Poor Greece: What Austerity Looks Like

I read an article in The New Yorker this morning about life in Greece (click here to go to the article).  Greece is in the midst of a depresssion:

For many, Syriza represented the first real hope in years that Greece could climb out of economic crisis. Most of the patrons, including Panos Alexopolous, a welder by trade, had long been out of work. “You wait and wait for something to change,” he told me, “but those previous governments were all the same.” He was laid off in 2009; a year later, Greece, which had racked up enormous debt, agreed to a bailout from international creditors on the condition that it impose a harsh regimen of spending cuts and other economic reforms. His pension dwindled to about four hundred and fifty dollars a month and, following a cut of forty per cent to the country’s health budget, his medical costs soared. Soon, his family was on bread lines. Sometimes, he would set up on a street corner with a sign asking for spare change, but always in a neighborhood far from home so that no one would see. “Syriza,” he said, “is the first government that will give us our pride back." 

Previous Greek governments had overspent.

Years of such corruption and tax evasion, coupled with reckless expenditure—as a share of G.D.P., for instance, Athens spent almost twice the E.U. average on military purchases—pushed the Greek state into massive budget shortfalls, prompting the government to borrow heavily. In late 2009, the government announced that it had racked up enough debt to be running a deficit of almost thirteen per cent of G.D.P., sparking fears of a default. Greece’s creditors were mostly European banks, which had, in part, used public bailout money following the 2008 credit crunch to scoop up Greek bonds. For example, French and German banks were on the books for thirty-one and twenty-three billion euros, respectively. The troika stepped in during the spring of 2010, and again in 2012, to orchestrate bailouts of the Greek government, offering two hundred and forty billion euros in loans in exchange for a drastic reduction in government spending and other measures to make the Greek economy more competitive. “Understand that this debt is symbolic,” Theocharakis said. “It’s simply too much to ever be paid back fully.”

So Greece gets bailed out.  But does it?


the troika and other creditors raised most of the bailout tranche from capital markets through low-interest bond issues, and then loaned the money to Greece at much higher rates. Close to ninety per cent of the money returns directly to the original creditors, or goes to recapitalize Greek banks; most of the funds don’t even touch the Greek government’s hands, landing instead for a few days in an escrow account, until they are transferred to bond holders. Eurogroup officials say that, in the short term, this circular flow is simply a way of avoiding a Greek default, and the political and economic fallout that would attend it, while the country creates the conditions for long-term financial health. From the perspective of many Greeks, though, it appears as if Germany and other euro-zone states are effectively bailing out their own banks, thereby rewarding poor lending decisions and speculation, and using the terms of the Greek bailout to enforce market liberalization. “Essentially,” said Theocharakis, “they are piling loans onto a country that’s already in so much debt.” Indeed, since the 2010 bailout, Greece’s debt-to-G.D.P. ratio has grown by fifty per cent.

The loan funds don't go to Greece or its people:  they go to the banks who had loaned the money to Greece in the past.  So the Greek people suffer today because of political decisions made in the past.  And their own government has very little power to change that suffering.  Why don't you Google Greece and add to the story line?  Do you think that the situation that Greece is in is fair?