Greece: A dream gone wrong (Feature)

By Christine Pirovolakis Apr 20, 2010, 6:06 GMT

Athens - A decade ago Greeks eagerly swapped their drachmas for the euro, with the hope that it would bring an era of strong financial growth.

Today, as eurozone leaders remain on standby with a potential bail-out package, Greeks wonder: 'Why has it gone so horribly wrong?'

Greece's budget deficit is four times the limit set by eurozone rules. Poor governance and uncompetitiveness have caused the country's fiscal situation to deteriorate markedly in comparison to other eurozone members like Germany and France.

At the centre of the crisis are millions of Greeks like Panagiota Rigopoulou. The 40-year-old lost her temporary administrative job at a tax office in Athens and has been unemployed for more than eight months. Her husband's civil service paycheck has already been cut by almost a third, to just over 1,000 euros (1,354 dollars) a month.

Now, Rigopoulou fears her family of three will face even greater hardship under the watchful eye of Greece's EU peers and the International Monetary Fund if the government decides to tap into a recently approved 30-billion-euro emergency loan package.

'If they resort to this aid, this will mean even tougher measures for us - what prospects do any of us have now?,' the 40-year-old asks.

That question haunts millions of other Greeks who have expressed fears of even stricter measures and are angry at what they say has been years of waste and corruption that has driven the country to the brink of bankruptcy.

While the aid package should provide Greece with some temporary relief, its problems are far from over.

The government faces a major hurdle to restructure its finances, reduce its massive debts and restore market confidence damaged by years of overspending and fudging its statistics.

'Greece has been living beyond its means in recent years with the Greek government borrowing heavily and going on something of a spending spree during the past decade,' said Panagiotis Petrakis, director of the Economics Department at the University of Athens.

He said that public spending soared and public sector wages practically doubled over the past decade. He points out that as money flowed out of the government's coffers, tax income was hit due to widespread tax evasion.

'Greece's economy is one of the smallest in Europe and is fundamentally based on tourism, but its weak growth prospects and huge debt could still lead it to default in the future or restructure its debt payments over the next few years.'

Part of the country's problems lie within the bloated public sector, where its more than 1 million civil servants are protected by law from being fired. Some retire with pensions as early as their 40s.

'Any sign of reform in these matters is met with widespread resistance and is therefore eventually scrapped - thus, when the global financial downturn hit, Greece was ill-prepared to cope,' Petrakis said.

Thus, tackling corruption and punishing tax evaders have become some of the highest priorities of the country's newish Socialist government.

But the prospects for these measures are not promising, given that the majority of Greeks see their political parties as Europe's most corrupt.

In two decades of Socialist rule in the 80 and 90s, and under the recent governance of the New Democracy party, the looting of public wealth became an art form, covering up corruption a science.

According to Transparency International, Greece is one of the most corrupt countries in the European Union, apart from Romania and Bulgaria.

Nearly one in five Greeks responding to a national survey said that they or someone in their household had paid a bribe in the past year to a doctor, lawyer or civil servant in order to receive better or faster service.

'Our economic problem and corruption go hand in hand,' said Aris Syngros, manager of the Greek branch of Transparency International, adding that corruption and widespread tax evasion have been crucial in dragging the country into the present situation.

According to officials, nearly 5 million of Greece's 11-million strong population declares an annual income below 12,000 euros.

'The biggest problem is that over time, people have come to understand that corruption is in their blood - that it is normal,' says Syngros.

In a government survey of 200 doctors in the upmarket Athens neighborhood of Kolonaki, half of the doctors declared an income last year of less than 30,000 euros a year while the remainder claimed less than 10,000 euros a year.

'It is not possible for a taxpayer to declare an income of 15,000 euros a year, while at the same time maintaining a large home with swimming pool, a yacht and sending their kids to private school,' said Greek Finance Minister George Papaconstantinou.

A survey earlier this month showed more than three-quarters of Greeks believe the belt-tightening measures announced by the government are unfair because they would hit lower earners the most, leaving the wealthy and well-connected unharmed.

'People will have to make a lot of sacrifices in the short term - and whether we take the aid package or not the path ahead is a tough one for the Greeks,' insists Rigopoulou.