How long can Greece hold out against modern economics?

Riot police line up outside a closed branch of the National Bank of Greece during a 24-hour national strike in February, when Greek workers protested government cutbacks. (Milos Bicanski/Getty images) Riot police line up outside a closed branch of the National Bank of Greece during a 24-hour national strike in February, when Greek workers protested government cutbacks.
By Thanassis Cambanis
August 29, 2010

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PAROIKIA, Greece — Like the throbbing of the cicadas in the cypress trees, an electric pulse of anxiety is scoring this otherwise unremarkable summer on the tourist island haven of Paros. Greek visitors sip their frothy iced coffees; foreign tourists play racquetball at the water’s edge; and the small merchants whose exertions fuel Greece’s middling economy serve ouzo on the rocks with their customary theatrics.

Summer here is sacrosanct, a time when Greeks exercise their inalienable right to lazy lunches of tomato salad and deep-fried smelt. For a month or two, most people decamp to an island or their ancestral village, escaping the enervating responsibilities of everyday life — a ritual enjoyed by everyone from janitors and factory workers to ship owners and government ministers. The nation simply shuts down in July and August.

This year, however, the sense of an impending economic disaster has injected a sour note: You can hear it in the once-crowded cafes, in the warnings about strikes that might disrupt travel, and in the foreboding with which restaurant owners bid farewell to longtime summer patrons by saying, “If we’re here next here!” rather than the traditional kali antamosi, “until we meet again.” In the background, the chatter is all about fear. Stores that peddled stuffed animals and model windmills have closed, along with cafes, minimarts, hotels, and electronics emporiums. The main supermarket in Paroikia, the bustling harbor of Paros island, has declared bankruptcy. Customers pick from wilted produce and the few remaining items on the half-empty shelves.

As Europe lurches forward in a slow-motion continental crisis, Greece is the proverbial canary in the mineshaft. The Greek government, which ran deficits for decades to cover

its bloated public payroll and finance its teetering social security system, ran out of money and no one wanted to lend it more. To prevent a wider crisis, larger European countries chose to rescue Greece with a $145 billion “salvation package” in exchange for Greece’s promise to reform its profligate ways. The government already has begun implementing a daunting list of reforms. It has trimmed pensions and public sector wages, increased taxes and eliminated bonuses. But the most painful moves are still to come, most explosively a huge slashing of the public sector jobs that most Greeks still consider a birthright.

In September, Greeks are supposed to return to work and the national economy is supposed to rumble to life. Nobody, however, knows whether the engine really works in the jalopy that is Greece’s economy. Will Greece begin a slow slide into destitution this fall? Or, more dramatically, will the country explode? Labor unions already have staged a few small but paralyzing strikes this summer, shutting down the ports, cutting off the supply of gasoline for private cars. These actions are but previews of the main event expected in the fall, when vacations are over and the government starts dismantling the gravy train that has funded the Greek way of life these past three decades.

What happens next will resonate far beyond this small country’s borders. Greece is about to learn whether a modern state can withdraw entitlements that people have come to take for granted but which the government no longer can afford. For fiscal hawks, this is a harbinger of what could happen to the American economy when, say, the social security system finally goes bankrupt, or when the government no longer has enough money to fund Medicare. For Greeks, it’s something else as well — a kind of identity crisis for a way of life defined almost as a rebuke to contemporary liberal market economics.

Americans, the saying goes, live to work; Greeks work to live. As a credo, it reflects a Greek belief that a worker on any rung of the class ladder deserves security and pleasure in exchange for hard work. It’s not outsized salaries or short workdays that define the Greek model. First and foremost it’s job security: Until recently Greeks struggled to find jobs, but once employed they never feared losing them. A close second is the principle of egalitarian access to the pleasures of life: going out to eat or listen to music on the weekends, and taking your family on Easter and summer vacations.

From the outside, the Greek sense of entitlement is often misunderstood as a desire for some kind of lazy lifestyle. In actuality, though, most of the government and union workers raising hell in the streets work hours as long as any American blue collar or office worker; many of them, in fact, work two jobs — at a bank or ministry in the morning, driving a taxi in the evening. What Greeks have treasured for decades and are now contemplating losing is the kind of job security that most Americans surrendered in the 1970s. All those wasteful government jobs underwrote a vast reservoir of public confidence, and in large measure blessed Greece with a joie de vivre. Small entrepreneurs don’t feel as stressed when the government countersigns their loans and when they know, if the business fails, they still have a stable job at the state water and sewer authority.

“We are not Americans here!” one of my friends, who works for the public pension system, said when she explained to me that she expected to spend most of the fall protesting to protect the benefits that have allowed her to take three entire years of maternity leave with full pay. I spent some of my 20s working as a journalist in Athens. Almost none of my peers were even looking for jobs — the time for work would come later, so why rush things? While I was living there, the government imposed a 2 a.m. curfew on nightclubs to increase economic productivity, unleashing a wave of civil disobedience that tanked the measure. To this day, and even in the current atmosphere of near-panic, no corporation or government entity even purports to try to accomplish anything in July and August. “You’ll have better luck in September,” an officer told me when I tried to renew my motorbike registration at the Paros central police headquarters. “The coordinator for traffic matters is on vacation.”

Greece is making a valiant effort to preserve humanity in the face of the imperative for economic productivity. Sure, the rich in Greece live in absurd luxury (yachts, swimming pools, multiple Mercedes, and the like), but the working class has perks unfathomable to your average American: six weeks or more of vacation, and enough money to take them in the beach or the mountains; long, fully paid maternity and disability leaves; and free health care.

