In Greece, personal despair threatens to erupt in violence

Economists predict a 4 pc contraction in GDP this year, and the raw numbers support the pessimism

“Many times I have thought of taking my father’s car and driving it into a wall,” he said, declining to give his last name because he was reluctant to draw attention to himself under these circumstances.

Hunched over and shaking, he sat last week in the spartan office of Klimaka, a social services organisation in Athens that provides help to the swelling numbers of homeless and depressed Greek professionals who have lost their jobs and their dignity.

“I am a peaceful man but I hear my mother and father crying at night,” said Anargyros, 41. “We were the people in Greece who helped others. Now we are asking for help.” It has been one year since Greece avoided bankruptcy when Europe and the International Monetary Fund provided a 110 billion euro ($155 billion) bailout. While no one expected the country to reverse its sagging economic fortunes quickly, the despair of Greeks like Anargyros reflects a level of suffering deeper than anyone had anticipated.

Economists are predicting a 4 per cent contraction in gross domestic product this year, and the raw numbers support the pessimism. Cement production is down 60 per cent since 2006. Steel production has fallen, in some cases more than 80 per cent, in the last two years. And analysts say that close to 2,50,000 private sector jobs will have been lost by the end of the year, pushing the unemployment rate above 15 per cent.

With local headlines shouting of credit rating downgrades and the unlikely possibility that Athens might abandon the euro, panicky Greeks are pulling their money from banks. Greece lost 40 billion euros of deposits last year, and bankers say withdrawals have increased recently.

These struggles have once again made Greece an urgent matter for the 17-nation euro zone, whose finance ministers are meeting to discuss Greece and the debt crisis that has defied Europe’s year-long efforts to contain it. On the table will be whether Greece — which is now projected to miss its deficit target by as much as 2 percentage points of GDP this year — will require another round of loans totaling as much as 60 billion euros, and what further budget cuts would be required in return.

But there is serious debate about whether this kind of prescription — subjecting Greece to more cuts and sacrifice in order to justify a second installment of funds from a reluctant Europe — is the right one. This form of remedy violates two very basic economic principles, according to Yanis Varoufakis, an economics professor and blogger at the University of Athens.

“You do not lend money at high interest rates to the insolvent and you do not introduce austerity into a recession,” he said. “It’s pretty simple: The debt is going up and GDP is going down. Have we not learned the lesson of 1929?”

The arrest of Dominique Strauss-Kahn, the head of the IMF, on sexual assault charges could create new uncertainty about a push for more severe austerity. Strauss-Kahn generally favoured a less onerous approach, and if he is forced to resign it is possible that tougher conditions preferred by Germany will be imposed.

But while the debate over how to fix the Greek economy has played out in public, the ways in which this slump is tearing at the country’s social fabric are less well known. The transformation has been jarring to a citizenry long accustomed to a generous welfare state.

Homelessness

Social workers and municipal officials in Athens report that there has been a 25 per cent increase in homelessness. At the main food kitchen in Athens, 3,500 people a day come seeking food and clothing, up from about 100 people a day when it first opened 10 years ago.

The average age of those who show up is now 47, down from 60 two years ago, adding to evidence that those who are suffering now are former professionals. The unemployment rate for men 30 to 60 years old has spiked from 4 per cent to 10 per cent since the crisis began in 2008.

Aris Violatzis, Anargyros D’s counselor, says that calls to the Klimaka charity’s suicide help line have risen to 30 a day, twice the number two years ago. “We can not imagine this,” Violatzis said. “We were once the 29th-richest country in the world. This is a nation in deep emotional shock.”

Evidence of the emotional and social shock was abundant in Athens last week. Even as IMF and European banking officials worked with Greek officials to hash out the contours of a second bailout package, a nicely dressed middle aged woman with silver buckles on her shoes sifted through the garbage cans outside the five-star hotels where many of these officials were staying.

“This is an explosive situation, and there could well be violence,” said Stefanos Manos, a former economy minister who has advocated more aggressive spending cuts. “Especially as those who lost their jobs were earning 50 per cent less than those who kept them.”

There is mounting criticism that Prime Minister George A Papandreou, after a burst of changes last year, has lost his nerve. A plan to raise 50 billion euros by 2015 by privatising the publicly owned power and train companies has been a bitter disappointment. Those companies, home to powerful unions that protect what some view as thousands of excess workers, remain largely untouched by reforms.

Papandreou has achieved some success in opening up closed professions and reforming the country’s pension and retirement systems. And he still retains the support of many Greeks, who believe that there is no better alternative.

But his critics say he may be avoiding the difficult choices in the belief that, as the saying goes, the god of Greece will save Greece by means of a fresh European bailout.

That is what Richard Parker, a political economist from Harvard who is serving as one of Papandreou’s top outside advisers, thinks should happen. Germany, he says, has to overcome its Calvinist instincts and write Greece one big check so that it can continue its economic overhaul process.

“Greece’s debt is just 3 per cent of the euro zone GDP,” said Parker, who has known Papandreou for more than 40 years. “And the price of tipping over Europe will be much larger. My attitude is, give them the money.” Greece may well get the assistance, with strings attached, of course.

But whether that will help lift Anargyros D out of his despondency remains unclear. He lives off his father’s monthly pension of 962 euros, which is down from 1,500 euros a year ago, and he must borrow money for the bus from his home in the Peloponnese region to his counselling sessions in Athens.

“Everything was coming up roses,” he said, mashing a cigarette into the ashtray before him. “And then the banks took it all away from us.”