Greek austerity bill passes amid recession

Last December, near the end of my semester abroad, I escaped a blustery Scotland with two of my friends to spend a few days in Greece. Our first sight upon emerging from the Athens Metro in the Thissio neighborhood, in search of a late supper, was the austere and time-worn Acropolis, bathed in golden light. We would spend hours at the Acropolis the next morning, snapping photos of the Parthenon and Erechtheum, and then descend back into modernity to grab lunch in Monastiraki and get fitted for a pair of custom sandals crafted by the famous poet sandal-maker, Stavros Melissinos—a few of the usual touristy things one does when pressed for time in a new and exotic place. Everywhere I went in Greece, including the port city of Piraeus, the island of Aegina and the Temple of Poseidon in Sounion, I looked for signs of the eurozone crisis in society. Indeed they presented themselves, chiefly in the form of children on the streets playing small accordions in hopes of a coin or two, and clusters of boarded-up shops lining the sidewalks. What I also found was a tremendous ability on the part of Greek society to compartmentalize its economic tribulations and preserve the integrity of its culture through its people, whose geniality and generosity made an impression on me that lasts to this day.

Sadly, this past weekend a few hundred Athenians chose to lash out not only at their government but also at their fellow citizens. The rioting began on Sunday afternoon, in response to the Greek Parliament's passing of a harsh new austerity bill on a vote of 199 to 74. What until then had been peaceful protests drawing tens of thousands to Syntagma Square quickly spun out of control, with rioters throwing rocks at police officers, who responded with streams of tear gas. Around 60 civilians were hurt, and 70 police officers injured. Then the vandals began to set fire to their city's buildings.

A stunning number of Athenian landmarks fell victim to the chaos; two cinemas and a Nazi resistance memorial were burnt to the ground. Buildings dating back to the late 19th and early 20th centuries were reduced to rubbish, 170 offices and shops damaged, and graffiti scrawled throughout the city.

According to the National Confederation of Greek Commerce, any plans to rebuild and reopen the affected businesses and rehire displaced employees are likely impossible in the near term. Greek Prime Minister Lucas Papademos, speaking out against the violence, declared, "Vandalism and destruction have no place in a democracy and will not be tolerated."

Why did these few hundred people see fit to set their city ablaze? Why did they choose to undermine the moral authority of the peaceful protests that had come before them and push hundreds of neighbors into the same kind of economic turmoil the country itself has been facing for so long?

For the vast majority the trouble came with the terms of the new austerity deal, meant to secure 130 billion euros ($172 billion) in fresh loans for Greece from the "troika" of the European Union, European Central Bank and International Monetary Fund, as well as a 50 percent "haircut" to the debt owed by Greece to private creditors. The bill is a sequel to a deal made in May 2010 for a bailout of 110 billion euro ($145 billion). The Greek coalition government hopes that the new funds, combined with austerity measures, will help set the country on the path to relative fiscal sustainability (the debt-to-GDP ratio is currently 133 percent; the current plan is to trim that to 120 percent by the end of the decade). To that end, they voted Monday to cut the national minimum wage by 22 percent, slash entitlement spending and lay off a fifth of all public workers by 2015. According to Der Spiegel, officials are also thinking about getting rid of the extra two months' salary given each year to workers in the private sector.

While the Greek government has displayed a pattern of promising cuts but not enacting them in the past, the lawmakers now clearly recognize how desperate the situation is (better late than never). The contagion of Greek debt remains a risk to the rest of the EU that must be contained, and a default could lead to a massive regional bank run as well as further collapse of the Greek economy. The two primary coalition parties, PASOK (Greece's major socialist party) and New Democracy (the conservatives) had 22 and 21 legislators break ranks respectively in this weekend's vote, and each party chose to expel all its dissenters. Of course in any democratic society such purging of the rank-and-file for an inconvenient vote should never be allowed to happen. That said, the maneuver demonstrates how much Greek party leaders want to show their potential European lenders, including Germany's perpetually annoyed Finance Minister Wolfgang Schäuble, how determined they are to make the harsh cuts they just passed. But in an economy with unemployment standing higher than 20 percent and an anticipated Q4 2011 GDP decline of more than four percent, even if one thinks that a 13th and 14th month's salary is a sign of fiscal decadence, these measures could be legitimately considered draconian.

Many commentators think they probably won't even work; according to economist Simon Tilford, cited in The New York Times, austerity usually involves the devaluation of the country's currency in order to increase foreign demand for domestic goods and services. The Greeks, however, cannot devalue the euro. Indeed, the CBS News website states generally that austerity in recessionary environments fails to solve the key issues (American politicians, take note!).

In terms of public support for the package, Greeks remain as split as they were several months ago. Back in November, 60 percent disapproved of the bailout, but 70 percent wished to remain in the eurozone. A national survey published last week in the newspaper Paron pegs support for the deal at 38 percent, but now it seems the number of those who want to default has shot up to 48 percent.

It is hard to blame skeptics of the deal for wanting simply to break things off with the eurozone and return to the drachma. Der Spiegel reports that German Chancellor Angela Merkel made a firm promise last week that she would not herself be part of any Greek exit from the eurozone. But while officials all around Europe have continually restated their personal dedication to the Greek rescue project, Greek citizens themselves have seen their society deteriorate in ways previously thought impossible. The most plausible timeline to restore the economy back to pre-crisis levels has been pushed back from 10 years to 20, and the stellar alignment of political wills amongst the troika, Greek Parliament and private creditors seems unlikely to emerge.

For the Greeks who continue to negotiate daily life on the brink of economic disaster, it must surely be infuriating to be forced to watch from the sidelines as political elites fumble through the motions, many of them unsure if there is a light at the end of the tunnel. Whether or not Greece is rescued, the scars left by this Sunday's protests will likely mar the face of Athens for some time to come. Nonetheless, the millions of tourists who journey through Greece each year, myself included, can perceive none but the most strikingly visible signs of the crisis being endured. This is a testament both to the degree to which tourists willfully partake in the most pleasant and exciting parts of their destination—the foods, wines, temples, trinkets and such—and to the spirit of the Greek people, which should not be underestimated. But there is only so much hardship a society can take before something gives way; nearly 28 percent of Greeks found themselves in poverty or social exclusion in 2010 according to numbers released last week by Eurostat, and that number has surely only grown." One can only hope Greece's leaders, as well as Europe's political and financial elite, guide them safely through the the months ahead.

—Lane Kisonak '13 is a political science major. He is also Opinions Editor of The Miscellany News.