article

06.17.11

Greeks Want More Money

Protesters in Greece are using some tactics seen in the Arab Spring. But instead of trying to oust a dictator, they want another financial bailout. Stefan Theil reports.

“From Tahrir Square to Syntagma Square,” read one sign. “The Arab Spring Will be Followed by a European Summer,” said another. Greeks, who in the tens of thousands have occupied Syntagma Square in central Athens to demand an end to the government of Prime Minister George Papandreou, have taken their cue from the successful protest movements in Egypt and Tunisia just across the Mediterranean Sea. The parallels are everywhere, from the tents in which demonstrators have occupied Syntagma Square day and night since May 25, to Facebook groups like “Indignant Greece” and “Angry at Syntagma,” which the protesters use to inform followers and organize gatherings. The group called “Indignant Greece” has more than 146,000 followers on Facebook, and warns demonstrators not to bring children when organizers expect violence, as well as links to sister protest movements in other European countries affected by the crisis, such as Portugal, Spain, and Ireland. Just like the Arab uprisings quickly spread across the Middle East and North Africa, protests against austerity and reforms to bring down debt have turned into a pan-European movement.

The comparison stops there, because Greece is a democracy and not an authoritarian regime. The tyranny the Greeks want to overthrow is that of the “Memorandum,” the agreement with the International Monetary Fund and the European Union stipulating that in return for last year’s €110 billion bailout of bankrupt Greece, the country must cut spending, increase taxes, and raise the retirement age. As a result of all this austerity, unemployment is now over 16 percent, the gasoline tax has gone up by €1.52 (that’s $2.17) per gallon, and the national sales tax is now 23 percent. After a year of such pain, Greece has little to show for it but still-higher government debt.
 
Why does Greece matter? For one, it’s a sign that Europe is still avoiding tough decisions on its festering financial crisis, which threatens to spread to other over-indebted euro economies like Spain and Portugal. A protracted crisis would mire the entire continent in low growth, which would hit the American economy too: The impact could come, for example, through American banks invested in Europe, and by a lowered demand for American products. Greece also demonstrates how quickly and deeply things can go wrong when a country combines an outsize public debt with an uncompetitive economy that’s dependent on imports and inflows of capital.

The protesters say they’ll stay in the square until the EU forks over another bailout of up to €120 billion. Following the usual bickering and posturing over the last few weeks, the EU inched toward just that on Friday, after German Chancellor Angela Merkel caved into French demands that banks holding Greek bonds (French banks hold more of them than any other country's) must be fully bailed-out as well, and not be forced to take a “haircut,” the usual procedure of writing off part of a loan when the debtor is unlikely to repay. It will be the second bailout of Greece and its creditor banks in a little more than a year.

As in any good Greek tragedy, over-indebted Greece cannot escape its terrible fate.

The problem, for anyone who can do the math, is that a fresh bailout will just kick the problem down the road. Greece’s government debt, which is 160 percent of its GDP and rising fast, is simply too crushing for the tiny, stagnating country to pay back. Another bailout merely postpones the reckoning, and throws good money after bad. As in any good Greek tragedy, over-indebted Greece cannot escape its terrible fate.

What’s new now is that the protestors on Syntagma Square are beginning to go beyond just saying "no" to the austerity imposed by the IMF and EU, and are talking about Greece abandoning the euro altogether. Though what comes after that is rather fuzzy to most. On the square, a new protest group called "We Won't Pay Anything" set up stands last week for citizens to organize moneyless barter trades, a way to avoid taxes by getting out of the cash economy. Trading bicycle repairs for haircuts, however, is just as unlikely to solve Greece and Europe's problems as another round of bailouts.