2/27/12

Analysis: Source of Greek crisis? A nation in denial Reuters

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Analysis: Source of Greek crisis? A nation in denial

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By Michael Winfrey and Ingrid Melander

ATHENS | Thu Jun 16, 2011 7:13pm EDT

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(Reuters) - European leaders are scrambling to save Greece from a debt default that could cause global economic turmoil, but the Greeks themselves seem in denial.
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In a reaction that is causing frustration and anger abroad, the Greeks seem more inclined to blame others for their troubles than accepting that something is deeply wrong with their country and painful medicine is urgent. "The ordinary people don't understand the seriousness of the situation...not only for Greece, but for the whole world economy," said Jan Randolph, director of Sovereign Risk Analysis at IHS Global Insight. Violent protests against austerity measures demanded in return for an international rescue worth billions of dollars have combined with political infighting and euro zone dithering to severely spook international markets. No single element of society appears to have fully embraced the gravity of the situation, analysts say, and investors fear political wrangling and
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opposition to austerity measures could push the country into a messy

default on its sovereign debt, which totals 340 billion euros ($480.8 billion). Greek PM says While countries like Latvia have taken IMF medicine, suffered quick but

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painful contractions, and are now on paths of recovery, analysts said Greece's case increasingly threatens to resemble Argentina, which defaulted in 2001 and is still shut out of financial markets. Greece's bailout lenders, the European Union and International Monetary Fund, have called for national consensus behind reforms to win a new financing package but in the country itself a great deal of time is spent pointing fingers rather than looking for solutions. Government and opposition paint each other as obstructing a solution, private company workers blame the bloated public sector, civil servants blame tax cheats and most Greeks say corrupt politicians are the main problem.

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2/27/12

Analysis: Source of Greek crisis? A nation in denial Reuters

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"The big problem of Greek society is the tendency to consider somebody else is responsible for everything that goes wrong," said Theodore Couloumbis, of the ELIAMEP think-tank. "It's like someone who suffers from a severe disease and wants to know what caused it rather than taking precautions to cure it." PAINFUL MEASURES

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The government has reduced public sector wages by a fifth, raised the retirement age for wo
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cut pensions by more than 10 percent, and cut temporary public contract jobs. But the underlying budget problems remain. Tax evasion is still rampant -- the labor minister billion euros from 2004 to 2009, their workers virtually immune from being fired. "Ninety-nine percent of the Greeks' problems are of their own making," said Randolph. "If everyone had been paying their taxes, we wouldn't have a budget deficit this high."

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Greeks are upset with austerity and in a poll held last month, 80 percent of respondents said refused to make any further sacrifices to get more EU/IMF aid.

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Workers at banks and state utilities heading for privatization, public sector contractors, and e and liberalization of a highly bureaucratic economy. Those demonstrations turned violent on Wednesday.

doctors have taken to the street of Athens in almost daily protests to oppose deregulation, se

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Analysts say another problem is that Prime Minister George Papandreou's government appe
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have failed to explain to the public how desperate the situation is -- that default will have a m impact not only in Greece but beyond its borders.
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French and German banks have the most exposure to Greek debt. If Greece went under, ma maybe Spain.

pressure would increase on other indebted euro zone countries such as Ireland, Portugal an

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A confusing internal political battle seems to have compounded the problems, with Greek politicians still eyeing a domestic audience rather than thinking of the broader picture.

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That may have played a role on Wednesday, when Papandreou initiated and then broke off

with the conservative opposition on creating a unity government to push through new austeri jitters.

measures. He later announced he would reshuffle his cabinet instead, adding to internationa
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Pundits said there was a small chance Papandreou thought a unity deal was possible, althou the conservatives have for months demanded the renegotiation of Greece's 110 billion euro bailout from the EU and IMF last year. "I can't believe they are doing this with all the money they are being offered," one frustrated
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European Central banker said.

Papandreou may also have wanted to scare wavering deputies into voting for the new five-ye 28 billion euro austerity package that is an IMF and EU condition for continued aid.

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"The real risk to the next package is coming from within Greece itself," J.P. Morgan wrote in a research note.

"The prime minister is losing support within his own party, and there is huge conflict across th political spectrum and the population as a whole." DISAPPOINTMENT IN EUROPE

The confusion roiled markets globally and shocked European Union officials who have appea for Greece's political elite to unite behind the reforms.

Analysts said it looked as if Greece was drifting away from a Latvia-style situation. The Baltic took an EU-IMF bailout in 2008 to avoid bankruptcy.

It imposed spending cuts and tax hikes worth about 15 percent of gross domestic product ov
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2/27/12

Analysis: Source of Greek crisis? A nation in denial Reuters

three years, including wage cuts for teachers and health workers of up to 50 percent.

The measures triggered an 18 percent economic contraction in 2009 but Latvia's economy b growing again last year and it has returned to borrow on international markets.

By comparison, Greece managed to cut its budget deficit to 10.5 percent of GDP last year, fr

15.4 percent in 2009. But it has fallen behind on the targets it has agreed with the EU and th protests. Markets are skeptical that Greece can be saved, not least after Wednesday's violence. Combined with resignations by several deputies from Papandreou's party and persistent differences between euro zone policymakers trying to arrange further aid for Athens, some analysts see the chances of a messy default rising.

a result that led to the cabinet agreeing to the new belt-tightening campaign that sparked the

"The protests are not going to go away and the Greeks can't deliver ... it looks like you're see Control Risks. "I think we're moving inexorably to default." (Editing by Barry Moody and Mark Trevelyan)
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growing divisions between the IMF, EU and ECB," said David Lea, western Europe analyst at

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Comments (21)

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Analysis: Source of Greek crisis? A nation in denial Reuters

DiegoForever wrote:

The Greeks are like a person standing on a ledge and threatening to jump if you don t give them what want. The rest of the Euro zone should let Greece default. The sovereign nations should recapitalize t banks as necessary to cover the losses from bad Greek paper. Loaning Greece money and putting m Greek paper on the balance sheets of German Banks, the ECB, French Banks etceteras makes no s It just makes the problems worse. Greek needs to default, the Greek people evidently have no foresig they will have to learn from experience. When the other PIIGS see what happens to Greece, they will much more amienable to reform.
Jun 16, 2011 9:26pm EDT -- Report as abuse

Hansard wrote:

A bloated dysfunctional civil service, unions that have been given largesse by the government and international banking cartels siphoning off what s left and the unionists and students[if there is a prote you'll find socialist inspired students] are rampaging, demanding their entitlements. Reminds me of a of spoiled kids, kicking and screaming in a store because their mommies won t buy them more usele toys.
Jun 17, 2011 7:07am EDT -- Report as abuse

eleme wrote:

I am a greek myself and seriously, i don t agree that ordinary greeks aren t aware of the gravity of the situation, or are too selfish in the way they are acting. We know better the gravity of the situation, be we are the ones who r facing its consequences, i.e. young well educated people who have *no* job, o middle aged people who, just like you rest of europeans and americans, have taken a bank loan to bu flat and now face a situation where either they are fired= no salary, or see their salary cut to half. So in other words, u cant just generalise and say greeks arent aware of the gravity of the situation, sure are.
Jun 17, 2011 7:26am EDT -- Report as abuse

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