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Photo Gallery: A Political Tremor in Athens

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Papandreou's Demise Euro Crisis Heralds the End of an Era in Greece

They were roommates in college. But now, fallen Greek Prime Minister Giorgios Papandreou and opposition leader Antonis Samaras are bitter rivals. Their two parties are to join in a unity government, but most in the country aren't hopeful that their misery will end soon. By SPIEGEL Staff

One of the two men, Georgios Papandreou, 59, was the politician Europe had favored, the model schoolboy. He implemented what his country's partners in the euro zone wanted from the Greeks. He designed cost-cutting plans, until the protests in front of the parliament building in Athens became larger and more violent. In response to marching orders from Brussels -- or, as many of his fellow Greeks say, from Berlin -- he raised taxes and fees, and he tried to trim down a sprawling government bureaucracy, until it bit back in resentment. He risked -- and lost -- his popularity among supporters who had voted him into office as his country's savior.

And when all of this did not have the desired effect, the reliable leader suddenly veered off course, in the eyes of his handlers. He proposed that citizens vote in a referendum to decide whether he had a sufficient mandate for such draconian measures. Suddenly, Papandreou's relationship with his European partners soured.

The other man, Antonis Samaras, 60, Papandreou's conservative and nationalist rival, was Europe's bogeyman. He was a member of the Greek administration that carried political nepotism and clientelism to the extreme -- and submitted bogus budget figures to Brussels. Samaras, now the opposition leader, rejected all austerity measures, saying that when he comes into power, he doesn't want to be "running a ruined country."

He called for extensive tax cuts and wanted to renegotiate the bailout agreements between Greece and the European Union. Europe's conservative leaders, like French President Nicolas Sarkozy and German Chancellor Angela Merkel, could hardly contain their fury over their unruly fellow conservative. They felt that he was power-hungry and saw him as a politician who was prepared to sacrifice the entire country to reach his goals.

Political Shift

Until the day last week when Samaras believed a power grab could meet with success. Suddenly his earlier words were forgotten and Samaras declared himself willing to acknowledge the European demands. In return, Sarkozy was quick to praise Samaras, calling him "bold and responsible."

It is a political shift in Greece that is not without irony. Both men, Papandreou and Samaras alike, had once proposed -- perhaps not quite seriously, but it was more than just a joke -- governing the country together. It was the early 1970s and there was a military government in place in Athens. The two young men were both studying in the United States, where they were roommates at Amherst College in Massachusetts.

Samaras would organize parties with coeds, and Papandreou would play songs on his guitar, like British rocker Alvin Lee's "I'd love to change the world, but I don't know what to do."

Today, the two politicians say they don't see each other as enemies -- and yet one thing is clear: Close collaboration is out of the question for the two bitter political rivals. Indeed, Samaras' insistence that Papandreou resign before an interim government could be formed was a key element in Papandreou's decision to step down over the weekend. And yet, events both last week and this, have made some form of cooperation between the two unavoidable.

According to Greek Finance Minister Evangelos Venizelos, on Dec. 15 the country will run out of the money it needs to pay pensions and government salaries. Yet to ensure that Greece receives the next tranche from the European aid package, the Greek parliament will have to approve the Oct. 27 decisions on the rescue of the euro made by leaders of EU member states.

Heading for New Elections

Papandreou's decision to step down on Sunday paved the way for the creation of that majority, a cooperation between Papandreou's PASOK party and Samaras' Nea Dimokratia. But the two sides have yet to agree on the head of a caretaker government. An announcement is expected on Tuesday.

What is clear, however, is that Greece is heading for new elections in February. And it is a vote which could fundamentally change the country. According to opinion polls, the Greeks are no longer willing to put up with the eternal cockfight between Papandreou and Samaras. They hold the entire political class responsible for the country's troubles, and it seems likely that neither of the two major parties will be able to form a majority government after new elections. Instead, the traditional parties will have to form coalitions with rising smaller parties. The days of the lone wolves in Greek politics are drawing to a close -- and they themselves are mostly to blame.

Athens, in this late fall season, feels as though an invisible gray veil had been placed over the city. The mood, say residents of the Greek capital, is "murky, like Ouzo with water." After more than a year of disastrous news, it seems as if many of the once proud Athenians had lost their self-confidence, and as if exhaustion were slowly replacing their anger.

The retiree dressed in a suit and tie, who recently started going to the Gregoris café on Syntagma Square to drink his coffee against the sterile backdrop of a fast food restaurant, is taking advantage of a special: a cup of coffee for only €1 ($1.37) instead of the usual price of €2.30. And the people who are haggling to buy choice cuts of meat at the lowest possible price at the meat market beneath the Acropolis also know that this is where they can get the best deals.

One in Three Storefronts Is Empty

The crisis has severely wounded the country. This is not only evident in the 17.5 percent unemployment level, which is still lower than the unofficial rate, or the 43 percent unemployment rate among young people. The effects of the recession are visible at every turn in Athens. Hundreds of businesses are for sale, and on some shopping streets in higher-end neighborhoods like Kolonaki, one in three storefronts is empty.

