Just eight years ago, when Athens hosted the Olympic Games, the capital celebrated with an orgy of stadiums, hotels and other infrastructure purchased by what seemed, at the time, to be the fruits of a long economic boom. Today the Helliniko Olympic complex in Athens stands as a monument to this hubris, a decaying white elephant which costs £65 million a year just to maintain. Nearby is one of a handful of new clinics set up to cope with the effects of Greece’s extreme poverty.
Dr Giorgos Vihas, a volunteer cardiologist at the clinic, sometimes cannot believe the problems he’s treating: men and women sick from eating out of bins; five-month-old babies underweight because the parents can’t afford milk. The doctor blames a ‘systematic destruction of the health system’ after the government signed an austerity deal with European Union authorities. He also offers a political diagnosis. ‘The EU medication is worsening the situation. The medical prescription of the bailout leads to a certain death.’ Why certain death? Because, in times gone by, Greece would have defaulted on its loans — as it has done quite often — and its currency would have hit the floor, making its exporters more competitive. But with the euro, the only option is an ‘internal devaluation’. This phrase, a fairly new one, is a euphemism for genuinely savage cuts to public spending, higher taxes and collapsing living standards.
Thanos Karagiannis, one of Dr Vihas’s patients, is a victim of ‘internal devaluation’. Three years ago he was a successful businessman. Now he stays with his 80-year-old mother and lives off her pension. ‘I’m here today simply because I’m very poor and I cannot buy my medicines. There is no future.’ Mr Karagiannis is one of an army of new voters for Syriza, the radical left coalition. They complain that Germany wants to reduce Greece to Bulgarian levels of poverty.
But the Germans themselves have a slightly different take on this Greek tragedy. The most senior architects of the eurozone in Germany feel that the pain is an inevitable consequence of a burst bubble. During the first eight years of the euro, the real cost of employing Greeks surged by 40 per cent — without Greeks working harder or producing more. German workers, on the other hand, saw their productivity rise and their wages fall. This tale of two workforces — of ‘unit labour costs’, to use the cold economic phrase — is as important to the euro debate as the deficit and debt figures.
Whereas the Greeks are outraged by the scale of the cuts in salaries and government budgets, the Germans point in indignation to the staggering increases: state spending in Greece soared by 89 per cent over the past decade, rising almost five times faster than in Germany. So what Greeks call sado-austerity is seen by their European masters as a painful return to a reality from which the Germans never really departed.
In theory, Greece very much needs what a Eurocrat might call ‘labour cost realignment’, but to those affected, the idea means destitution. ‘It upsets me that they believe we get high wages. Our wages are very low,’ says Alexis Athanasios, a factory worker. ‘We can’t even afford to support our families.’ Haris Manolis, a 38-year-old technician, resents Germany for wanting ‘to come here and open factories with cheap labour’.
Of course, there is one way for Haris and Alexis to regain competitiveness in the long term — and that’s what’s making the Euro-masters frantic with worry. Because the obvious answer for Greece, in the long term, is to follow Britain’s example and devalue. But for that, they’d need the drachma.
Sterling has broken the fall for Britain. Its value has tumbled by about 20 per cent, making our workers (and their goods) a fifth cheaper to overseas buyers and softening the impact of the recession on jobs. If the drachma still existed, or were brought back, it would be likely to lose half or more of its value. Greek workers would become cheaper to Germans, without having to accept such a sharp pay cut.
Yes, of course it’ll hurt, but it’s easy to see why, to those affected, to Dr Vihas and his patients, the drachma is an increasingly attractive option. The alternative, two years of ‘internal devaluation’, has deepened and lengthened the Greek recession. Unemployment is at a record of 22 per cent and a scandalous 54 per cent for the young.
And there are many signs that Greece has had quite enough of ‘internal devaluation’. They did not reject the euro as such in last week’s elections. But they did reject the rules that go with being a hobbled economy and a member of the club.
‘Achtung Frau Merkel! The Greek people want to live free and they don’t want to be again under a new occupation by Germany,’ Manolis Glezos tells me in his house in Athens. He is one of modern Greece’s greatest heroes. As a teenager during the Nazi occupation of Athens in 1941, he climbed the Acropolis to rip down the Swastika that flew over the Parthenon. ‘Frau Merkel’s attitude — it is the same as was Hitler’s during the occupation. The measures taken are not the same, of course. But the attitude’s the same. Hitler wanted to put the Greek people to submission, to get them to their knees, to extinguish them, by starvation and executions. Frau Merkel wants to subjugate the Greeks financially, wants to subjugate us politically, but just as we didn’t accept and overthrew all Hitler’s plans, in the same way we’ll overturn Frau Merkel’s plans.’
