A Greek tragedy

An anti-austerity protester draped with a Greek flag sits in front of police guarding parliament in Athens.
An anti-austerity protester draped with a Greek flag sits in front of police guarding parliament in Athens.

SHE wore a black skivvy, blue jeans and silver-buckled black boots. After clambering through a window, the 40-something Lambrousi Harikleia perched precariously on a ledge two floors above Patission Street, off Omonia Square in downtown Athens. Driven to desperation by a harsh new round of cost-cutting that threatens the government housing agency at which she and her husband work, Harikleia for a moment wrenched attention away from the unseemly slugfest on the economic fate of her country.

A whole city block was cordoned off and five hours lapsed before Harikleia, the mother of a disabled child, was coaxed back through the window by police negotiators.

This was the human toll of a country in economic free fall.

Today, humiliated and disoriented, no longer certain of what it even means to be Greek, let alone European, Athenians are lashing out under the weight of five grinding years of recession - and the prospect of perhaps decades of crippling reform and restructuring to every aspect of their lives.

Enraged protesters on Sunday lobbed Molotov cocktails into more than 40 city buildings when authorities tried to shoo them away from the Parliament. Inside the assembly, MPs forced through another $400 million worth of painful budget cuts on top of $4 billion already promised, part of a spiral that has prompted Greece's spiritual leader, Archbishop Ieronymos II to warn of a ''social explosion''.

This weekend, Greeks are awaiting a pronouncement by a European troika - the European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB) - on what would be a second bailout of $160 billion for Athens, on top of $135 billion less than two years ago. It is a pronouncement also keenly awaited across Europe and the world's financial markets. But such is the distrust between the negotiating parties that there are doubts that all the money will be forthcoming without which Greece would default within weeks on bonds worth $17.8 billion.

The Greek suspicion, founded on blunt public comments by German, Dutch, Finnish and Luxembourg officials, is that the Europeans are manoeuvring to cut Greece adrift from the European monetary union.

European officials for their part are furious that Greek political leaders continue to allude to a need to renegotiate some of the bailout conditions, despite having signed undertakings that there would be no backing away from their commitments.

The depth of the suspicion was encapsulated on Wednesday by Wolfram Schrettl, professor of economics at Berlin's Free University, who told reporters: "Statements and assurances from Greece [that it will abide by loan agreed conditions] are no longer taken at face value. There is a growing belief that Greece is looking for a sucker - and Germany is playing the sucker."

In an atmosphere like that, it is highly likely that the Europeans will dribble out just as much cash as Athens needs to get the country through an April election campaign, before seeking to lock the new administration into a tough new suite of conditions, including that it hold to sweeping pension, salary and job cuts previously agreed.

But there is also a growing confidence in Berlin and several other capitals that the markets could recognise not only that Greece is beyond salvation, but that it could be cast out without contagion spreading to other euro basket cases Portugal, Spain, Ireland and Italy.

THE charred, boarded-up facades of the torched shops and banks and the smashed marble cladding that became missiles in Sunday's running battles are quickly absorbed into the grimy streetscapes of the Greek capital. But despite the removal of protest graffiti from the marble front of the Bank of Greece, and the buzz of cheerful, well-heeled crowds in the brightly lit boutiques and wine bars of Ermou Street - and even the sight of young lovers kissing beneath laden orange trees on Syntagma Square - a malaise cloaks the Greek capital.

Walking westward from the square, past looted stores, a visitor comes upon Sofokleous Street where hundreds queue daily at a municipal soup kitchen, part of a church-backed network that distributes 250,000 meals nationally every week. Property and business owners who were squeezed too hard; widows and widowers left with as little as $120 a month from their pensions after they have paid rent - these are the new poor: well dressed and, as one soup-kitchen staffer observed to a reporter, people ''who speak languages … and own laptops''.

University of Athens economist Panagiotis Petrakis ticks off the indicators: standard of living down, by as much as 30 per cent; bank deposits that have not been spirited out of the country dwindling; almost 70,000 businesses folded in 2010 and bankruptcy stalking more than 53,000 of the remaining 300,000; unemployment, 25 per cent, with youth joblessness 47 per cent and rising; a quarter of the population living in poverty; homelessness up 25 per cent; petty crime, doubled.

On top of all that, Petrakis detects a slow run on the Greek banks. "It means a slow death for the economy," he forecasts.

"People are depressed," the economist says, acknowledging that an acquaintance of 40 years was among those who had contributed to a doubling of the suicide rate since the onset of the crisis.

"Greeks had a feeling that something bad would happen - and now they don't believe this recession will end," he says.

There is no shortage of finger-pointing and name-calling. Greeks mostly blame their politicians for the mess they are in. Their politicians excoriate their European paymasters, especially the Germans, as much for their willingness to exploit the Greek addiction to debt, as for their ruthlessness in imposing a regime to rein in that debt and check the nepotism, corruption and incompetence it helped fund.

"The Germans have to share responsibility for the mess we are in - they did make the loans," a young woman tells The Saturday Age. "Why did they give us more and more money without questioning our ability to repay?"

But 34-year-old finance and investment consultant Dimos Charakidas cuts the northerners some slack. "If you were in their shoes, you would have to see that Greece promised reforms for two years, but did nothing."

Instead, the politicians used the money to pay a bloated public sector - one in seven Greeks is on the government teat - on the understanding that families and whole communities would continue to support them. Stories of hospital janitors earning more than doctors under this system of patronage, known as rousfeti, are rife, and apparently accurate.

"The compromise was that these not-so-good politicians would be re-elected as long as they didn't impose the drastic measures needed to address the impact of the national borrowing," Charakidas says. As a result, change has been too little and probably too late.