A teacher's salary of €800 a month is enough to rent a three-room apartment in downtown Athens, but not to pay for food, clothing and entertainment. "And certainly not to start a family," says a woman named Vagia. Despite her two bachelor's degrees and a master's, she has been sitting at home for more than a year now, sending out job applications. She is 26, eager to work and she has spent her whole life so far amassing valuable skills -- including fluent German and English in addition to some Russian. Whenever Vagia sends out an application for a job abroad, she imagines the employer's reaction: "Oh no, he probably says, not another one who wants to get out of Greece."

According to the new uniform salary schedule for government employees, which went into effect on Nov. 1, teachers' salaries will be reduced to an average of €15,000 next year. Tax officials, who are among the highest-earning civil servants and generally made two to three times as much as teachers, can expect to see their salaries cut by up to 50 percent.

The new budget rules trim an intricate system of more than 100 perks for civil servants, some of them absurd, down to half a dozen. Once again, the publicly traded semi-governmental organizations, such as the electric utility DEI, are not as sharply affected, because radical unions successfully fought for more limited cuts.

The burdens for taxpayers and consumers are also growing rapidly, partly as a result of the 12th new tax law in two years, which the parliament will have to ratify by mid-November.

Political scientist Panos Kazakos calls it a "design flaw" of Papandreou's political strategy that, in his last election campaign, he was strongly supported by civil servants and, particularly, the unions. As a result, he was hesitant to cut their many privileges too drastically. Those privileges include average salaries of €70,000 in state-owned companies, as well as top salaries for train drivers of up to €7,000 a month.

A Country Bled Dry

"Horizontal cost-cutting measures were the easy way for Papandreou, but they sent the wrong message," says Kazakos. Such measures impose an equal burden on all income and wealth classes. "The Greeks are willing to make big sacrifices," says Kazakos, but notes that they also demand fairness. Unfortunately, however, fairness is a rare commodity, in light of the double pensions for members of parliament and the thousands of luxury yachts anchored at the capital's harbors, boats whose owners pay almost no taxes.

Now many Greeks feel that all the sacrifices have been for naught. The international outcry over Papandreou's referendum proposal showed the Greeks just how close they are to losing their currency, despite all austerity measures.

What opposition leader Samaras had consistently predicted and Prime Minister Papandreou had sold as a necessary evil on the road to recovery has now happened: The kill-or-cure remedy has led to a complete collapse of the Greek economy. Tax revenues remain far short of projections, while government spending on such costs as unemployment benefits has skyrocketed.

The value-added tax was already raised twice in 2010 and now stands at 23 percent, and the tobacco tax was raised three times within a few weeks. Greek households have lost an estimated quarter of their income. As a result, each new reform becomes a war of nerves. General strikes were declared seven times last year alone.

But in June 2011, a year after the first bailout package, the country was still in need of €78 billion in funding. The so-called troika, made up of inspectors from the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), demanded new cost-cutting proposals in return for the next loan disbursement, and Papandreou delivered. Salaries for civil servants were reduced once again, taxes on heating oil and cars were raised, and a new tax on luxury goods and real estate was introduced. In addition, all Greeks now pay a solidarity fee of about 5 percent of their net income.

'Property and Blood'

But the largest chunk of money is to come from a massive privatization program. The government plans to sell real estate and state-owned companies on a large scale, which is expected to raise some €50 billion. The program triggered outrage among Greeks. A cover story in the deeply traditional newspaper Vradini was titled: "Property and blood for the fifth loan tranche."

So far, however, investors have shown only tepid interest. Many companies on the list are viewed as unsellable, like the Greek national railroad, which was still losing hundreds of millions of euros annually until recently.

And the Greeks are grumbling increasingly loudly about the austerity regime. Mass demonstrations take place regularly in the country's major cities, and sometimes there are riots. Politicians who address the crowds have been pelted with eggs and even stones. Parliamentarians are receiving threatening emails, while protestors are blocking the entrances of restaurants commonly frequented by politicians.

A national holiday was celebrated two Fridays ago with parades all over the country, but it also turned into a settling of accounts with politicians. As soon as they turned up at the parades, as they normally do on such holidays, the country's political leaders were booed, spat on or beaten.

Not even the president came away unscathed. Karolos Papoulias, 82, had tears his eyes when he stepped in front of the cameras. He had "gone to war for Greece," the elderly politician said. "I fought the Nazis when I was 15, and now they say I'm a traitor."

Papoulias was once a respected man. Even though he was one of the co-founders of the Panhellenic Socialist Movement (PASOK), of which Papandreou is the leader, the conservatives nominated him to be president in 2004, and four months later the parliament elected him into office with the largest majority in Greek history. Now Papoulias only feels that he is a victim of the popular rage triggered by the financial crisis. Having to listen to people call him a "fascist" is a disgrace, he says. "It hurts me."

