T alk to Constantina Iliopoulou about the economic crisis that is ravaging her native Greece, and she might break down and cry.
“Our family has been destroyed,” she says. Her mother and father live in separate rooms and have not spoken to each other in months because of quarrels over the failure of their family business. “This is harder for me than the loss of money.” The country’s economic collapse forced the closure of their paper importing company after more than 30 years, during which it had earned annual profits of up to €6 million (about US$7.73 million).
“The crisis made people forget their honor,” says the 30-year-old Iliopoulou. “They stopped paying their bills because the money wasn’t there anymore.” As a result, the firm lost €2.5 million and shut down at the beginning of this year.
“The Greek Rotarian keeps motivating, encouraging, inspiring. We give, during these hard times, a hope and a vision. And we never give up.” - Nikos Makrigiannis, 2011-12 governor, District 2470
Iliopoulou had been earning more than €5,000 ($6,450) a month as an executive of the company; now she works for a not-for-profit organization and makes less than one-fifth that amount. Her 65-year-old father receives a pension of about €700 ($900) a month.
“He worked all his life so that my brother and I could be well off, and now he feels that he has failed us,” she says. “So he sits at home and cries.”
Fifth year of recession
Greece is suffering through its fifth consecutive year of recession, the effects of which have been exacerbated by an austerity program laid out by the country’s international creditors. The resulting impoverishment has spared no class, no age, no sector of society, and no profession. Millions of people are out of work, companies are failing, hospitals are short of staff and medicine, and schools have no money to purchase books. And most analysts agree that conditions will get worse before they improve.
“This situation has killed our dreams,” says Nikos Nimikos, a 50-year-old cabdriver in Athens. “No one asks now what you are going to do tomorrow. We don’t make any plans for the future. All we can do is to try to cope with what we do today. It is like a natural disaster.”
A mechanical engineer by training, Nimikos turned to driving a taxi because the small company he owns, which manufactures aluminum windows and doors, was on the verge of bankruptcy because of the collapse of the Greek construction industry. “Last year, I had 12 employees,” he says. “Now I have only three. I’m going to close it down. I don’t want to fight anymore.”
He is not alone. According to a survey conducted in January by the Institute of Small Enterprises (IME/GSEVEE), more than two out of five companies in Greece said they lost money in 2011, and about 180,000 enterprises said they risked shutting down in 2012.
Most economists say that the seeds of Greece’s economic crisis were sown more than 30 years ago, when Andreas Papandreou, then the prime minister, created a bloated, expensive state apparatus characterized by political cronyism and unbridled spending (see sidebar). This created huge annual budget deficits that required constant borrowing from international lenders.
The slumping world economy sent the Greek budget deficit soaring to nearly 16 percent of GDP in 2009; the national debt surpassed 125 percent of GDP. (As a point of reference, the European Union’s Stability and Growth Pact requires its members to keep deficits to 3 percent or less of GDP and debt to 60 percent or less of GDP.) Because of its disastrous fiscal situation, Greece was unable to find lenders to finance the debt and sought help from the International Monetary Fund, European Central Bank, and European Union, collectively known as the troika. In exchange for providing massive bailout funds, the troika laid out a program of fiscal austerity that includes cuts of up to 40 percent in pensions and salaries. As a result, the cash-strapped Greeks have stopped spending money.
Another IME/GSEVEE survey found that about two of three households in Greece have drastically reduced their spending so they can meet their basic needs, and more than 9 of 10 households have stopped buying shoes and clothing altogether. Data published in August by the Greek national statistics agency Elstat show that retail sales by volume fell by 10.6 percent in June. This followed declines of 10 percent in May, 13.3 percent in April, and 16.2 percent in March. Consequently, the country’s economy, which was overly dependent on consumption, has collapsed. According to Elstat, Greek GDP fell by 6.3 percent in the second quarter of 2012 – the 14th drop in 15 quarters.
The recession and the austerity program have thrown millions of people out of work. In July, Greek unemployment stood at 25.1 percent, up from 17.8 percent a year earlier and more than triple the rate in June 2008, just before the crisis began, Elstat reports. Joblessness is particularly high among the young, with almost 55 percent of those ages 24 and under out of work. Hiring is practically frozen in the public sector, and in the private sector, only one person is being hired for every seven layoffs.
Yannis Monogios, a senior research fellow at the Athens-based Centre of Planning and Economic Research and an adviser to Finance Minister Yannis Stournaras, describes the austerity program as “shock therapy,” adding that many of its measures, while well intentioned, were “ill conceived and poorly implemented.” He especially faults the lack of “a safety net, a floor under which the poor segments of society could not fall. To initiate so many reforms in such little time was asking too much, too soon.”
