
While the economy remains catatonic and civil society is in crisis, all such boosterism amounts to is a 21st-century version of claiming the operation was successful; it’s just a shame the patient died. It’s a more dramatic variant of something George Osborne and the austerity crowd are trying in the UK, too: to define down what success looks like.
Two summers ago, I sat with economist Yanis Varoufakis on his balcony overlooking the Acropolis, and asked him to sum up the outlook for Greece. “It’s in freefall.” Last night, I asked him the same question. “It’s still in freefall.”
Then he told me a story. Last year, his book The Global Minotaur was a bestseller in Greece, ahead even of Fifty Shades of Grey. But, he said, he had not received a cent in royalties. Why not? His publisher hadn’t received any money from the bookshops, which were all bust. Rather than chase them, put booksellers out of business and finally kiss goodbye to getting any money, the publisher preferred to leave it be. So the shops, the imprint and the author all got by on nothing.
That sweet little story of economic inertia seems to me to say a lot.