While technocrats haggle, ordinary people feel
Greece: The debt crisis is
getting worse, not better, and Greeks are wondering how much more they can
A new Greek
tragedy is being written.
of economic chaos have torn great holes in the social fabric of the
country. There has been a surge in the number of children abandoned by
their parents. A kindergarten teacher in Athens found a heartbreaking note
about one of her four-year-old pupils in the weeks before Christmas.
"I will not be coming to pick up Anna today because I cannot afford
to look after her," it read. "Please take care of her. Sorry.
It is just
one snapshot from a nation in pain. More than 878,000 people are
unemployed 18 per cent of the workforce. Athens officials say that the
numbers using the city's homeless shelters and soup kitchens is up by 25
per cent since the economic crisis began. Hospitals are reported to be
understaffed and starved of supplies. And, as became all too clear when
talks with bond-holders stalled yesterday, there is no end in sight to the
agony. The International Monetary Fund expects the economy to shrink by a
further three per cent in 2012. Others are still more pessimistic. One
forecaster has predicted a whopping 7 per cent contraction.
"Troika" of inspectors made up of officials from the
European Central Bank, the European Commission and the International
Monetary Fund will return next week to check that the government is
delivering on its reform commitments, slashing public spending. They will
receive updates from the prime minister, Lucas Papademos, and the finance
minister, Evangelos Venizelos, and decide whether to release the next
slice of funds that Greece needs to redeem 14bn of its bonds in March.
visit from the Troika prompted mass demonstrations. Crowds chanted slogans
such as "Don't let capitalism kill you" and "Now or never:
time to revolt". Greek unions which are preparing another strike
next week argue that the massive public austerity being demanded of
the Greek government by the Troika is driving the economy into the ground,
making the situation worse, not better. A growing number of economists
outside Greece agree.
But the fate
of ordinary Greek citizens also resides in the unsentimental clutches of
private sector financiers. Germany, the biggest single contributor to the
EU/IMF Greek bailout, began pushing hard last year for something called
"private sector involvement" in the bailout. This meant that the
holders of Greek bonds would write down the value of their investments.
Germany did not like the idea of pumping ever more money into Greece
merely so that the country could pay out those funds to private
bondholders. In October, a 50 per cent bondholder "haircut" was
announced. Eurozone leaders agreed the deal with the Institute of
International Finance (IIF), the lobbying group of the global banking
But the IIF
only really speaks for the large banks of the continent. A number of small
hedge funds have also bought up cheap Greek bonds and are refusing to take
a haircut on their investment. So now there is a stand off. The German
Chancellor, Angela Merkel, warned at a press conference in Berlin this
week that Greece will not receive the next instalment of its bailout
funding unless the deal is reached. Charles Dallara, chief executive of
the IIF, flew to Athens this week for meetings with Greek ministers in the
hope of brokering a deal between the country and its creditors. Yesterday
those talks broke down. Some believe Germany will get its way. Others
expect the hedge funds that are holding out to be paid off. No one really
Yet even if
the deal is ultimately done, many say that Greece needs to be let off more
than 50 per cent of its debts. And the number of economists who take the
view that Greece can only return to sustained growth if it leaves the
eurozone, defaults on its debts and introduces its own devalued currency
month of economic misery brings the prospect of Greece leaving the euro
closer. The great unknown, though, is whether a eurozone exit would mark
the beginning of the end of this tragedy for Greece, or a new, darker act.
Downgrade: What it means for Europe
downgrade is an embarrassment for President Nicolas Sarkozy. But the move
was long expected by markets.
still contracting. Social unrest rising. Athens needs to redeem 14bn of
debt in March.
of debt yesterday, but market demand was subdued. Later its credit rating
was cut. Mario Montis government faces high costs for long term
this week so popular it had a negative yield means Germany makes
profit by borrowing.
regarded as a safe haven, like Germany's. British 10-year bond yields have
been hitting all-time lows.