Greece in Panic as It Faces Change of Homeric Proportions

     

In one of the biggest banks in the centre of Athens a clerk is explaining how his savers have been thronging to pull out their cash.

Wary of giving his name, he glances around the marble-floored, wood-panelled foyer before pulling out a slim A4-sized folder. It is about the size of a small safety-deposit box – and those, ever since the financial crisis hit Greece 18 months ago, have become the most sought-after financial products in the country. Worried about whether the banks will stay in business, Greeks have been taking their life savings out of accounts and sticking them in metal slits in basement vaults.

The boxes are so popular that the bank has doubled the rent on them in the past year – and still every day between five and 10 customers request one. This bank ran out of spares months ago. The clerk leans over: "I’ve been working in a bank for 31 years, and I’ve never seen a panic like this."

Official figures back him up. In May alone, almost €5bn (£4.4bn) was pulled out of Greek deposits, as part of what analysts describe as a "silent bank run". This version is also disorderly and jittery, just not as obvious. Customers do not form long queues outside branches, they simply squirrel out as much as they can. Some of that money will have been used to pay debts or supplement incomes, of course, but bankers put the sheer volume of withdrawals down to a general fear about the outlook for Greece, one that runs all the way from the humble rainy-day saver to the really big money.

‘Clueless’ government

"Every time the markets move, I get phone calls," says an Athens-based fund manager. "They’re from investors asking: ‘How can I get my money out of the country?’ "

One senior investment banker is more blunt: "People are scared that the government doesn’t know what the fuck it’s doing." He tells a story about an acquaintance who took out €30,000, wrapped it in a bag and stashed it in his garage. "The bag had previously had some food inside," he says. "So it attracted rats, who ate the notes."

Bags of money in garages, frightened savers fleeing banks and even the country: these aren’t the sort of stories you associate with a comparatively-prosperous European country, but with a developing one facing a life-or-death economic crash. The fact that they are now emerging from Greece not only indicates the scale of financial distress, it suggests something else: Greece today looks like parts of Latin America in the worst moments of its financial crisis.

In an echo of the days of Jim Callaghan, the International Monetary Fund is back in Europe, doing what it is more accustomed to doing in Buenos Aires or Brasilia: making emergency loans and telling the government how to run its economy. What is more, the scale of the changes an overborrowed Athens is now making are so vast and so rapid that they will leave Greece looking like a different country.

The government itself describes its plan to slash public spending and jack up taxes as one of the most ambitious deficit-reduction programmes in the world. But what often goes missing from this discussion of a fiscal crash-landing is the impact on the lives of citizens who have precious little time to adjust. When salaries of civil servants are slashed by up to 30% within a few months, as happened last year, and over 20% of public-sector workers face unemployment within the next four years – plus whole swathes of national assets are to be privatised before Christmas, with more job losses doubtless to follow – then you are talking about a wholesale transformation of a workforce.

Greece is already one of the poorest and most unequal societies in Europe, reckons Christos Papatheodorou at the Democritus University of Thrace. Among the few countries that look worse are Romania, Bulgaria and Latvia. So what will Greek society look like after the government’s austerity measures take effect? He pauses, then says: "It will probably look like a developing country."

That message has not been lost on workers either: one of the new nouns used by trade union members and others who oppose the cuts is kinezopeisi, or China-isation. The claim is that such large drops in wages will lead to a workforce paid barely more than their counterparts in Shenzhen.

The oddest thing of all is that some of the leading lights in the government appear to see nothing wrong in a wholesale transformation of Greek society, albeit not into one that resembles an enterprise zone in eastern China. Elena Panaritis is widely tipped as one of the up and comers in Greece’s government, and it is not hard to see why: smart, formidably well-trained in economics after a career with the World Bank, funny and fluent in English, she is exactly the sort of person any prime minister would choose to give a keynote address to fretful institutional investors.

And for a Greek politician involved in pushing through some of the most abruptly painful economic measures in the country’s history, she does not seem especially Greek. When I observe how many Apple computers are in her office, she replies: "That’s because I’m not Greek, I’m American." Her speech is American-accented and peppered with "darn" and "have a nice day". [See footnote] When asked to describe how Greece needs to change its economy, her answer revolves around changing its institutions and its structures – in other words, making Greece less Greek. Castigating the bureaucracy, she says: "It’s not a kibbutz, it’s a big country!"

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