"Since the crisis erupted in 2008, the politicians have been very slow to respond," a well-placed observer told The Saturday Age, alluding in particular to a commitment to axe 30,000 jobs but which resulted in only a cut of 1000 positions and 10,000 early retirements. "Reluctant to fire people, they opted for the easiest way out - increase taxes to keep paying them."

The conditions insisted upon by Europe include the axing of 150,000 jobs from an 800,000-strong public sector by 2016, and a 22 per cent drop in the minimum wage - in a country in which average wages have dropped 15 per cent since 2009. The retirement age is to be lifted from 58 to 65 and restrictive closed shops that control the professions and services are to be busted.

When privately employed Greeks are not complaining about politicians and the government, they vent about tax. "Taxes are so high because almost everybody else, businessmen, professionals and companies, can evade them - and the schemes introduced to reduce evasion don't work," Charakidas says. ''The injustice then is that the government increases the tax on those who do pay."

After making social security payments commensurate with his salary over 49 years, Charakidas' father began drawing a pension of $2430 a month in 2009. "We estimate that in present day values, he must have contributed more than [$1 million], but they have just cut his pension to [$1580] a month."

Meanwhile, prices remain high, he says. "Despite all the economic loss to middle and lower-class families, no prices have gone down - not for food, not for medicine," Charakidas says.

"The theory is that you have an internal devaluation by lowering wages and pensions, and prices will fall - they haven't."

Even so, popular support for staying in the European Monetary Union is strong - 77 per cent, according to a recent poll. Some suspect that the Greek government makes regular references to exiting Europe (and reverting to the drachma as currency) to maintain Greek support for the euro.

Some here try to defend Greek honour by taking aim at old wartime foes (and euro zone moneybags) Germany, with pointed reminders of its occupation of Greece during World War II. There is nothing subtle in the wall posters around Athens, depicting Chancellor Angela Merkel in a Nazi uniform.

But the more substantive attacks argue that the Greek economic crisis proves the euro zone to be an impossible construct. "It simply cannot absorb this earthquake," says University of Athens economist Yanis Varoufakis. "Without change by Europe, disintegration is inevitable."

Speaking after a round of meetings with bankers and other officials in Frankfurt, Varoufakis says he believes his interlocutors are preparing to ditch Greece. ''They now think they can amputate Greece and Portugal from the euro zone, and cauterise the stumps with no great damage to the rest of the zone. They would pump billions into Italy and Spain, but I fear they are profoundly mistaken, because inevitably Italy, Spain and Ireland will go too, and the euro zone will have crumbled."

By Varoufakis' reckoning, the proposed bailout is a disaster because it is conditional on further ''savage'' cuts to spending amidst a deep recession. "The ECB and IMF's own feasibility studies tell us that for this plan to work and for Greece to deal with its debt mountain, we need growth of 2 per cent - but right now we are shrinking at 7 per cent."

A deeply frustrated Greek Finance Minister, Evangelos Venizelos, vented on Wednesday: "[We] are waging a battle for survival in the euro zone - there are many in the euro zone who don't want us any more."

European and US financial markets reeled, especially when Greek President Karolos Papoulias chimed in, using a military setting to reprimand Venizelos' German counterpart, Wolfgang Schauble, for insulting Greece. "We all have the obligation to make the effort to get through this crisis," the Greek President began. "[But] I will not accept Mr Schauble reviling my country. I don't accept this as a Greek. Who is Mr Schauble to revile Greece? Who are the Dutch? Who are the Finns?" And then he too made an oblique reference to the German occupation - "We always had the pride to defend not only our own country but the freedom of Europe."

Delieza Yiouli, who counts herself blessed to have a job as a university quality control manager, sketches a portrait of her family. Burned in a pre-crash stock exchange crunch, they strove successfully to be debt-free, but now fret that they should be investing what is left of their savings abroad, because in the event that Europe abandons Greece, Athens will revert to the drachma "and we will lose everything''.

But as her parents hunker down, she finds herself increasingly isolated. "All my friends have left Greece or are thinking of leaving," the 31-year-old says. "Six have gone already - to Paris, Germany, Denmark, Holland … it's hopeless here because there are no jobs, salaries are very low, [$480] a month, if you are lucky; and taxes are too high."

Her friends are among tens of thousands of young Greeks who have departed in the past two years. An Australian ''skills expo'' in Athens late last year, which catered for 800 applicants, reportedly received 13,000. And despite Greek immigration to Australia having come off a post-war high to just a trickle of about 100 per year in the last decade, almost 2500 dual-citizenship Greeks who had gone back to their homeland returned to Australia last year.

"This economic free-fall is driving a new migration wave,'' warns Varoufakis, ''and the people we are losing are our best equipped, best educated human capital. It means a country slowly, steadily losing its potential for creativity and recovery."

Some Greeks wonder how the European Union ever believed Greece could be a member. "It will take 10 or more years of reform to change Greece to make it a good fit,'' says Petrakis the economist. ''When we do return to growth, Greeks will debate if they want to keep that membership. I'm not sure why the EU ever accepted us."

Ultimately, however, Greeks will have to grapple with the northern European charge that their way of life has been too much Zorba the Greek and Mama Mia - and not enough Greece: cradle of Western civilisation.

Today's Greeks tend to hold one of two views, says Charakidas. The more popular, he explains, is to curse their politicians for failing to tell them the consequences of their rampant borrowing - a position he considers a cop-out.

He sits back, indicating that he is more inclined to a second, less popular argument. "I'm in the minority. I believe you get the government you deserve … and here that means this crisis will get much worse before it gets any better."

Paul McGeough is chief correspondent.