By Anne Seith (Spiegel)
Despite
drastic austerity measures, a new Greek debt haircut looks unavoidable.
The old system has proven resistant to reform and billions in emergency
aid hasn’t been enough to turn things around.
After
making a lot of money manufacturing swimming pools, Stelios Stavridis
has redirected his entrepreneurial talents toward saving his country.
The
66-year-old Greek business executive with aristocratic features
recently became the head of the country’s privatization agency, which
has been charged with selling off hundreds of government-owned real
estate, companies, marinas and airports.
Stavridis
is the third man to hold the position in only a year, but this doesn’t
reduce his professional confidence. He says he has just had “excellent”
conversations with observers from the so-called troika, consisting of
the International Monetary Fund (IMF), the European Commission and the
European Central Bank (ECB), who regularly review the country’s
progress.
However,
Stavridis also had to confess to the troika that his agency is unlikely
to meet its goals for this year. The planned sale of the national gas
company to the Russian Gazprom conglomerate fell apart at the last
minute, and now a €652 million ($839 million) deal for the privatization
of gambling company OPAP is also on the rocks, because the buyer feels
that he is being cheated.
This
means Stavridis will almost certainly fail to reach his original 2013
privatization goal of €2.6 billion. Because of these and other
difficulties, the financing plan for Greece now faces a large shortfall
of €11.1 billion by 2015.
Yet Another Debt Haircut?
Greece’s
euro partners have already pledged more than €230 billion in aid, and
government spending has also been slashed by dozens of billions.
Representatives of Greek business are now convinced that the country
cannot survive without yet another debt haircut.
The
subject is politically sensitive, especially in Germany, because this
time a debt haircut would also affect public creditors, which already
hold 80 percent of Greek sovereign debt. In other words, a large share
of German assistance loans would be irretrievably lost.
German
Chancellor Angela Merkel is still strongly opposed to a debt haircut,
fearing that Greece’s enthusiasm over reforms will vanish once financial
pressure subsides. The country needs more than money alone to get back
on its feet. Even the IMF is critical of the devastating effects of
austerity programs on the country’s economy. But that is only half the
truth. The fact is that while Greece has drastically cut spending, efforts at structural reform are stagnating. This also hampers economic success.
When
the troika observers first arrived in the country in 2010, they were
surprised at just how overregulated the economy was, at how inefficient
the entire government and judicial apparatus had become. Not even the
estimated government deficit for 2009 was correct. When it was
recalculated, 6 percent turned into 12.7 percent and eventually even
went up to 15.6 percent.
Six
austerity programs later, the deficit is expected to decline to about 4
percent for this year. Greece’s euro partners attribute this success to
the efforts of conservative Prime Minister Antonis Samaras. “The
current government is finally strongly committed to bringing order to
the state,” says Panos Carvounis, a representative of the European
Commission in Athens. “Things are moving.”
‘Greek Success Story?’
According
to Carvounis, the country finally has a complete picture of its
revenues and expenditures, and Samaras has made progress with reforms of
the healthcare system. The labor market has also been radically
reformed. Greece’s costly multi-employer collective bargaining
agreements are now history, and the rules governing settlement payments
to laid-off workers are no longer as stringent as they used to be.
This
spring, because of these successes, it seemed that the country was out
of the woods. Unit labor costs, seen as an indicator of a country’s
competitiveness, had declined by 10 percent compared to 2007, thanks to
the easing of labor market regulations. Major corporations like
Unilever, Philip Morris and Hewlett-Packard were announcing substantial
investment plans.
During a visit to Beijing, Samaras overconfidently touted what he called his “Greek success story.”
But
what outsiders see as successful reforms come at the expense of
ordinary Greeks. A few hundred meters from the office of EU
representative Carvounis, a retiree shot himself to death last year
because of financial problems. Surveys show that household income has
plunged by almost 40 percent since the crisis began.
