Eurozone officials have predicted that Greece has fallen into recession. This will surprise those whose attention has wandered away from the grievous economic travails faced by the Greeks, because the assumption was that the country had long been mired in deep recession.
In fact, until the final quarter of last year the debt-laden economy had been recovering, albeit slowly. The left-wing Syiriza government had been predicting 2.7 percent growth in GDP, a target subsequently cut back to 2.1 percent, which now still looks ambitious.
A recession is called after two consecutive falls in growth, which is what Greece had experienced. Ordinary Greeks continue to be incensed by the severe financial stringencies they are facing and a new wave of strikes has hit the country, called by the major trade unions. The trigger is an upcoming vote in parliament that will cut pensions and remove tax breaks. The measure has been demanded by the country’s creditors in return for a fresh tranche of bail-out cash that will keep the state solvent and the economy on an even keel, even though as ships of state go, Greece is sitting pretty low in the water.
It is hard not to feel some sympathy with the man in the street, since the financial mess was in large measure caused by spendthrift governments which for instance by 2009, when the crisis hit, had increased expenditure by 87 percent whereas tax revenues had grown by only 31 percent. This irresponsible behavior was compounded by deliberate falsification of the figures by the finance ministry and the central bank, with the willing assistance of some international investment bankers.
In 2001, Greece became the twelfth member of the eurozone. What is remarkable is that after Athens lodged its application to adopt the single currency, successive reports by Brussels officials had warned that the figures the EU was being shown by the Greeks were phony. Yet with their eyes fixed on the integrating political effect of the single currency, the eurozone authorities ignored the reality that the parlous state of Greek finances disqualified the country from joining. There then followed eight marvelous years in which the Greeks benefited from the perceived strength of the euro and were able to borrow at rates hardly more onerous than those enjoyed by Germany, the European economic powerhouse. It is hard to blame the Greeks for the credit binge on which they embarked, though those who governed them and were in a position to know the dangerous condition of the state finances had no excuse to carry on spending as if there were no tomorrow.
When the US subprime mortgage crisis broke and the international financial markets collapsed in 2008, Greece was found out. The country could no longer borrow at any price to settle its obligations and default loomed. Eurozone countries saved the day by buying up much of the debt and writing part of it off. But the price for this support was severe cuts and economic reforms, including privatization. It is the continuing austerity and hardship that tens of thousands of Greek workers are protesting this week. And their anger is directed at eurozone leader Germany. Had it not been the eurozone’s decision to admit the already struggling Greek economy, the financial crisis would have come far sooner and almost certainly been less catastrophic.
