'A Toxic System' Why Austerity Still Isn't Working in Greece


Part 2: An Uphill Battle to Reform

In the bloated administration, for example, many civil servants owe their jobs to political favors rather than to their own competency. Even Prime Minister Samaras awarded senior government positions to several supporters from his home district of Messinia after taking office.

By 2015, the government bureaucracy is required to shrink by 150,000 jobs, and another 15,000 civil servants are to be replaced by young, well-qualified candidates. But the government has long shied away from layoffs.

Instead, the government promoted early retirement programs and placed 2,000 civil servants into a so-called mobility reserve. Athens had promised the troika that the workers would be permanently laid off if no new jobs could be found for them within a year. But the government managed to find work for everyone in the mobility reserve, and a promised search for another 12,500 civil servants for the program petered out. Men like Odysseas Drivalas are the reason for this reluctance. The tanned former civil servant is the president of ADEDY, the umbrella trade union for civil servants. As the head of a union serving about 400,000 members, he thinks it is a "myth" that the government has too many employees. "We are planning another general strike soon," he says.

Men like Drivalas ought to be involved in the reform process, but chances of that are slim. Many union members support the leftist Coalition of the Radical Left, or SYRIZA, whose leader, Alexis Tsipras, warns against turning Greece into a "German colony."

The Old System Resists

The sometimes ludicrous conditions in Greece's government agencies are one of the main reasons the economy is doing so poorly. In one example, a fast-track process introduced in 2010 was intended to help entrepreneurs obtain all the permits they needed within 60 days, which was later changed to 45 days. But three of four major investors that completed this procedure are still fighting for their projects today.

"They overestimated the speed at which such reforms could be done," says Paul Mylonas, chief economist at the National Bank of Greece. Most of all, the reformers probably underestimated the old system's powers of resistance.

There is no shortage of ideas about how to move the country forward. Economist Mylonas, for example, is convinced that there is significant room for expansion in the shipping-related service sector, especially in areas like "logistics, insurance and storage." EU representative Carvounis wants the tourism industry to focus more on visitors interested in culture and mountain biking. The country, he says, is "almost empty for six months" every year.

But these are the kinds of plans that require a long time to implement. "Ninety percent of our companies are only three to five people," says Mylonas. "We cannot be competitive on this basis."

These conditions make the troika's forecasts for future development seem delusional. It expects the country to generate 3.5 percent growth in 2017, while the national debt is forecast to decline from 175 percent of GDP today to "substantially below" 110 percent by 2022.

Even chief privatizer and professional optimist Stavridis admits that he and his fellow Greeks have "huge problems." But, he adds, "I am 100 percent certain that we will win."

Translated from the German by Christopher Sultan


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yiannaki 07/09/2013
1. Change in Greece.
Question: How do you change a not-system ?
biffgee 07/09/2013
2. Greece debt
The problem is simple. Too many takers in Greece and not enough makers. Have fun, euro countries, supporting these moochers.
hacim obmed 07/09/2013
3. greece
There is no solution for greece but to leave the euro. Every competent economist has told you this for years. You continue to try and defy the laws of nature with this silly attempts at haricuts and bailouts. Meanwhile people suffer more and more. This whole thing would have been solves two years ago by a euro exit. So learn your lesson and get on with the job.
aaallison 07/09/2013
4. Greece
Austerity is not optional. The Greek economy was based on borrowed money which the country lacked the resources to repay. Prospective lenders have finally noticed. The scandal here is that, as always, it's the relatively powerless who bear the brunt while, as the author repeatedly points out, the establishment avoids the pain. The inevitable bond-holder haircut is of relevance only to the bond-holders. Greece is going to have to learn to live within its rather meager means.
gsmullennix 07/09/2013
5. Why austerity won't work.
It won't because the rule makers have determined that those with the least will be the ones upon whom the financial burden is placed. In other, more sane times, their would be a great reduction in the value of the currency and the economy would become competitive again and business would grow. Not now though. Now, the currency is a huge millstone around the necks of the ordinary Greek. And, why can't Greece leave the Euro? I think everyone knows that doing so would greatly devalue the pensions of the bureaucrats and politicians. So, those voters who happily voted for the politicians who promised them 'more' and ignored that 'more' was being paid for with debt. Until Greece devalues, it will never be free of the millstone holding it to the bottom of the sea.
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