A Risky Move

It was a black Friday for Greece and, most of all, for the Papandreou government. Against the background of the violence at the parades, the premier fleshed out a plan he had been thinking about for some time. On Monday evening a week ago, Papandreou went before his party's stunned parliamentary group and announced a referendum. The Greek people had the "wisdom and knowledge" to be able to reach their own decision about the bailout plans designed to combat the crisis, he explained. "It's a matter of whether or not the Greeks want to stay in the euro zone."

It was a risky move, prompting critics like Takis Theodoropoulos to criticize him for gambling. "He has gambled away his political capital," said Theodoropoulos, "and now he wants to resign as a hero and say: It's not my fault."

This time Papandreou, who despite his rhetoric is also a skilled tactician, had pushed his luck. At last week's G-20 summit in Cannes, Merkel and Sarkozy made it clear to the Greek prime minister that they would throw Greece out of the euro zone if its citizens voted against the additional austerity measures.

It was a conversation reportedly not without raised voices, and Papandreou warned that Greece could face the threat of a coup if the austerity measures imposed by Brussels continued for too long. But Merkel was unimpressed. A minister reported that the German chancellor even tried to dictate to her Greek counterpart the date of a possible referendum and exactly what question was to be asked.

The End of a Prince

On the return from Cannes to Athens, Finance Minister Venizelos, Papandreou's toughest rival and one of his potential successors, broke with the prime minister and demanded that he abandon the referendum. The next day, an uprising against the referendum erupted among the Socialists, and Papandreou was forced to discard his democratic idea. Now, the Papandreou era has drawn to a close.

The prime minister, who was born in the United States and lived abroad for many years, had always been something of an outsider in his own party. He was seen as an intellectual and eloquent leader, but also as an "overseas Greek," a man without his own power base.

Papandreou, the son and grandson of former prime ministers, seemed to feel he was a global player of sorts, and he could never acquire a taste for the rough-and-tumble of politics at home. "He saw himself as a member of a world government, but not as the leader of the Greeks," says author Stavros Lygeros.

Lygeros, whose recently published book "From Cleptocracy to Bankruptcy" became a bestseller within a week, has watched Papandreou for the last 30 years and knows him better than most. He claims to see the "psychology of a prince" in the premier, a man who cultivates in his subconscious the self-image of a feudal lord, in relation to both his party and the country.

Papandreou found it easy to distance himself from Greece. "I run a corrupt country," he admitted in Brussels, with a frankness that impressed his European partners. But his words were less appreciated at home. "He exposed his country for his own personal benefit," says Lygeros, adding that this is something Greeks are not quick to forgive.

Difficult to Follow

Papandreou's changes while in office were not difficult to see. The intellectual, affable conversationalist and astute political analyst became a thin-skinned and, according to one fellow party member, "defiant" prime minister. Last week, both his political opponents and the state television network called him "confused," when the back-and-forth of his political flip-flopping between announcing his resignation and his intention to stay in office had become difficult to follow.

Tasos Pappas, a columnist and expert on PASOK with the liberal, left-leaning daily Eleftherotypia, wrote that he had noticed "signs of panic" in Papandreou. According to Pappas, the prime minister lost his faith in close allies, is constantly changing his close associates and is convinced that there is a "big conspiracy against him" -- a conspiracy of malicious members of parliament, bankers, the media and even military officers with influence in the party.

Now that a national unity coalition is imminent, it still hardly seems likely that the temporary unanimity between two unpopular major parties will convince Greeks that their fates are now somehow easier to bear, says journalist and author Nikos Dimou. He claims to have written "the most successful Greek non-fiction book since antiquity." The book is about the "misfortune of being a Greek," and it was first published 36 years ago.

The Greeks, says Dimou, are now at the crest of their political crisis, searching, once again, for someone to blame -- mostly outside Greece. Greeks, says Dimou, have long been known as "world champions in uncovering major conspiracy, sometimes attributable to the Americans, sometimes the Jews and sometimes global capital."

But the fact that the Greeks are now pinning much of the blame in the euro crisis on the Germans, that Merkel has been pictured with a Hitler moustache, and there is talk of a "second occupation" of Greece, goes too far, says Dimou. After all, he adds, he experienced what it was really like when the Germans occupied the country in 1941. "I saw people dying in the streets."

Of course, the tone has also worsened in Germany, at least compared with the days of Johann Joachim Winckelmann, a lover of Greek culture who shaped the image of the noble Greek in the 18th century. At the time, no one questioned whether Greece was still compatible with Europe. Instead, German poets were singing the praises of Greece, with words like these: "Without freedom, what would you be, Hellas? And without you, Hellas, what would the world be?"

BY MANFRED ERTEL, WALTER MAYR, ANNE SEITH, AND DANIEL STEINVORTH

Translated from the German by Christopher Sultan