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Eight years ago, Greece’s financial crisis threatened the value of the euro and led to the world’s largest bailout in history. As the country approaches the end of the bailout program next month, unemployment rates remain high and foreclosures loom as residents who are heavily taxed help the government repay loans. NewsHour Weekend Special Correspondent Christopher Livesay reports.
On a recent evening in an upscale neighborhood of Athens, we followed Tina Papoti to see what is an increasingly common phenomenon here in Greece. A surprise tax inspection.
The thing we want to see right now is if the businessmen issue their receipts.
Papoti works for Greece's Independent Authority for Public Revenue which was set up just last year to tackle tax evasion. An enormous problem costing tens of billions of dollars a year, tax evasion has been so widespread here politicians jokingly refer to it as a "national sport." But that's changing. Tax inspectors are increasing pressure on businesses to record sales and pay tax to the government.
This is our job. We have to do it correct. This is the law. We have to learn to respect the law.
In fact, tax reform is one of several measures Greece has been forced to adopt in exchange for bailouts that have kept the country afloat for the past 8 years, bailouts which will come to an end next month. Now economists are anxious to see if Greece is strong enough to stand on its own. There's a lot at stake says Panos Tsakloglou, a professor at Athens University of Economics and Business.
How big have the bailouts been in Greece? How much money has it taken on loan?
Altogether the loans exceed 260 billion euros.
More than 260 billion euros. That's an enormous number. Put that in perspective for me.
This is something that is by far the largest loan ever given in history. In order to give you some kind of order of magnitude, there is an international organization that has this role of bailing out. This is the International Monetary Fund. If you take the four or five largest loans ever given out to countries like Brazil, Argentina, Russia and so on by the IMF still they do not sum up to the amount of money given to Greece.
To understand why such large bailouts were needed, Tsakloglou says you have to consider how grim things looked at the start of the Greek financial crisis in 2010. With its huge deficits, a bloated public sector, and billions in uncollected taxes, Greece was already the financial sickman of the European Union. Then it came to light that Greece had been underreporting its debt for years. Just as the world economy was beginning to recover from the global financial crisis, Greece was on the verge of bankruptcy.
If there was a collapse of Greece that would have meant they see the collapse of several other large banks that had lended to Greece. This means they say the global economy would have gone into a spiral.
To save Greece, the so-called Troika, the European Central Bank, the European Commission, and the IMF agreed to authorize billions in loans on the condition that Greece enact strict fiscal reforms and austerity measures. Public sector jobs and pensions would have to be cut. Taxes increased. Greece was put on a strict budget. But as bad as it was in 2010, by 2015 it was even worse when a new government came into office promising to end unpopular austerity measures and threatening to default on the loan program if it didn't get better terms.
At that time Greece was on the brink of leaving not only the Eurozone but possibly the European Union too.
Greece was actually considering leaving the Eurozone.
Quite openly some of the ministers were advocating a return to the Drachma. Which means perhaps after Greece there would be other countries that would follow and the euro would collapse.
A domino effect.
Precisely. This would have very likely had effects for the entire financial system of the world.
It was a stalemate with the average Greek citizen in the middle worried their life savings might be wiped out. At the height of the crisis Greeks were panicked they be kicked out of the euro zone and started withdrawing their savings at an alarming rate. In order to keep banks from imploding, the government put limits on the amount of money people could withdraw. Only 60 euros per day. That's roughly 70 dollars. Eventually the Greek government gave in, agreeing to continue reforms and austerity measures in exchange for a final bailout. But it's been hard on the Greek people who regularly take to the streets to protest. Pensions and other welfare payments have been cut up to 70%. The size of the public sector reduced by one-fourth. Thousands are threatened with loss of their homes to foreclosure. And unemployment, which at one time hit 28% is still high at around 20%. Among the hardest hit are Greece's next generation. Youth unemployment is above 40 percent. As a result, tens of thousands of young Greeks have gone abroad looking for work. Others like Kostas and Elma Rousis headed for the hills.
You studied history and now you're herding goats in the country. That doesn't sound like a typical career path.
No. It's difficult to do career here. Because we don't have work. We don't have jobs to work here. It's difficult. Very difficult.
Rousis says he would make only about 470 dollars a month as a professional archeologist so he and his wife decided that living off the land was a better option.
It's better money and better life.
Still, he doesn't earn much and says he's paying more in taxes now then before the crisis.
How much money did you make last year?
Twenty thousand euros. And how much did you pay in taxes.
Ten thousand euros. So of the twenty thousand euros you made last year half of it went to the government in taxes. That's a lot of money.
It's a lot of money. It's too many taxes. I have taxes for my car. I have taxes for my buildings. I have taxes for the salary of the year. Too many taxes. So if you gather all the taxes of the year you give to them 50%.
Of course I understand that some categories of the population are heavily taxed.
Dimitrios Tzanakopoulous is Greece's Government Spokesperson. He says the bailout money is being used to pay off the government's loans. And he acknowledges that while the country has succeeded in maintaining a budget surplus the last three years by raising revenues and cutting spending, the average Greek is paying a high price for the crisis.
I spent the morning with a goat herder. Just to give you some context. He told us that last year he made 20-thousand euros. Ten thousand of those had to go to taxes, so he is left to live off of ten thousand euros. There are a lot of people like him in Greece suffering right now.
I understand that the burden of the crisis is heavy. People had to go through sacrifices all those years and we try to do our best in order to heal some of the wounds of the crisis. As for the taxes. The taxation average rate is around 42% whereas in Belgium which is the highest in Europe is 53%, in Germany 48% in France it's around 50%.
Of course, in those European countries social services, like health care, are considered very good. Not so in Greece. Dr. Christos Georgalas is a surgeon in a well-funded private hospital. But he says public hospitals in Greece are in bad shape.
Funding for public health care has been slashed, has been reduced. It was already low and it has been reduced further and that coupled with the lack of organization has resulted in a significant reduction of health care available to most people.
His wife Amanda agrees. She's also a surgeon, a resident in a public hospital in Athens where she makes less than four dollars an hour.
The conditions are not good. We are on a constant basis lacking materials, of gauzes, of the most basic things we don't have. That makes my job hard.
Georgalas knows he and his family are much better off than most but he worries about the future of his country.
There has been a lot of damage done to the social fabric. A lot of people have paid a very high price for the crisis especially the ones living at the edges.
Do you think that those who have suffered the most have a better future now that the bailouts are coming to an end. Will things get better?
To build a successful society I think you need some basic premises. You need a fair society. You need an egalitarian society. You need to have strong social support system, a good public health system, a good public education. None of this exists. I don't think of any country which has managed to advance without having this. So I don't know how Greece will progress.
But he will soon find out. August 20th is the expected end of the bailout period and the start of Greece having more control of its own economic policy. Greece has been assured no or low interest rates on its loans through 2032. It may never pay it all back and will be monitored closely by its creditors. There are doubts Greece can maintain economic growth in the long term and that things will get better for the average Greek citizen. But for now the government is breathing a sigh of relief that the worst may be behind them.
After eight years of tragedy we had to go through we are ready to return to European normality so to speak. But I think the struggle does not end on the 20th of August. We have many things to do and many things to change in Greece in order for the recovery to be sustainable and viable in the future.
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