Herculean Task Ahead: Is It Already Too Late to Save Greece?
The International Monetary Fund and the European Union are coming to Greece's aid with a financial commitment worth billions. But is it already too late to rescue the cash-strapped country? By SPIEGEL staff.
One of Greece's purported saviors is a short, rotund, 72-year-old man named Leandros Rakintzis. He was once a respected constitutional judge on the country's highest court, the Areopagus. Since 2004, he has been the head of a government agency that is the first of its kind for Greece. Rakintzis is Greece's general inspector of public administration.
His body twitches and shakes with delight as he talks about his successes and discoveries. For example, he discovered that on weekends, hospitals admit elderly people who require nursing care or are confused because their children bring them there so that they can take a few days of vacation. This, of course, drives up healthcare costs.
He also discusses an administrative office called Kopais, named after the lake of the same name near Thebes, which was established in 1957. The purpose of the office was to prepare for the draining of the lake so that roads could then be built in the lakebed.
In that same year -- which is now over half a century ago -- the lake disappeared forever. But there are still 30 employees working at Kopais today. When employees retire or are let go, their positions are filled with new employees, who are paid monthly salaries of up to 2,500 ($3,175). They supposedly work on drainage issues, but no one knows exactly what those issues are or who benefits from their work.
Rakintzis has stories to tell that take place throughout Greece, and some are downright unbelievable. For example, the government agency that was created to manage a bid to make Greece's second-largest city, Thessaloniki, a European cultural capital in 1997 is still humming away. Its employees are supposedly working on winding down the major event and settling up the accounts -- 13 years later.
How many people work there? "I don't know. Not even the government knows that," says Rakintzis. He adds, in an almost threatening tone: "Not yet." Rakintzis and his staff are now in the process of investigating about 4,000 government offices and agencies in similar situations.
In addition to Rakintzis, the IMF, officials with the European statistical office Eurostat and economists from many countries are hard at work to bring order to Greece's ramshackle finances. Rakintzis and the others are painstakingly searching for the holes into which Greek government funds have been seeping.
It is a Sisyphean task for Rakintzis, who has a staff of only 30 people to assist him. There is probably no other government agency in Greece that faces such a massive task with so few employees.
Bloated Public Sector
Greece has more than five times as many civil servants per capita than the United Kingdom. The country's inflated government apparatus consumes tens of billions of euros a year. It's money the Greek state doesn't have -- and actually never did. Greece's gross domestic product is only slighter higher than that of the German state of Hesse and is just one-tenth the size of Germany's total economic output.
For this reason, the government has been borrowing fresh funds on the international capital markets for years, generously and cheerfully spreading the wealth among its citizens. The introduction of the euro made it even easier to incur debts because, by joining the common currency, Greece qualified for lower interest rates than anyone would ever have thought possible.
But now the bubble has burst. Greece threatens to turn into another Lehman Brothers -- except on a whole new scale. The 300 billion in debt that the country has accumulated poses a threat to the entire European community.
If Greece falls, other shaky economies like Portugal, Spain and Italy could be next. As a result, the philosophical ideal of a politically and culturally united EU family is gradually crumbling.
Many people in Europe are asking themselves the following question: How many more countries will be affected?
The financial markets, at any rate, have lost their confidence in the erstwhile cradle of democracy. Without the promised loans of 110 billion from other countries in the euro zone and the International Monetary Fund (IMF), Greece would have been bankrupt by no later than May 19, when it will be required to repay a 10-year bond worth 8.1 billion. And that is only the first of many tranches that will mature in the coming months and years.
In approving the Greek bailout plan, the international community is more intent on saving its own banks than rescuing Greece itself. The Greek government owes 162 billion to foreign banks and private industry worldwide. German banks hold 33 billion in Greek government bonds.
Creditors must surely realize that the loans are no longer collectable, says Ulrich Blum, the president of the Halle Institute for Economic Research in eastern Germany. "The verdict on Greece is already in."
In return for the loans, the Greek government is expected to cut costs and finally reduce its massive budget deficit, introduce sound budget-management practices and pay off its debts. But is this even possible anymore? Is the Greek economy even capable of withstanding such kill-or-cure remedies?
In specific terms, the donor nations and the IMF are requiring additional wage cuts for public employees and a further increase in the retirement age from 63 to 65.
In addition, only one-fifth of civil servant positions that become available are to be filled, and the value-added tax will be raised a second time this year, to 23 percent.
Finally, the government will be required to take decisive action against tax evasion, which is practically a national sport in Greece, as well as tackle rampant corruption.
These are drastic measures, and they will deprive the Greeks of the last of their money -- money that will then be unavailable for consumption, which will hamper the economy even further.
Thousands are now protesting against the austerity in Athens each week. Last week, the protests turned violent when three bank employees, including a pregnant woman, died when demonstrators torched their bank on Wednesday. Protestors had thrown a Molotov cocktail through the window of the building.
The images of terror, fire and anger in the streets have unsettled the world. There are growing doubts that the radical cuts into the established rights of citizens are politically enforceable. At the same time, hopes are waning that Greece will ever be able to repay its debts.
The doubts are justified. After the end of the bailout program, the Greek deficit will still comprise at least 125 percent of GDP. And no one has a clue as to how the country will ever pay off its mountain of debt.
Almost all experts agree that the Greek economy cannot perform this Herculean task. In fact, it will not even be able to begin to repay the billions in loans.
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