The ethos of the Greek model is admirable, although for too long it relied on wishful financing. The self-respecting, independent, and self-employed Greek only earns as much as necessary, only pays taxes if forced, and views the imperatives to work longer hours, save more money, and defer gratification as foreign, even Protestant, impositions. In sum, this Greek ethic holds, the rules of modern economics are a trick to further enrich capitalists and stock market speculators: If you call their bluff, nothing of actual value will be destroyed, and you’ll probably have a more pleasant life. This belief animates most Greeks, from the fictional sex worker played by Melina Mercouri in “Never on Sunday,” the film that launched Greece’s tourist industry, to today’s real-life taxi drivers and shop owners whose tiny enterprises dominate (and some economists believe, fundamentally retard) the Greek economy.

All this freedom and dignity come at a high price, and not just in terms of the crippling public debt that underwrites the bloat of government jobs. The Greek economy frustrates most attempts at creativity and innovation, and the famously well-educated Greeks often find little use for their advanced degrees in a static job market anchored with red tape to the ground like Gulliver by the Lilliputians. People love the way of life, but very few, especially among the young, actually find satisfaction in their jobs.

Most professions remain closed by arcane, medieval rules, and bureaucracy stifles virtually any innovation. (For instance, there are only 35,000 truck drivers in a country of 10 million, and no new licenses have been issued since the 1980s.) Older Greeks still benefit from phantom bureaucracies, like the famous train workers union whose members are still paid to monitor level crossings that were replaced decades ago with electronic arms. Meanwhile, middle class strivers in their 20s and 30s, with degrees in architecture, engineering, medicine, accounting, or literature eke out spending money with part-time jobs tutoring high-school students until they can find employment in their field. Patience and hard work can lead to a decent life, but it’s virtually impossible to create a new business or to rise from working to middle class.

In exchange for the European bailout, Greece has promised to cut its debt and deficits, and the only way to keep its promise is by slashing these government jobs. The government also has promised to lift the arcane, almost Soviet, restrictions on the job market (like those trucking licenses). Combined, these two moves alone will revolutionize Greek life. Tens of thousands, at least, will lose their guaranteed government jobs. And hundreds of thousands of more, who enjoy de facto job security because their professions are more or less closed to newcomers, will face competition, along with the lower wages and the attendant insecurity.

In one sense, the Greek plight is a case of just desserts: Try to live beyond your means forever, and one day it’ll catch up with you. The inalienable national right to a long vacation surely does wonders for the psyche; the question is whether this charming institution can survive its contact with modern economics.

Everyone I’ve spoken with this summer sees both terror and potential in Greece’s economic plight, alternately referred to as the “crisis,” the “catastrophe,” or simply “the fall.” That long Greek summer might soon be a relic of the past or a privilege of the rich.

“We’re all afraid of what will happen in September,” said Andreas Adrianopoulos, a former cabinet member who quit Greece’s notorious corrupt political realm and has earned a rare reputation for independent thinking. “There will be riots, street protests, violence. Will the government then have the courage to continue with the needed reforms?”

In Athens, the near future is pregnant with violence. Riot police already are out in force, loitering by the dark blue buses with wire windows known as “cages,” used for the mass arrest of protesters. Public school teachers in their 60s are deferring retirement, terrified that their pensions won’t cover their rent.

Those wrenching reforms, however, have also energized a younger generation of Greeks at the beginning of their working life, who have yet to taste from the public sector cornucopia and who believe they’ll be able to adapt to a more liberal system and, perhaps, know a kind of professional job satisfaction denied their parents.

The faint whiff of opportunity has to do with the stultified nature of Greek economic life. Maybe, just maybe, some Greeks imagine, the reforms underway will free entrepreneurial, educated Greeks not only to earn more money but to break into the creative professions for which they train but which are often off limits to them unless they emigrate. One aeronautical engineer I know — trained in Germany — works in human resources. Another friend couldn’t find work with his degrees in literature and psychology, so he went to medical school.

Greece will try to resolve the current crisis with a minimum of actual strain on the most vulnerable beneficiaries of its welfare state, like the retired workers who suddenly can’t afford the copayments on their prescription medications because their pensions have been cut. In a more interesting test, Greece will try to reform its economy without ending the way of life that sets it apart from the more developed capitalist West.

In Paros, the smallholders and merchants are working 18-hour days, hoping to earn enough to service their loans and survive until next summer. So far, at least 23 shops in the central market street have announced plans to close down; they no longer can afford their leases. Yiannis Mantalovas, who owns and runs the waterfront Hotel Livadia, has cut costs this year by working as its chief waiter. His wife, Xanthi, runs the front desk and keeps the hotel books, often while taking care of their 3-year-old daughter. “We just need enough to make our lease payments,” Yiannis said. “There’s no cushion anymore. No one is loaning money to businesses like ours right now.”

Yiannis and his family rent a modest house and drive a beat-up red car. They have worked nearly a decade to make their hotel profitable, taking their first long vacation, to Thailand, this past winter. They haven’t lived beyond their means, but they could face economic ruin because their government hasn’t been as frugal as they have. “We’ll be fine,” Xanthi told me as I sipped an iced espresso on her terrace. “It’s Greece I’m worried about.”

Thanassis Cambanis is the author of ”A Privilege to Die: Inside Hezbollah’s Legions and Their Endless War Against Israel.” He teaches at Columbia University’s School of International and Public Affairs.

(iStock photo, Globe staff illustration)