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In Greece, New Austerity Measures Rile Many

July 20, 2010 at 12:00 AM EST
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The economic crisis in Greece is bringing a new wave of anger among its citizens over austerity measures to control its debt. Paul Solman looks at how Greek citizens are coping with the debt crisis and speaks with Prime Minister George Papandreou.
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JIM LEHRER:Now, the second in our series on big economic troubles in Europe.

Tonight, our economics correspondent, Paul Solman, looks at how Greek citizens are reacting to ways of dealing with the debt burden.

Paul’s series is part of his ongoing reporting on Making Sense of financial news.

PAUL SOLMAN:Greece, still here, tourists still flocking, more per year than Greece has citizens, shops and restaurants in Athens still open and pretty pricey, government still on duty, on guard, but Greece is now marching to different drummers, Europe and the IMF, which came to its aid with a three-year loan package, on condition that Greece raise taxes and cut state salary.

This month, Prime Minister George Papandreou also pushed pension reform through parliament, raising the retirement age, while reducing benefits.

GEORGE PAPANDREOU, Greek prime minister: These were very difficult measures.

Obviously, that’s why people are unhappy and feel the pain. Even though there are demonstrations, we also have a large support. People understand that this is a patriotic duty, that we must move forward, change our economy, do not default, and deal with our debt.

PAUL SOLMAN:The government boasts, it’s beating its IMF deficit targets, refinancing its debt at cheaper rates. But how much support for austerity is there in Greece? Will the reforms succeed, eventual default be averted, no more crisis?

A cab driver who asks to be called by his adopted name, Avgenios (ph) — he came from Cameroon as a student in 1973, at the end of Greece’s military dictatorship — is a longtime observer of Greek society.

Do the Greek people understand that part of the fault is theirs for having spent more than they earned?

MAN:No, definitely not. It’s something that you don’t want to believe.

PAUL SOLMAN:Is that why they’re protesting so much?

MAN:No, no, no. They’re protesting how to share the weight of the crisis.

PAUL SOLMAN:Crisscrossing Athens, we found only disagreement over how, if at all, the government should pay back the mostly short-term money it’s borrowed, over $300 billion euros at the moment, 115 percent of annual Greek GDP.

The debt supported the comfortable Greek lifestyle: perks for the plutocrats atop, social welfare benefits for the rest. Fully half of GDP is public spending, yet a third or more of the economy is estimated to be underground, off the books, untaxed, and thus incapable of covering the cost of government.

MANOS MATSAGANIS, Athens University of Economics and Business: We hang on the balance. And we will be hanging on the balance for the next three years.

PAUL SOLMAN:Economist Manos Matsaganis who says Greece is stuck, caught between an old-world mentality and the new fast-paced global economy.

MANOS MATSAGANIS: Greeks have grown accustomed to a level of consumption which is Northern European, combined with a business culture that is decidedly Middle Eastern, which is not really feasible, not very productive.

PAUL SOLMAN:Not really feasible because, among other things, private sector employees are actually outnumbered by Greece’s not-very-productive government workers.

MANOS MATSAGANIS: You know, people don’t turn up for work, or they turn up at 10:00, and they leave at 11:00, they go shopping, and they come back. No, they don’t do — basically, they — they do nothing. Pay is not great, but it’s secure. And we retire at the age of 50. Fantastic.

PAUL SOLMAN:Retire at 50?

MANOS MATSAGANIS: Absolutely. Government has handed out concessions in the form of pension privileges to favored groups. First, it was the military or the judiciary. Then it was civil servants. Then it was worker — workers in state-owned enterprises. And this is how the system developed.

PAUL SOLMAN:It’s a system of buying off political pressure groups that the government’s new reforms aim to change. But with half the work force employed by the government, no wonder so many Greeks civil servants are upset by the cuts, among them, George Tzaferis and Ioanna Radeou.

GEORGE TZAFERIS, Greece (through translator): There’s a misimpression that all of us Greeks have been living large. But if you looked at the small salaries we have been getting, you would see they can’t be cut much further.

IOANNA RADEOU, Greece: All we want is all the rights that we have gained through the past years, from one century now, and everything is gone with all this plan, no social security, no public sector, no nothing.