Some 64 percent of young people are unemployed, and the healthcare
system, after several rounds of austerity cuts, is on the verge of
collapse. In many public hospitals, patients have to pay for their own
bandages and swabs, while relatives are called upon to care for them,
because of a shortage of nurses.
‘Our Political System is Toxic’
In
light of such conditions, the troika has often proposed that the
wealthy be required to play a stronger role in financing the government.
But even the Samaras administration shies away from challenging their
influential lobbying groups. Greek ship owners, for instance, the
country’s most powerful business group, contribute little to the
country’s recovery. In fact, their ample revenues from shipping are
tax-exempt.
“Our
political system is toxic,” says Antigone Lyberaki, 54, an economics
professor at Panteion University in Athens. According to Lyberaki, the
government apparatus and economic structure were destroyed by decades in
which bribes and political relationships were more important than
performance.
Over
the years, powerful lobbying groups were able to secure privileges that
they are now fiercely defending. For instance, when the government
sought to eliminate overpriced licenses for truck drivers, the drivers
shut down traffic throughout the country, and the military had to be
brought in to bring supplies to hospitals.
It was only one of hundreds of bitter conflicts over the gradual liberalization of Greece’s utterly overregulated economy.
An Uphill Battle to Reform
In
the bloated administration, for example, many civil servants owe their
jobs to political favors rather than to their own competency. Even Prime
Minister Samaras awarded senior government positions to several
supporters from his home district of Messinia after taking office.
By
2015, the government bureaucracy is required to shrink by 150,000 jobs,
and another 15,000 civil servants are to be replaced by young,
well-qualified candidates. But the government has long shied away from
layoffs.
Instead,
the government promoted early retirement programs and placed 2,000
civil servants into a so-called mobility reserve. Athens had promised
the troika that the workers would be permanently laid off if no new jobs
could be found for them within a year. But the government managed to
find work for everyone in the mobility reserve, and a promised search
for another 12,500 civil servants for the program petered out. Men like
Odysseas Drivalas are the reason for this reluctance. The tanned former
civil servant is the president of ADEDY, the umbrella trade union for
civil servants. As the head of a union serving about 400,000 members, he
thinks it is a “myth” that the government has too many employees. “We
are planning another general strike soon,” he says.
Men
like Drivalas ought to be involved in the reform process, but chances
of that are slim. Many union members support the leftist Coalition of
the Radical Left, or SYRIZA, whose leader, Alexis Tsipras, warns against
turning Greece into a “German colony.”
The Old System Resists
The
sometimes ludicrous conditions in Greece’s government agencies are one
of the main reasons the economy is doing so poorly. In one example, a
fast-track process introduced in 2010 was intended to help entrepreneurs
obtain all the permits they needed within 60 days, which was later
changed to 45 days. But three of four major investors that completed
this procedure are still fighting for their projects today.
“They
overestimated the speed at which such reforms could be done,” says Paul
Mylonas, chief economist at the National Bank of Greece. Most of all,
the reformers probably underestimated the old system’s powers of
resistance.
There
is no shortage of ideas about how to move the country forward.
Economist Mylonas, for example, is convinced that there is significant
room for expansion in the shipping-related service sector, especially in
areas like “logistics, insurance and storage.” EU representative
Carvounis wants the tourism industry to focus more on visitors
interested in culture and mountain biking. The country, he says, is
“almost empty for six months” every year.
But
these are the kinds of plans that require a long time to implement.
“Ninety percent of our companies are only three to five people,” says
Mylonas. “We cannot be competitive on this basis.”
These
conditions make the troika’s forecasts for future development seem
delusional. It expects the country to generate 3.5 percent growth in
2017, while the national debt is forecast to decline from 175 percent of
GDP today to “substantially below” 110 percent by 2022.
Even
chief privatizer and professional optimist Stavridis admits that he and
his fellow Greeks have “huge problems.” But, he adds, “I am 100 percent
certain that we will win.”
Translated from the German by Christopher Sultan
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