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Greece's Great Depression

Tens of thousands came out this week to show their opposition to another round of austerity measures.
Last modified: 27 Sep 2012 13:06
[Reuters]

The summer is over, and the protests have resumed in Athens.

Tens of thousands came out this week to show their opposition to yet another round of austerity measures and cuts in social spending.

Don't be fooled by the dramatic TV footage of clashes in Syntagma Square; this, by the standards of recent Greek marches, was a relatively trouble-free day in Athens, and the vast majority came on the march with peaceful intentions.

It's my first time in Greece since late June, and I can sense some changes in the political atmosphere.

The coalition government, led by Antonis Samaras, is getting a more sympathetic hearing in European capitals than its predecessors.

There seems to be a new determination among European leaders to keep Greece in the eurozone, come what may.

Crucially, German Chancellor Angela Merkel now seems convinced that letting Greece go could set off an unpredictable chain of events on the financial markets, and is therefore too risky.

Mr Samaras' argument, that he needs more time to implement austerity measures, has the support of the French, and may win the day. Ironically, the street protests may even help him, by reinforcing the fear amongst European partners that Greece is close to social collapse.

The Greek government is a coalition, and it's under enormous pressure because of the economic crisis.

Here Greek analyst Nick Malkoutzis argues that it may not hold together under the strain of trying to impose more tax-rises and cuts on social spending.

Meanwhile, the Greek economy continues to contract at an alarming rate. Since the recession began, the economy has shrunk by almost 25 per cent.

Unemployment is also at around 25 per cent, although it's much higher for young people. No wonder Greeks talk about a "depression" rather than a "recession".

In central Athens, a third of small shops have closed. All the evidence suggests that the cuts imposed by the Troika (the IMF, the European Central Bank and the European Commission) have contributed to this dramatic situation. And now a new round of cuts is on the way.

But the Troika can't take all the blame. If successive Greek governments had made a greater effort to improve tax collection and reform sclerotic parts of the public sector, state finances would now be in better condition, and Greece would not be under renewed pressure to cut spending.

When Greece was given a second bailout earlier this year, it hoped to reduce its overall debt to 120 per cent of GDP by the year 2020.

Many economists now say this is impossible, and that if Greece is to ever recover, it will need yet more debt forgiveness. All this is very depressing.

And, unfortunately, the political situation is also alarming. The most recent opinion polls show the neo-Nazi Chrysi Avgi (Golden Dawn) party in third place in the polls, ahead of the now discredited Socialist PASOK.

Chrysi Avgi is a violent, racist movement. In desperation, Greeks are looking for extreme solutions.

There is a widespread contempt for authority. During Wednesday's march, I was struck by the fury many people around me had for the Greek police.

They shouted "traitors", and much worse, and applauded sarcastically as the officers marched by.

These people were not the hooded youths who had come spoiling for a fight, but rather, ordinary citizens who had come on the march because they see no light at the end of the tunnel.

If the economic crisis has taught them anything, it is that those in charge cannot be trusted.

Follow Barnaby Phillips on Twitter: @BarnabyPhillips