PAUL SOLMAN:Vasilis Polymeropoulos of the civil service union was defiant. We don’t like this economic attitude toward life you have in America, he said, prompting the question: How will Greece pay back its lenders unless it adopts a more American, market-driven approach?

VASILIS POLYMEROPOULOS, Civil Servants Confederation through translator): When I speak to my friends or relatives in the United States, they are always talking about how much money, how many dollars, how many houses does he own. It’s a sickness. They’re always talking about how much that person is worth. He’s worth $100,000, $300, 000. And, ultimately, it’s not important, because, at the end of the day, however many houses you earn, you are going to end up in the same place, and be three-and-a-half under the ground.

PAUL SOLMAN:Meanwhile, as the economy shrinks at a projected 4 percent annual rate, private employment is shrinking, too. And private Greek workers are also resistant.

SOTIRIS PANAYIOTIS, Greece: Greece is facing something close to a social explosion.

PAUL SOLMAN:So Sotiris Panayiotis preps students for college entrance exams at a private school where three colleagues were just laid off.

SOTIRIS PANAYIOTIS: All this austerity package implemented by the government and dictated by the European Union and the IMF, it’s not as simple as temporary pay cuts, one or two or three years of difficulty. It means like being thrown back into the Stone Age it was — concerns social rights.

PAUL SOLMAN:In an immigrant section of town, more graphic instances of the toll unemployment, now near 12 percent, and a reduced public safety net are starting to take. Doctors of the World, or Kosmou (ph), runs a free clinic for poor foreigners, but says Dr. Elena Mavropoulou.

DR. ELENA MAVROPOULOU, Doctors of the World: Now Greek people are coming in our clinic because they have not insurance and they have not even money to pay the little bit for the medicine. But they are obligated to come here because of the way the situation it is in Greece now. And I feel that they’re ashamed.

PAUL SOLMAN:Immigrants still queue up for medications, but so do out-of-work natives like Nioltos Nikas (ph), suffering from stress-related bleeding ulcers.

MAN (through translator): The only thing that keeps me from committing suicide is my daughter and my parents. I feel like a parasite.

PAUL SOLMAN:What do you mean you feel like a parasite?

MAN (through translator): Because there’s no work. I can’t offer anything to my family. I can’t buy my daughter a cookie, an ice cream. I’m a nothing.

PAUL SOLMAN:In fact, workers are being laid off, unheard of in Greece. That’s what teacher Panayiotis and friends were protesting.

If the schools can’t afford to pay them, due to the economic crisis, then isn’t the school within its rights to lay people off?

SOTIRIS PANAYIOTIS: The owners refer to that they have fewer students, but I think the problem is that they were teachers with dignity who demanded their rights. A job is not a privilege. It is a right.

PAUL SOLMAN:But almost every person has said to us the problem with Greece is, we spent more than we earned for the last 20 or 30 years. And everyone having a job would be an example of that.

SOTIRIS PANAYIOTIS: Yes, there is a problem with debt. But it wasn’t ordinary working people that created the debt. The Greek government must say, no, we’re not going to pay the debt.

PAUL SOLMAN:But Theodoros Pangalos, the larger-than-life number-two man in the government, says not paying, default, is the worst possible option.

THEODOROS PANGALOS, Greek Deputy Prime Minister: This would mean poverty, real poverty, real unemployment, and marginalization in the contemporary world for, let’s say, 20 or 50 years. We are in a global market. We are in a global market of capital and goods. And whoever doesn’t understand that doesn’t live in a contemporary world.

PAUL SOLMAN:In fact, one of Greece’s problems, says economist Matsaganis, is that too many Greeks are living in the past.

MANOS MATSAGANIS: I think we would be better off if we had a less illustrious history, if we were a normal country, you know, of mediocre ancestry. I think that has ruined us. It’s like, you know, young offsprings of very rich self-made people. This is us.

PAUL SOLMAN:So, you might ask, is there any hope? Government, under pressure, tries to change the system. The people resist. In fact, the best hope for reform may be dealing with the problem everyone here deplores: the endemic tax fraud that has so long hobbled the Greek economy.

And, so, tax reform is the subject of our second report on the Greek economic crisis.