Apostolis Chamonikolas, 57, has suffered a triple whammy: He lost his job, saw his pension slashed, and then was hit with taxes that the government raised retroactively to bring in needed revenues. Chamonikolas retired in 2009 from his job as a mechanical engineer with a woodworking machinery company, but he continued working because his pension was only €856 per month. He was laid off this March, the same month the government cut that pension by more than 25 percent. Then the state asked him to pay taxes of €1,500 on his 2009 income, for which he originally had not been obliged to pay anything. “This would be very funny if it were not so tragic,” he says, adding that he may need to seek work abroad to make the mortgage payments on his house.
On the small Aegean island of Tilos, Tellis Hatzifountas is also thinking about leaving the country. “I cannot find a job to buy food for my family,” says the 32-year-old, whose wife, a teacher at a private school, and infant daughter live on the nearby island of Rhodes.
Hatzifountas was planning to work on Tilos this winter, at a yet unspecified EU-funded job, and see his family once a month. But his wife’s monthly salary has fallen from €1,500 in 2010 to €580, because most people can no longer afford to send their children to private schools. He is considering moving with his family to Norway, where, friends have told him, he could find work clearing snow from roads. “I don’t really have a choice,” he says. “I must fight for my family and my child.”
Nikos Makrigiannis, 2011-12 governor of District 2470, says Greek Rotarians have responded to the economic collapse by funding several targeted projects. These have included providing cooking appliances to help prepare and distribute food to the hungry, and offering medical equipment to public clinics in depressed rural areas and to medical centers facing shortages because of budget cuts.
The crisis forced Makrigiannis to get creative to compensate for deep shortfalls in contributions. “We used to collect about €100,000 in donations every year,” he says. “In the last three years, this has been reduced by half.” In addition, he says, Rotary clubs lost members who were unable to pay their dues.
During his year as governor, Makrigiannis asked businesses to participate in joint projects. “I went to the Interamerican insurance company and suggested we sponsor a concert together and share the proceeds,” he says. “We each put up €50,000, and we each netted €25,000.” The Rotarians donated their share to a foundation for orphans and abused children.
He notes that some of the projects have provided an opportunity for Rotary to showcase its work, and that Rotarians are also providing a morale boost by their example: “The Greek Rotarian keeps motivating, encouraging, inspiring. He or she gives, during these hard times, a hope and a vision. And he or she never gives up.”
In August, the government of Prime Minister Antonis Samaras agreed to another package of austerity measures. To be eligible for more vital bailout funds, Greece must reduce expenditures by an additional €11.5 billion over the next two years. Greek media reports suggest that more than a third of the savings, or about €4.5 billion, will come from new cuts in pensions and wages.
This is bad news for Grigoris Kanelopoulos, who sells koulouri , a popular pretzel-like snack, from a stand near the Greek parliament. He notes that few people are spending money on nonessentials. “Look, I’m 40, an age at which you start a family,” he says. “But the crisis has made it impossible. How can I have a wife and children when I am forced to live with my parents because I cannot afford to rent a flat?”
A few blocks away, 34-year-old Eleni Spanou says she is afraid she will lose her family’s modest grilled-corn stand because she and her husband cannot afford its monthly rent of €1,400. “We already owe City Hall €18,000. I don’t have the money. I’m barely making enough to survive.”
Before the economic collapse, Spanou says, she and her husband earned enough for themselves and their two daughters. Now they do not spend anything on themselves. “I prefer to spend the little money we make on the girls,” she says, “so they don’t feel the crisis.” She sighs. “But now we also have to buy textbooks for them, because the schools can’t afford to buy them.”
Basic institutions at risk
The crisis is not only wreaking havoc on the lives of individuals and families; it is threatening the basic institutions of Greek society.
“We don’t know if the schools will be able to open this year,” said Klairi Deliyanni, deputy mayor of the municipality of Nea Smyrni, a large southern district of Athens, in mid-July. The district’s 42 schools, with about 300 students each, depend on quarterly disbursements of €155,000 from the central government, she said. The funds are used to purchase books and other supplies, pay for utilities and repairs, and cover other day-to-day expenses. The municipality had received one payment in six months, and no one was certain if more would come.
In September, Deliyanni said that €100,000 in government funds had finally arrived, but that to open the schools, the municipality had to add €60,000 of its own funds. (Nea Smyrni is one of only a handful of Greek municipalities with a budget surplus.) That money is enough to keep the schools open only until Christmas, Deliyanni said. “If we don’t get more funds from the government – and no one has assured us that we will – we’ll have to use our own money again. But it will not last us very long.”
