The Nation: Greek To You? Understanding The Crisis

Originally published on July 28, 2011 11:15 am

Steven Hill is a political writer.

When you stroll around Athens or many other parts of Greece, you see gangs of feral yet endearing cats living off people's handouts, apparently never wondering what would happen if their lifeline was suddenly cut off. Greece, in a way, has been like those felines, except suddenly the free lunch is over. For the umpteenth time — and not for the last time — Greece has been in the news over its huge government debt and the possibility of defaulting on its obligations. Secretary of State Hillary Clinton visited July 17–18 and met with officials, conveying the concern of the Obama administration. On July 21, European Union leaders will hold a summit, with Greek debt once again high on their agenda.

In a way, it's a shame that Greece, rather than Ireland or Spain, has become the public face of Europe's sovereign debt crisis. Neither Ireland nor Spain had huge public debts before the global economic collapse. Both were models of government transparency and accountability, and a case could have been made to the publics in Germany, France and elsewhere that they are deserving of a helping hand. Feline Greece, on the other hand, is a different story.

Most news reports about the Greek situation have focused on the dramatic mise-en-scène, with lots of graphic images of masked protesters, tear gas, police lines and the now-famous "Greece riot dog." But what this sensationalist reportage has failed to note is that many of the protesters in Athens's Syntagma Square have benefited from Greece's corrupt political system, which lies at the heart of its fiscal problems. Public employees in Greece have been a core part of the patronage machine fostered by past governments, and many of those protesters are in the street precisely because Prime Minister George Papandreou is trying to dismantle many of the corrupt practices of that machine — which was largely created by his father, former Prime Minister Andreas Papandreou, and his party, the PaSoK (Panhellenic Socialist Movement). Since the 1980s, PaSoK has rotated in power with its main opposition party, New Democracy, each with its own patronage cadre of supporters.

Not only public employees have benefited from the corruption of the Greek "clientalistic" state, as Papandreou routinely calls it. Greeks are not the lazy, indolent workers depicted in many media portrayals — they work more hours annually than most Europeans, about 35 percent more than Germans and as many hours as Americans (though their on-the-job productivity is not particularly high). However, many Greeks rely on an informal "gray economy" of family and social networks, which too often operates on nepotism, backroom deals, bartering and tax dodging. Greece was plagued throughout the twentieth century by bitter schisms among monarchists, democrats and communists, with dictators and elected governments rotating in complicated power alignments right up to the 1970s, when the last military dictatorship withdrew and the monarchy was abolished. But by that time a system based on not paying taxes to the corrupt political bosses and relying instead on informal family and social networks had become the fiber holding it all together.

Today, although merit systems exist on paper and computerization of the public administration is gradually being introduced, almost everything still is done with a wink and a nod — securing jobs, permits, even doctors' appointments or jumping to the head of the line for surgery. The practice of fakelaki (literally "little envelope," the slipping of bribes to those in power) — has become a Greek tradition, celebrated nostalgically in films like Zorba the Greek. This "system" pervades every level of society, down to the neighborhood and household levels. Few Greeks have their hands entirely clean. Even fewer have fought to fix it.

During the current crisis, those networks and the massive gray economy have served as a kind of safety net; in the longer term, however, they will impede the modernization of Greece. This is because in an economy designed to provide for a mass society, you have to be able to count things. Revenues, expenditures, imports, exports, surpluses and deficits: all of these and more must be tracked as accurately as possible. But if everything is being done hush-hush, on the sly, in back rooms, without official receipts or records, with a bit of payola in the right palms for looking the other way ("There's your 'tax'"), the government can't count anything. It can't be sure of how much money it has to spend because it can't be sure how much revenue has been taken in. So the government just makes up figures; deficits disappear with a few clicks of the computer mouse or the subterfuge of Goldman Sachs. "Foreign observers have long regarded Greek budget figures as mythological," says Alec Mally, a former US Embassy economic counselor and longtime Athens resident.

Read the rest of this commentary at The Nation.

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