Generations of Pork How Greece's Political Elite Ruined the Country

AP

Part 2: EU Feels Lucky to Have Papandreou


Samaras, like Papandreou a wealthy member of the upper class, is now the prime minister's opponent. He is a tough rival who's not afraid to use whatever tactics necessary. The two men are on familiar terms, though, having shared a student apartment in the US in the 1970s.

EU financial policymakers consider themselves lucky to have Papandreou, who's trying to cut costs. Samaras, on the other hand, is promising voters to lower taxes and drive a hard bargain with the EU over austerity measures.

While Papandreou's standing with the public has fallen rapidly in the past few weeks and his PASOK party has slumped to 27 percent in the polls, its lowest rating in 34 years, Samaras' New Democracy has held steady at 31 percent. That was enough to rank the party as the most popular in the eyes of voters in mid-June, but was still 2.5 percent less than its results in the 2009 parliamentary elections.

About three weeks ago, Papandreou gave his conservative opponent a call, wondering if the two battered parties couldn't work together to save the country, in a grand coalition. Papandreou suggested he would even be willing to make the post of prime minister available.

'Like a Cat Chasing its Own Tail'

The conversation was supposed to remain confidential, but Samaras alerted journalists. He then embarrassed Papandreou in parliament again shortly afterwards, making it clear that he wasn't interested in a consensus government.

Regardless of whether it happens under Papandreou alone or with both politicians working together, if Greece starts economizing, it risks choking its own economy. "It's like a cat chasing its own tail," says Greek economics professor Yanis Varoufakis.

Former IMF chief economist Kenneth Rogoff recently warned: "If they just continue with the European Union's austerity program, they're going to be in slow growth or recession as far as the eye can see, and at the end of the day they're still going to default."

And it's not as if Greece hasn't already adopted austerity measures. Athens managed to cut its budget deficit from 15.4 percent of its gross domestic product to 10.6 percent last year, thanks to its first austerity package. The government made cutbacks in salaries, retirement funds and social benefits, among other things.

This austerity policy also caused 200,000 people to lose their jobs last year, with unemployment reaching an all-time high of 15 percent by late March.

With pay in the private sector also often falling by 10 to 20 percent, consumption likewise dropped by nearly 10 percent and the recession intensified. It's a vicious circle. Since taxes need to increase and spending needs to decrease, the situation is likely only to get worse.

The austerity package approved last week certainly envisions plenty of tax increases and spending cuts. There's a solidarity tax for everyone, and property taxes will go up. The government has also finally pledged to take more effective action against tax evaders, although no one knows precisely how.

Run-Down Stadiums and Old Airbuses

The package includes cutting around 150,000 public sector jobs by 2015, with the sale of state-owned assets bringing in a further €50 billion. The only problem is that many of those assets will prove difficult to sell. They include run-down Olympic stadiums and four aged Airbuses, although the government also holds thousands of square kilometers of land, some of it in prime coastal locations.

The state will also offer up to 17 percent of the utility company PPC, currently 51 percent government owned, to private investors. This is despite bitter opposition from the union, which is right to anticipate that the sale would mean layoffs among the current workforce of 21,500. During the parliamentary vote on Wednesday, the lights went off in several regions of Greece as a sign of protest.

Economics professor Georgios Argitis from Athens University sounds disdainful as he talks about the "ruling class of politics and capital that made the country its prey" and caused this mess. Contentious best-selling author Petros Markaris derides the "ailing state apparatus." Its representatives "have only one interest, namely maintaining their privileges," he says. "They don't give a damn about anything else."

He's referring, for example, to the parliament employees who still draw 14 months' salary each year, with an additional two on top of that. He's referring to the land of plenty that is the public sector, where politicians provide for those who have helped them, fathers for their family members and agency heads for their personal favorites.

Each new government which has taken office in Greece has hired thousands of officials and employees, without firing the old ones. No one was bothered by this, as long as each person's own job prospects remained good.

Now, though, people are rejecting the entire political elite. This May, 71 percent of Greeks said they didn't have confidence in their government, while 76 percent had just as little confidence in the opposition.

REPORTED BY FERRY BATZOGLOU, MANFRED ERTEL, CLEMENS HÖGES, HANS HOYNG

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