Sinking in the status quo

Nothing highlights the shortsightedness of those who govern Greece more than the disaster of our pension system. It reads like the script of a horror movie: workers and employers pay exorbitant health and pension dues, which, along with huge state subsidies, are so badly mismanaged that Greeks have pathetic state health and education systems; this forces them to pay out of their pockets for medical treatment and tuition. When half the money paid in salaries does not go into workers’ pockets (but into social security dues and taxes), then much less goes into investments and consumption – two of the driving forces of employment.

Not only are workers and their employers being bilked for substandard services, draining funds from the private sector, but the system also places endless demands on the state through subsidized services and the payment of deficits run up by security funds and hospitals. This adds to the country’s debt burden and draws an increasing amount of money away from infrastructure, social services and other foundations of a modern society.

As if this were not bad enough, a rapidly aging population multiplies the effects of the collapsing social security system. Fewer and fewer people enter the labor force, which means that not only will they have to pay intolerable amounts in dues and taxes, but these payments will not be enough to cover the pensions and medical needs of people who are already in retirement. As time passes, it appears increasingly unlikely that younger people will be able to expect pensions and other benefits when they reach retirement age. In 2050, close to 60 percent of the population will be over 65. Who will do the work? With the drain on public coffers, it is extremely difficult for the state to provide the tax breaks, subsidies, and so on, that could encourage families to have more than one or two children.

The social security system is also grossly unfair. Most workers and pensioners are covered by the Social Security Foundation (IKA), by far the largest state fund among scores of minnows. People on IKA pay high dues but receive the lowest benefits. They are also excluded from the system of one-off retirement packages – which can come to 200,000 euros, in addition to a pension. These inequalities are unjust not only to those being shortchanged now but also undermine the whole system for future pensioners.

Given these factors, one would expect that the whole nation would be mobilizing to solve the problem. But any government’s attempt to reform the social security system is met with a universal uproar. Trade unions, opposition parties (even dissidents in the ruling party), workers, professional associations, anarchists, and so on, unite in rare agreement that nothing must be done to disturb the status quo. Virulent protests greet any attempt to consolidate and decrease the large and grossly inefficient number of funds, to increase the retirement age or to raise dues. Everyone agrees that the government should just keep footing the bill. The truth is that feckless politicians and institutional mismanagement – not the size of workers’ contributions nor their retirement age – are mostly to blame for the system’s woes. But with minimal effort going into reforming the system, none of the problems are solved.

The fear of protests has kept this government’s reform effort at a minimum. It appears it has learned the lesson of Costas Simitis’s PASOK government which froze and abandoned all effort to govern when party dissidents and unionists derailed an effort at serious social security reform in 2001. The pension system is still standing because of changes instituted by a highly unpopular New Democracy government in the early ’90s. At that time, thousands of protesters were in the streets every day. Now every opponent of change wants to maintain the status quo that arose from that reform. The irony is nice – but that won’t help save pension funds nor keep the state from going bankrupt. Then, which status quo will everyone want to protect?

Editorial in Athens Plus, 12 June, 2009

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Math delusion

Easter is over, but the government is still tottering under the burden of a cross formed by the scandals that it must handle, the economy’s death spiral and the fact that it has a one-seat majority in Parliament. But even as the nation – both audience and protagonist in this sad act – is consumed by the spectacle, the dark clouds gathering above its head are a far more serious threat than Costas Karamanlis’s Calvary.
The clouds come in the form of numbers – merciless economic data from which there can be no escape, where faith in resurrection will not suffice. The country is in very serious trouble. On Wednesday alone, a host of economic figures showed how deep a hole we have dug ourselves into. Eurostat, the EU’s statistical service, confirmed that Greece’s 2008 budget deficit was 5 percent, way above the government’s figure of 3.7 percent – which was already above the eurozone’s 3-percent excessive deficit threshold. Also, the International Monetary Fund announced that it expects Greece’s gross domestic product (GDP) to shrink by 0.2 percent this year and a further 0.6 percent in 2010; unemployment is expected to rise from 7.6 percent in 2008 and 9 percent in 2009, to 10.5 percent 2010 – which means 143,000 more people unemployed. At the same time, the Bank of Greece announced that receipts from tourism in the first two months of the year were down 20.2 percent from the previous year. These are the most official figures we have had so far, with tourism sector officials estimating that visits and revenues may drop between 10 and 20 percent this year. Also, receipts from shipping fell by 25 percent in January-February. As tourism accounts for about 18 percent of GDP and employs one in five workers, we can imagine what a 10-20 percent drop means. At the same time, the government’s loan-servicing expenditures rocketed from 33.1 million euros last year to 527.2 million in January and February.
As a measure of how big these figures are, the government’s desperate one-off extra tax levied on people earning more than 60,000 euros annually and the freeze on civil service salaries is expected to net under 300 million euros. So the question is very simple: With our deficits and debt greater than expected, with our loan requirements and expenses growing, with fewer people in our work force and with fewer revenues from tourism, shipping and taxes, how on earth are we going to meet our financial obligations as a country?
This is not a philosophical question; it’s a matter of simple math. Thinking that we can carry on as we have so far – with strikes shutting down our ancient sites and museums, with youths burning the city center as a rite of passage, with various closed-shop professions feeding off  the efforts of others – will only drive tourists away and lead to a brain drain, cutting our productivity and revenues even further. Thinking that we can just ride out this storm is a mass delusion of national proportions.

