Greek Debt Crisis: Caught Between The 1st and 3rd World
Greek Debt Crisis: Caught Between The 1st and 3rd World
Editor-in-Chief’s Note: This recap of the climate within Greece was written by a long-time ITS member and customer residing right in the middle of the turmoil. I’m thankful to be able to present his perspective here to offer an in-depth look at how these issues appear from the ground.
There’s trouble on the other side of the pond, here in Greece. While I’ll be summarizing the political climate here, I’ll also do my best not to make any accusations on whose fault it is.
To provide a little background, Greece, or Hellada as we call it, is a small country on the south-east coast of the Mediterranean Sea. Our population sits at about 11 million people, our currency is the Euro and we’re part of the European Union, which is a loose federation of countries that share a few laws and even more economic freedom. Interstate movement of people, goods and services
is was the idea.
Since the beginning of time, Greece has been standing at the crossroad of the world, where East meets West. This has resulted in a complex culture that combines elements from many others and has even had some part in shaping the Western world too.
Truth be told, we consider ourselves part of the West. We have banks, malls and normal day jobs. We enjoy pretty much what everyone else does, eating, drinking and having a good time. The movie, My Big Fat Greek Wedding movie was funny to us because it was hugely exaggerated, but I digress.
We also won’t walk away from a fight and have a great sense of patriotic responsibility. All Greek males, Hellenes as we call ourselves, have served in the Army for 9 to 24 months and those that haven’t are frowned upon. We’re hospitable and take pride in showing our foreign guests a good time when they visit us.
All that being said, Greece is plagued by the concept of being caught between a First and Third World country. Our government has a high level of corruption, but you can’t buy yourself out of a traffic ticket as you can in the other Balkan countries. The court system also takes time, but is as just and true as in any other European country. Keep in mind that we’re a very safe country and unjust actions like a murder receive national press with extended coverage and commentary that lasts for days.
Our long standing government corruption has lead to a deteriorating economy that’s been subsidized by financial assistance coming from the European Union, the world financial crisis hit us hard at the end of 2008. As a result, we had to seek assistance from the IMF, World Bank and the EU in exchange for very harsh taxation and austerity measures that drove the population further into poverty.
During this, the country got desperate and the leftist SYRIZA party gained popularity. This year on the 25th of January, with the promise of “saving the country from its harsh creditors,” SYRIZA won the national elections. Ever since, they’ve been in negotiations with our creditors to humanize the terms of the credit agreements in the form of lifting taxation from the poor and depositing it to the rich, or so they were telling us.
Friday Night, 18 Days Ago
The deadline for the extension of the assistance Greece had been getting was very close and there seemed to be an agreement on the table. Suddenly, the negotiations collapsed and the Prime Minister called for a referendum on whether to keep the assistance and the harsh terms that came along with it. Keep in mind that this happened at 01:30 on Friday night (technically Saturday morning) when most people where sleeping.
Something like this can lead to a major credit event and that’s exactly what happened. People rushed to the ATMs to withdraw their money and those that were awake managed to withdraw as much cash as they could. The ATMs soon ran out of cash and “capital controls” were soon enforced, leaving most waking up to ATM withdrawal restrictions.
“Capital controls” in this sense mean that you can’t transfer money abroad and can only withdraw 60 Euros per bank account each day, however there were no provisions for businesses. Come Monday, banks were closed and have been ever since. Credit cards also ceased to function initially, but were later reactivated during the week for national purchases. As an example, we haven’t been able to use PayPal since.
You have to understand that Greece, while a modern country, is very much dependent on cash transactions. We do have credit/debit cards, but most prefer to use cash when they can. It’s a cultural thing I guess, we generally distrust our corrupt government and we love a good conspiracy! The elderly seemed to be the worst off, as many weren’t that well versed with ATMs. Huge lines have been a consistent sight each day, as people line up to withdraw their daily limit of 60 Euros.
In these situations, people treasure cash for two reasons:
- It’s not dependent on telecoms as credit cards are.
- In case of a national default, followed by an exit from the Eurozone to a national currency (Drachma), hard currency in Euros won’t be depreciated and even multiplies its internal value.
Some of us had forecasted this event and made provisions to have cash at hand, but you really don’t want to spend your savings for fear of it not being replenished. Holding out as long as possible with cash transactions, means that you have to utilize your credit cards wherever you can. Of course, you first have to have a credit card and one that’s not close to its credit limit. Checks can’t be deposited in banks that are closed and are completely worthless at this point. Safe deposit boxes, that only exist in banks here, are of course inaccessible. There were some talks recently about opening them with warrants and taxing their contents.
As a side note, we love tourists here, so a special provision was made to allow tourists to use their cards without limits. A citizen of Greece can also exploit this by making a trip to a neighboring country and depositing some money in a bank. You’d then get a debit/credit card issued and you’ve effectively gone around the national withdraw limit, since cards from abroad don’t have the restrictions mentioned. There are some withdraw costs associated, but hey, it’s an emergency situation. Plus, your cash is in another country’s bank and technically safe anyway.