Mr Glezos is 90 years old now, still a Greek MP and a patriarch of Syriza, which performed spectacularly in elections on 6 May and is likely to do even better in new elections next month. Syriza’s success and the fiery anti-bailout rhetoric of its 38-year-old leader Alexis Tsipras have shaken Greek politics and the entire European Union. In coalition negotiations, Mr Tsipras made aggressive use of his second-place mandate, refusing to yield to the demands of europolitik. He even wrote to the heads of the European Commission and the European Central Bank to complain about the ‘barbaric’ austerity plan.
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I asked Mr Glezos if Greece was on the verge of a peaceful revolution. ‘Of course. It started already on 6 May and the river doesn’t run backwards. My country started saving itself when the Greek people chose a new way for themselves and the rest of the world.’ Syriza claims it wants to keep Greece in the euro, but also says it cannot abide German sado-austerity. That is to say, it is calling the Germans’ bluff. Either they will relent on the cuts programme — enacted under the direct supervision of eurozone officials — or they risk losing a eurozone member. And if one eurozone member goes, there is no telling who will follow.
A Greek exit used to be unthinkable. Now it’s being openly discussed and even has its own portmanteau word, ‘Grexit’, used on the trading floors and the diplomatic chambers. Threatening a ‘Grexit’ is Syriza’s most powerful bargaining chip. A top official told me at Syriza HQ that Greece’s mainstream parties had been too scared to refer to this directly in negotiations, knowing how easily Greece can infect the Italian and Spanish banking systems. Syriza’s optimistic scenario is that François Hollande, just elected French president on an anti-austerity ticket, will come riding to the rescue, with Merkel’s German opponents.
To make such a threat involves pushing the EU, the European markets and the banking system beyond any brinkmanship ever previously imagined. It risks what US Treasury Secre tary Timothy Geithner has referred to as ‘the threat of cascading default, bank runs, and catastrophic risk’. But after speaking to Syriza’s officials, I’m not sure it shares a deep emotional commitment to the euro. Syriza is willing to risk Greece’s euro membership.
Strikingly, German politicians and leading members of the ECB have popped up over the past week to say that a Grexit would be ‘manageable’, and will ‘do more harm to Greeks than the eurozone’. This is Eurospeak for: ‘Go ahead, Syriza, make my day.’ President Hollande and Chancellor Merkel indicated to Greek voters that next month’s election would be seen as a referendum on Greece’s commitment to the eurozone’s rules.
But the more Greece’s hard-left parties are attacked from abroad — and by the discredited mainstream parties in Athens — the more popular they become. In other European capitals, officials believe that Syriza’s analysis is correct. A Greek exit would lead to uncontrolled contagion, and leave Chancellor Merkel with little option but to move immediately towards sharing eurozone debts with a eurobond. Syriza are open about their plan to play chicken with Greece’s euro membership. If they are miscalculating about how patient Germany feels, as I suspect they are, Greece will be out of the euro rather quickly. And Greek people are already reconciling themselves to the return of the drachma. After all, as one steel factory worker, Haris Manolis, put it: ‘We survived 5,000 years with the drachma but in ten years in the euro we have problems, like we’re going to die.’
One sure sign that the drachma might make a comeback is that deposits are draining from Greece’s bank accounts in a slow-motion electronic run. Those with money don’t want to wake and find their euro savings converted into a devalued currency. Last year alone, £300 million of Greek money was poured into the London houses according to the estate agents Knight Frank. Another firm, Savills, says Greek inquiries for properties over £1.5 million surged by 40 per cent last month. The cash exodus is accelerating — on Wednesday the Greek president revealed that Greeks withdrew an astonishing €700 million (£560 million) from the country’s banks in the week ending on Monday.
As one Athenian politico put it to me: these election results are ‘the consequence of anger’ and a type of revolution. ‘I think we need another election just to check that we Greeks meant it,’ she says. If the result is the same, or Syriza come top, then this hard-left party has a mandate to play poker with the integrity of the eurozone. It is not a game that Greece seems likely to win.