During a conversation in his Athens office, Gerasimos Kouzelis, professor of political science at the University of Athens, opens a closet to show the rolls of toilet paper he bought because the school could not afford them. “This is a sign of absolute crisis,” he says, only half joking.
Kouzelis says the economic collapse has “changed the way people perceive their daily life. You are starting to accept the normality of someone who lives on garbage. This is terrifying. This is a large-scale change. Impoverishment to this extent hasn’t been seen in Greece since World War II.”
The British daily the Guardian reported that about 400,000 people in greater Athens – 1 in 11 residents – now visit a soup kitchen every day. And Deliyanni said a number of students had fainted from hunger in the classroom, compelling the municipality to initiate a program of free breakfasts for children. She said that Nea Smyrni, like other municipalities, was also running a “social market” stocked with contributions from individuals and companies to provide free food for the unemployed and needy.
The spending cuts also have ravaged the country’s health care system. Even name tags are unaffordable for many hospitals. During a recent hospital visit, Kouzelis had to bring his own.
According to information made available by Monogios, hospital budgets have fallen by 40 percent and about 26,000 public health workers, including 9,100 physicians, have lost their jobs already. The austerity program calls for another cutback in the budget for hospitals and drugs, of more than 34 percent by 2015. These cuts come at a time when more Greeks than ever, unable to afford private health care, are using public hospitals.
Fallout from spending cuts
Spending on mental health has decreased by 45 percent, while the uncertainty and drastic loss of income have also affected psychological well-being. Twenty-five percent more suicides occurred in 2010 than the previous year, and 40 percent more in the first half of 2011 than in the same period a year earlier, according to the Greek Ministry of Health.
HIV infections rose by more than 50 percent in the first half of 2011, according to Apostolos Veizis, head of the medical operational support unit for the Greek chapter of Médecins Sans Frontières (Doctors Without Borders), because of an increase in the number of heroin users and because more people were working as prostitutes to earn money. (Veizis says the crisis has reduced the price of sex in central Athens to as little as €2.) Greece also saw a 15-fold increase in HIV cases among intravenous drug users, due largely to the inability of nongovernmental organizations and the Greek health care system to meet the demand for needle exchange. “You have 10 people now sharing one needle,” Veizis says. “Public health care programs are not in place.”
One reason for this is the government’s recent freeze on NGO funding, which has devastated many local health services. “The Ministry of Health relied on many of these [NGOs] to provide services it was unable to fulfill, such as neighborhood clinics and needle exchange,” Veizis says. “And now the government has stopped funding its own service providers.”
Veizis and his organization are trying to fight malaria, which was eradicated in Greece nearly 40 years ago. Of the 50 cases there as of September, Veizis says, 42 were among migrant workers who came from countries where the disease is endemic. However, a number of recent cases have been locally transmitted, which is a worrying development, he says. “To prevent the disease from becoming endemic here, you need a national program, systematically applied. But this is not happening.”
He blames the government for what he calls “horizontal budget cuts,” or an approach that sees no priorities and recognizes no emergencies, such as malaria or HIV. “They are just concentrating on numbers,” he says. “But this is more than mathematics. This is life or death.”
To try to fill the gaps, the Athens Medical Association and the Orthodox Church have opened polyclinics to provide free medical treatment, Veizis says. In addition, municipal governments have established “social pharmacies” that provide free medicines to people who cannot afford them.
Starting in May, Greeks were forced to pay the full price of drugs, because the state-run National Organization for Health Care Provision (EOPYY), which previously covered at least 75 percent of the cost, is short of money. Consequently, pharmacies are refusing to sell prescription drugs on credit to people insured by EOPYY, claiming that the state already owes them more than €1 billion in filled prescriptions. With pensions and salaries slashed, many gravely ill people cannot afford to buy their medications. In addition, hundreds of drugs are simply unavailable, as suppliers have refused to deliver them to public hospitals because of unpaid bills totaling about €130 million.
No light in this tunnel
The situation has become life-threatening. In the spring, the Panhellenic Pharmaceutical Association said in a statement, “Already we have cancer sufferers going from hospital to hospital to try to find drugs because no one can afford to stock them.” The circumstances are so desperate that relatives of deceased cancer patients have begun offering unused drugs to pharmacies and social pharmacies to help ease the shortages.
“I see no light in this tunnel,” Veizis says.
But the crisis could still get much worse, especially if the troika is not satisfied with the pace of the reforms.
“Their reaction will be that they will stop funding us, and we will be forced to leave the euro,” Monogios says. “And leaving the euro is like sentencing Greece to live a modern version of Dante’s Inferno.”