Things changed fast, but civil order has been kept so far. Keep in mind that uncertainty is the key word here, there was no precedent for what occurred. A possible bailout agreement was reached two days ago, but it will only occur if the Greek government passes certain bills in the next 24 hours. Unfortunately, the Greek governing party has been destabilized internally and can only pass the legislation with the consent of the opposition. If they don’t pass the bills, Greece will default and the devastating outcome has yet to be seen.
Crime has gone up, but not considerably. Mostly burglaries are in affluent areas where people think there might be a lot of cash in homes. Of course, this puts people that already had cash stored at home at risk.
Rioting hasn’t occurred yet apart from some very localized incidents in the very center of Athens by anarchist groups. This rioting isn’t uncommon and while triggered by the climate here, it’s not unique to the current situation. Road-rage is an issue though, as people are living through an extremely stressful situation and encounters have been physical.
Financial opportunism is another issue that’s surfaced and affected many businesses. For example, say a business is owed 10,000 Euros. With all that’s happened, many are settling debts in cash for much less than the original amount, often even 50-60% of what’s owed. Many people are taking advantage of this and have effectively multiplied their monetary dynamic. There’s also other “scamming” going on, but it’s beyond the scope of this article. The bottom line is that if you’re caught unaware, people will take advantage of you.
In Greece, we have a public health system and it is what it is. Our ambulance services are public and only work with public hospitals, this means that in an emergency, you’re only taken to a public hospital and they’re running out of supplies. Scheduled operations are being postponed to save on supplies and in some smaller hospitals in the countryside, people have been asked to bring their own medical supplies for minor procedures like stitches for a small cut, etc. You have to understand that for us, this is virtually unheard of. Up until 18 days ago, we were a First World country without these kind of problems.
As you might expect with imported goods, there began to be shortages with certain drugs as people rushed to pharmacies to get them. Ironically enough, they rushed to get these medications out of fear of shortages. This is especially rampant with children’s medications. Because we’re a responsible citizenry, we can buy many drugs over the counter that other people can’t, such as antibiotics. Because money can’t be transferred abroad, machinery and auto parts that aren’t already in stock can’t be ordered. This obviously causes a problem if your car breaks down at an inopportune time and is in need of repair.
There were also some fuel shortages in the first weekend, as gas stations stopped accepting credit cards. However, they were ordered to change that policy for both convenience and the safety of not having a large amount of cash accumulated at one location. Passports are an issue too, as people are flocking to passport issuing Police Stations and causing long lines (4-5 hour wait) and frustration. Everyone is trying to make sure they have passports for their whole family.
Food For Thought
At this stage of the debt crisis, I don’t know what will happen and can only speculate. It seems that a solution was reached with the EU that will not allow the country to go full-default. If that’s the case, banks will open (although we still don’t know when,) but capital controls will be enforced for at least two years! This means that we won’t have full access to our money and be living with all the implications that come along with that.
This is the best case scenario. The worst case scenario is that Greece won’t be able to implement the proposed measures and will default, going back to a local depreciated currency and effectively become a Third World country. Shortages on basic goods will occur, crime will spread and violence will rise.
I see people around me feeling insecure about the future as desperation sets in. They’re waiting in line for hours just to get 60 Euros out of an ATM that might be empty by the time they get there. People are numb and it’s showing everywhere.
If I can recommend something you can take from our situation in Greece, it would be to make provisions so you’re nοt fully dependent on the banking industry’s daily function. However, it’s still important that you don’t lose all connection to them, you need both credit cards and cash. Large sums of cash might be power, but they can also be a security risk if anyone finds out. Get medications to store and update them regularly. Store hygiene products as well and diapers for small children. It’s not just an issue of having the money to purchase these things, it’s an issue of availability.
As far as advice goes for those already dealing with these issues, keep your sprits high. Meet with friends to talk, do something constructive and don’t just stay indoors listening to the news. Go out and have fun, it’s good for morale. You don’t have to spend all of your cash, but a trip to the local park and some ice cream can go a long way. Above all, have a plan, it’s important to think about leadership and I’ll tell you why.
If you have a family, they’ll look to you for guidance. It will make them feel good if you have a solid plan and have explained what to do in case of an emergency. People are sheep and they need a sheep dog. If you own a business, gather your employees up in the communal area or even the parking lot. Give them a short non-political talk, share your worries and reassure them, if that’s something you believe in doing. Knock on your neighbor’s door, let them know you’re there and can help if they need anything. A positive mindset goes a long way, longer than I ever thought it would. True leadership goes even further.
One Last Note
I have been reading (and shopping) at ITS since it started and I’ve wanted to give something back with this article. Don’t let your country become like mine. People that are desperate are easily manipulated, which is a direct threat to freedom. I don’t know what tomorrow will bring, but things seem a bit better today than they were 18 days ago. We still have a long way to go and economic collapse may have been postponed, but the threat isn’t over yet.
However, I know one thing though, we are Hellenes and we are resilient. We hope against all hope and we fight even when fighting seems futile. The odds have been against us in the history books, but we still prevailed. The brave 300 may have also perished, but we overcame during the next battle.
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