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12/29/2009

Ali Sakiroglou and the other sailors in Greece's large commercial fleet have kept their country afloat for many years. But now Sakiroglu can't even help himself, as he sits in his below-deck cabin on the Captain Vasilis, a 2,000-ton freighter. The tiny, 40-square-foot space is sparsely furnished with a bunk, a table and a DVD player.

Sakiroglou presses the start button to watch a German porno film called "Mermaids on the High Seas." He can't understand what the actors are saying, but that doesn't matter. A heavy rain pelts down on the porthole. The ship has been docked at Elefsina, near Athens for a long time. Sakiroglou offers us schnapps from a plastic bottle with a handwritten price on it, indicating that it was probably purchased on the black market, tax-free. These days, who in his right mind pays taxes in a country like Greece?

Sakiroglou, 53, has a wife and six children in northern Greece, where there are many Greek Muslims. Before the financial crisis, the Captain Vasilis shuttled back and forth between the mainland and places like the Cyclades Islands, carrying cement. There was plenty to do and Sakiroglou, earning a monthly pay of €2,200 ($3,150), could afford to visit his wife. There were government construction projects and developers were building hotels, many at an obsessive pace. And everything was being done with borrowed money.

Nowadays no one can afford to buy cement and the ship is usually at dock, where Sakiroglou works as a security guard, earning only €900 a month. And unless the ship gets a new cargo in the next few days, he will probably even lose his current job. Ironically, he has only two years left before qualifying for retirement benefits. "Greece is finished," he says. "Who knows what will happen to my pension?"

When the global economy began to falter, triggered by bankers in New York and London, the cement shipments stopped. But this only highlighted the fact that Greece has little else but tourism and its commercial fleet with which to earn hard currency in international markets. Tax revenues declined sharply, and the government announced that it expected its deficit to be twice as high as initially predicted. But even that initial assumption was twice as high as is permitted under the Maastricht Treaty. The Greeks are now forced to borrow 12.7 percent of their gross domestic product, on top of the €270 billion in debt they have already accumulated.

The financial experts in New York and London reacted immediately. The three main rating agencies -- which rate the creditworthiness of companies and governments worldwide -- downgraded the debt of a euro zone country to "uncertain" for the first time. Moody's moved Greece's government bond ratings to A2 from A1 last week. Then the chief currency expert at the major Swiss bank UBS also advised investors to sell euros, noting that the currency was likely to lose value, partly because of Greece. This, according to the UBS expert, would bring down the euro even further, because "foreign central banks have to assess the risk of a possible collapse of the euro zone."

No Tomorrow

For years, the conservatives and socialists who took turns running the country borrowed as if there were no tomorrow. Through mismanagement and nepotism, they drove their country to the brink of bankruptcy. Citizens, for their part, reacted by engaging in corruption and fraud.

With the euro in place, this sort of situation is no longer merely the problem of a small country with a population of 11 million, but affects all of Europe. A national bankruptcy in a euro country could do tremendous damage to the currency. Moreover, a bailout of the Greek government could trigger a domino effect, with other shaky economies like Italy, Spain and Portugal opting for a "soft landing."

Last week, German Finance Minister Wolfgang Schäuble attempted to bring calm to the situation when he told the tabloid Bild that although Greece has lived "well beyond its means, we cannot pay for the Greeks' mistakes." It was the kind of thing someone says when they know this is precisely what could end up happening.

Before he was elected on Oct. 4, new Greek Prime Minister Georgios Papandreou translated US President Barack Obama's "Change -- Yes, We Can" slogan into Greek. But Papandreou's version was a little more dramatic: "We Must Change -- Or We Will Go Under." On the evening of Dec. 23, he managed to push the most severe austerity budget in recent history through the Greek parliament. The only question is: Will it be enough?

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• Part 1: Culture of Corruption Drags Greece Down
• Part 2: Asking Too Much of the Government