GREECE: Crisis choking health system
“Is it one minute to midnight in Europe?” That barbed question was posed this week by the economic historian Niall Ferguson and economist Nouriel Roubini.
“This time Europe really is on the brink,” the influential intellectuals wrote in an article for Germany’s Der Spiegel news magazine, which considered the catastrophic political and economic choices that the continent made during the Great Depression and the possibility that history may be about to repeat itself.
Nowhere do such concerns have more resonance today than in Greece, which is in a state of political and economic paralysis ahead of Sunday’s attempt, the second in six weeks, to elect a functioning government to confront a financial calamity that might be the gravest a western country has faced since the 1930s.
Sunday’s ballot is a contest of competing ideologies. Voters must choose between well-established centrist and right-wing parties whose corruption and profligate spending on unsustainable social programs brought Greece to its knees, or Syriza, which styles itself a coalition of the radical left and has never been close to power.
Syriza pays homage to Che Guevara, publishes posters with hammers and sickles and says that it will look to Russia and China as well as Europe for aid. Other than fresh spending to assist those Greeks reeling from the current economic storm, Syriza’s plans include renegotiating or reneging on a signed memorandum that Athens made with the EU that called for massive budget reforms in return for two huge tranches of emergency financial aid.
The party’s ideas have been attacked as pure fantasy as there is no obvious way for Greece to get new money, let alone pay off the debts it has. But the party’s rhetorical magic has a profound appeal to those furious with the old parties and who, after decades of living comfortably on borrowed money, now have trouble paying for basics such as food, shelter and medicine.
Syriza regards itself as a David fighting Goliaths such as Germany, which is viewed as the bogeyman that has pushed draconian cuts on Greece. Support for the party jumped to 17 per cent from about five per cent during the first election campaign. According to recent polls it has reached an astonishing 30 per cent Thursday. That may be enough for it to lead a left-wing coalition government.
With Portugal, Spain, Italy and Ireland confronting their own economic crises and France and the United Kingdom beginning to show signs of serious economic distress, what Greece decides on Sunday will have a dramatic effect on the future of the EU, the eurozone and, very likely, the financial health of the rest of the world.
However grim the fiscal outlook is for most of Europe, Greece’s books may be the most rancid. The country’s national debt exceeds its GDP. Unemployment is above 22 per cent and has hit 50 per cent among those under 25.
Tourism, which is Greece’s largest source of employment, is down between 15 per cent and 25 per cent so far this year. The other main economic engine, shipping, is starting to feel the effects of a global slowdown in trade.
The Greek economy has contracted nearly 25 per cent over the past four years while the goods and services tax has soared to 23 per cent. A run on Greece’s banks is expected at any moment. Nearly a billion dollars in euros already has left Greece legally during the past four weeks. One of those most favoured destinations: London’s white-hot top-end real estate market.
If Greece abandons or is forced to quit the euro, the so-called Grexit could trigger a Mediterranean-wide run on banks that would probably destroy the European Central Bank. European bureaucrats are already considering worstcase scenarios. Greek bank accounts would be frozen, withdrawals from ATMS would be strictly limited, and border and capital controls would be imposed as it digested a new drachma worth a fraction of the euro.
There is apocalyptic talk here of a staggering economic collapse that could turn Greece into what some have called “a new Africa.”
The battle for political supremacy in the cradle of democracy is terribly polarized and Sunday’s election is too close to call. As Greeks dither over options, fears are growing here that a third election may be required in September to break the deadlock. But no Greek thinks the economy can withstand a third hiatus. Nothing is moving in the market. Everyone is scared that, however they vote, Greece could be crushed irrevocably.