Milestones&Footnotes comment in AthensPlus, 24 April, 2009

Tigers and whipping boys

It gets a bit tedious, this continual carping in the European media about Greece’s problematic economy. Not a week goes by without some smart Alec somewhere giving vent to his rancor in an analysis regarding Greek profligacy. We keep getting lumped together with Ireland because of our deficits and the expensive money that we have to keep borrowing because international lenders are leaning on us as if we were the last suckers in a world that has suddenly gone cynical. Guys, we didn’t steal, we just borrowed. Expensively.
It’s grossly unfair to keep being lumped with the Euroskeptical Irish because – regardless of our personal admiration for them as a nation and as talented, artistic individuals – we are not in the same league: they are facing a hangover after having enjoyed a boom. From the bottom of the heap, Ireland jumped to the top through such daring innovations in their economy that they became the envy of the world. So much so that in more optimistic times we in Greece would hold conferences at which our prime minister and top aides would hold forth about how they would perform a miracle and turn our country into the Balkan equivalent of the Celtic tiger. Perhaps in their minds the Balkan equivalent meant going directly bust without wasting time on the boom part, without undercutting our competitors by abolishing corporate taxes and by creating an efficient economy with a trouble-free labor climate. Now the Irish are paying the price for old-fashioned, ancient Greek hubris: they thought that they were too good to fail, that their property prices would just keep rising. The tiger’s stripes now look like cuts and scratches.
No, we in Greece cannot be blamed for having taken anyone else’s business – we simply borrowed money in order to hide our weaknesses. But how weak are we? We have assimilated the lessons of boom and bust, knowing that history moves in cycles, great and small, important and trivial. Our history features leaders ranging from Leonidas, Pericles and Alexander the Great to the dismal constellation around the rusting hulks of today’s political dynasties. We know, through a great collective unconscious, that it’s not the boom nor the bust that matters, but the “getting by” on a daily basis – the cutting of corners, the hiding of taxes, the borrowing as if there is no tomorrow, the “let sleeping dogs lie, don’t rock the boat, this is how things have always been” approach. The country’s problems are too big and deep-rooted, our lives too short, Fortune too capricious for anyone to presume to try and sort out the mess. So let’s muddle on, with each forming his own sphere of influence at the others’ expense. At least we know that if salvation is to come from anywhere, it will be from workers in the private sector. They earn less than their counterparts in other parts of Europe, pay higher consumer prices, have worse health, education and welfare benefits, and yet they keep the country on its feet.
Being among those who have seen the country’s future mortgaged by crooks and useless politicians, our shouts drowned by the silence of futility, we can only wonder what it takes for a victim to rise up in anger – like a tiger.

Milestones & Footnotes comment in AthensPlus, 27 March 2009

Coming back down to earth

For at least a generation, Greece has operated as if the laws of economics do not apply – not the criminally complicated, mad laws, which turned out not to apply anywhere across the global economy, but the simple, good housekeeping rules, such as spending as much as you can afford. Greeks, as individuals, were not the biggest borrowers, having gotten into the game late and only after entry into the eurozone made loans affordable. The problem was elsewhere: in a naive, stupid or convenient inability to understand that when we demanded things of the state someone would have to pay – and that someone would, some day, turn out to be us. This ignorance was evident in polls, where we would see society overwhelmingly in favor of the demands and protests of specific groups (whether farmers or civil servants), when they confronted the state. Deficits went wild as governments caved in to everyone’s demands.

The government’s decision to levy a one-off tax on high earners and to freeze civil servants’ salaries if these are over 1,700 euros per month, is the first sign that reality is catching up with us. Society will now feel the pain caused by our overspending as a nation. And yet, the total amount expected to enter state coffers is a little less than 500 million euros – less than the amount promised to farmers a few weeks ago to get them off the roads and allow the country to function again. Perhaps the next time a group goes on the warpath, the rest of society will consider what it will cost each citizen to placate them. In that case, the government will have to weigh the cost of angering the rest of society and not just look for ways to appease the protestors so as to buy their votes.

However, even as society begins to realize that for every action there is an equal and opposite reaction, various groups are still behaving as if their acts can be tolerated forever, no matter how much damage they may cause the rest of society or the economy. Banks are still depriving small and medium-sized businesses of loans, despite a 28-billion-euro rescue package; hooded youths still rampage through Athens’s center in narcissistic hysteria; Culture Ministry employees repeatedly block visitors from the Acropolis and other sites and museums. Everyone acts as if the damage they cause is not their concern: Someone else will foot the bill.

Banks are banks: They will try to get away with anything that furthers their own interests. Anarchists’ raison d’etre is mayhem. But how can Culture Ministry employees and their bosses – the politicians who work out their pay and work regime – believe that their interests are served by damaging the country’s tourism industry? Whether the employees are right or not, whether solving their problem will cost a mere 10 million euros or so, the standoff with the government is likely to cost Greece a lot more. If we consider that tourism, which brought 11.3 billion euros into the country in 2007, could drop by between 10 and 30 percent this year because of the global economic crisis, we can make a safe bet that the danger of finding important sites closed will push many people to visit other countries instead. A 10-million-euro dispute could thereby turn into a billion-euro loss.

Perhaps the only way that protestors, the government and society as a whole can find a healthy balance is if we stop believing that our demands will by taken care of by divine providence – i.e., the state or the EU or both. If every demand were met by an additional tax levied on the rest of us, maybe the government, the political parties and the population would be moderate in our demands and thrifty in our spending so that we could emerge from the crisis stronger than we entered it.

AthensPlus editorial, 20 March 2009