There will be blood

It’s official: The eurozone is in recession. According to the European Union statistics agency, Eurostat, growth in the 15-member zone was negative in the third quarter of 2008, dropping by 0.2 percent for the second consecutive quarter. This is the first recession since the euro was adopted as the zone’s single currency. Those same figures, which were made public on Friday, show that Greece had an increase of 0.5 percent over the previous quarter, after a rise of 1 percent from the first to the second quarter of the year. So, with the eurozone in recession, Greece does not appear to be facing such a danger. But there cannot be one person who does not believe that Greece will experience all the ills of the recession, and that in many ways the consequences for us here may be much worse than in the rest of the eurozone, where the institutions that deal with the unemployed and handle symptoms of such crises are much more developed. For weeks now, negotiations between the government and banks have been dragging on over the terms of the 28-billion-euro package being offered to banks to help them cope with the problems caused by the global credit crunch and to keep the market liquid. The result is that many companies have already begun to suffocate, as banks cut down on loans or raise their interest rates. Companies that owe money cannot pay their debts, while importers, who must pay cash in advance, are unable to pay their suppliers and thus cannot import goods. The market is drying up in every way. The result is a great increase in the business of loan sharks, who lend at a rate of 3 percent a month. Companies (and individuals) have not yet had to pay back such debts and so the consequences of this dangerous state of affairs are not yet evident. But if the crisis continues and bank loans remain difficult, the price of goods and services will rocket (reflecting the expensive loans), and businesses will fold because they will not be able to pay the usurers. Along with the expected increase in the unemployment rate and the reduction of money in the market, Greece is heading for great social change. On the one hand, we will see those who have the resources to survive, on the other will be those who will struggle to survive on their wages, pensions or paltry state benefits. However much the government helps the banks, we can already see that the reduction in revenues from the drop in shipping, tourism, business and real estate will result in less and less money circulating. Loan sharks and other players in the black economy will become more prominent. Strengthening these underground forces will make a return to normalcy much more difficult than we would expect in a more regulated country. The fall in the official economy will also lead to fewer tax revenues, meaning that the government will face ever greater difficulties in providing the services that a society under stress will need. Popular discontent will lead to a greater number of demonstrations and strikes, with demands that no government will be able to meet. If the crisis continues and hits our neighboring countries harder than it has already, this will drag down Greece even further. In this case, it is difficult to see where salvation will come from. Furthermore, in 2013 EU money – in the form of agricultural subsidies and infrastructure funding – is expected to dry up. All this indicates how urgent it is for Greece to find a way to soften the effects of the crisis and to support the healthy forces of our society and economy. This would demand a political and economic system which, very simply, does not yet exist in Greece.