If I were from Greece
By Gabor Steingart*
When you were invited by friends, you would like to say afterwards: It was nice. You felt at ease and you were impressed by the things you’ve heard and seen. Unfortunately, looking back in such a pleasant way has turned out to be impossible in the case of the research tour to Greece a 20-member team of the Handelsblatt undertook in order to get information from the epicenter of the crisis.
Sure, over the past days we have met courageous entrepreneurs bracing themselves against the crisis – a crisis that is stronger than they are. We have paid visits to brave officials in their raddled offices. They try to impart some order to the anarchic. We have talked to politicians who are aware of the historic moment imposed on them by fate.
But the predominant impression has been different: We’ve come upon an exhausted country, a country suffering from a double burden: Its self-inflicted debt chaos and a European rescue policy which is only making matters worse.
The results the helpers achieved could hardly be more dismal: economic output is decreasing, unemployment is on the rise, young people dream of a life abroad. And the state deficit is soaring as if nothing has happened.
Such a mountain of debt can’t be shed by shrinking the economic strength. Although the country initiated the toughest austerity package a Western country has ever undertaken outside wartimes, its debt burden grew by 67 billion Euros; as measured against GDP, it increased from 127 percent to157 percent. You can’t get muscles by starving.
If I were from Greece I would sue my helpers for malicious injury. And at dusk, I would be there at Syntagma Square with all the others, in front of Parliament, in order to demonstrate my disapproval of a policy of crisis which only intensifies the crisis.
The downward spiral turns faster and faster. The debt cut agreed on Wednesday night in Brussels will decelerate Greece’s decay but it is not going to stop it. Most of all, it is one and a half years too late. If at that time debt had been cut in half, today it would be below 100 percent of GDP. The way it is now, however, access to the capital market will remain blocked for Greece in the foreseeable future.
A further complication is that one third of the debt instruments is owned by the Greeks themselves, 74 billion euros belong to their banks and thus their savers, 26 billion euros belong to their social funds and thus their pensioners. They have become palpably poorer overnight. I can understand why Chrysanthos Lazaridis, the man behind conservative opposition leader Antonis Samaras, says: “First, we were ill with typhus and now they gave us a cancer injection.”
The treatment given to Greece recalls the approach American economist Jeffrey Sachs and his Chicago Boys tested in Boris Yeltsin’s Russia: hasty deregulation, the churning out of privatizations and social cutbacks in the budget. They created the kind of Wild West capitalism which still splits Russian society into billionaires and have-nots to this day. Sachs, who at that time came to be known as “Dr Shock”, later apologized to the Russians.
The role of “Dr Shock” has been transferred to the numerous saviors of Greece in Brussels, Berlin and Paris. Again, at work are financial artists who know a lot about debt rescheduling, counterparty relationships and leverage effects but who have no understanding of the art of stimulating an economy and the people who work in it. Dr Shock’s successors spread a feeling of helplessness, not optimism. They extract money from the economy instead of enabling investments. They push the country from recession into depression.
Had we treated our brothers and sisters in the East Germany like the Greeks are treated now, the people there would still drive “Trabant” cars and wait for bananas. Everything we did do right in the GDR – the debt relief of one hundred percent for companies, the incentive programs for medium-sized companies which at first did not even exist, the incremental wage increase in order to create purchasing power – we are getting wrong in Greece. Those who don’t sow are not going to produce blossoming landscapes.
Europe has embarked on a program to dismantle the south whose devilish effects can’t be overlooked anymore in the cityscape of Athens. Heroin addiction and prostitution spread, many stores closed their shutters for good, angry citizens pry out marble slabs from the facades of numerous banks.
More dangerous, though, are the things which can’t be seen. If I were from Greece I would be amongst those who are alert and worried. I would keep a wary eye on that military machinery which governed the country between 1967 and 1974 and which might lie in wait for an opportunity for revenge. We know from many countries: Dr Shock is an enemy of democracy.
*Gabor Steingart is the chief editor of German newspaper Handelsblatt.