With last Sunday’s election of Syriza to power in Greece, the world is waiting for the face off between new Prime Minister Alexis Tsipras and the rest of the Eurozone. Germany, France and now the Netherlands say that there will be no debt reduction. Tsprias says there will be. With both sides so determined, it’s hard to guess at the outcome of the upcoming talks.
The problem is that there are two sides to the story of Greece’s crisis. The first is a tale of epic economic mismanagement, fraud and tax evasion on the part of the Greek government and society. The second describes the misery that Greece has been plunged into since 2008, where austerity has destroyed the job market, the health care system, and the future. Both sides of the story are true.
This in-depth article, written by Michael Lewis in 2010, lays out the first side of the Greek story. He describes three basic problems. The first is that the Greek system prior to 2008 was both exceedingly generous and exceedingly mismanaged. Drivers at the head of empty trains were paid huge sums, in a train system so inefficient that it would be cheaper to put the passengers in taxis. The retirement age was officially 65, but if you did ‘arduous work‘ you could retire at 55. These arduous jobs included those of hairdressers and waiters. Vast amounts of money were spent on public services, which then still failed to work smoothly.
The second problem is that Greek companies and individuals avoided taxes en masse without penalty. Investment banks like Goldman Sachs helped companies to dodge millions of dollars in tax, and small business owners followed their example. The only group of people who couldn’t avoid paying their tax were the public employees – who were compensated by high pay.
The third problem is that Greek officials lied to the Eurozone through their teeth to cover up the massive difference between the money they were spending and the money that was coming in. They even lied to themselves by failing to keep track of their own money. In 2009 what the government believed would be a 7 billion euro budget deficit turned into 30 billion once they did some research. While some may say this is nothing compared to (for example) the US’s hundreds of billions in deficit, the difference is that the US has no problem coming up with loans to cover that. A 30 billion euro debt isn’t that small when you don’t have 30 billion euros.
So after all of this, the first side of the Greek story basically says ‘it’s their own fault’. Austerity is needed, there is no other option. However, the second side of the story is just as powerful.
The four excellent articles above demonstrate the four things many Greeks are now lacking. This side of the story may be more well-known now, after 6 years of hearing about Greece’s misery on the news. But despite the country’s economy making a small upturn in 2014, all the statistics that matter are depressing. Thanks to the austerity program imposed by the EU, 7 out of 10 young people are out of work, pensions have been cut, healthcare spending has been cut and homelessness has risen by 25%. In one of Europe’s capitals, the Red Cross is helping the homeless and food banks are more popular than ever. While GDP may have risen slightly, you wouldn’t know it.
This is the second side to the story. It says that after 6 years of suffering under austerity, it is time for Europe to forgive the Greek debt and allow Syriza to carry out its program of social welfare and employment. Austerity isn’t working, and the Greek people are paying for the mistakes of their government.
When the leaders of the Eurozone and the new Greek government sit around the table, the finance ministers of countries like Germany will have the first side firmly in mind. They have no intention of letting their taxpayers cover Greece’s overspending and fraud. Syriza will be considering the second side. They have been elected to stop the misery, and failure is not an option. Both stories are true, but trying to deal with them will be a vast political, economic and moral dilemma.