Greece’s struggles with the debt, migration and pandemic crises.
The coronavirus pandemic struck just as Greece was about to overcome its decade-long debt crisis. However, the country handled the pandemic successfully, which has led people to believe that they can also conquer the deep economic crisis caused by the virus.
For eight years, the polling agency Metron Analysis has asked Greeks the same question every month: “Do you think Greece is moving in the right, or the wrong direction?” In all but two cases, the majority of Greeks felt it was wrong. The only times when a larger proportion of people were optimistic about their situation were in February 2015 and the autumn of 2019.
The pollster was surprised with the results in spring 2020, at the peak of the coronavirus epidemic. Greeks have never been as hopeful and certain about their future as they are now, 85.7% believing the country is doing well.
For the first time ever, all age groups, regardless of income level, social position or place of residence, are of the same opinion: Greece is moving in the right direction. According to the recent survey, Greeks’ trust in their national institutions, such as the government, president, local government and even the mass media, has clearly grown. At the time of the survey, Greeks had spent 50 days in quarantine due to the coronavirus.
The family and the army continue to be the strongest and most trusted Greek institutions. The most recent survey saw several new arrivals, such as science, technology degrees and experts, which 85% of Greeks said they trust. Although they consider themselves a religious nation, this time only 55% of those surveyed replied that they rely on the church.
The only institution for which support has continued to fall since 2018 is the European Union. Only 27.3% professed to trusting the EU; two years ago, the figure was 42.1%.
A Strong Government Disciplined the Nation
The coronavirus crisis has changed Greek positions, attitudes and even behaviour.
People have been used to seeing the Greek government as inefficient and hapless, and Greeks as not caring about the law—in other words, undisciplined. The right-wing government of prime minister Kyriakos Mitsotakis nevertheless showed some backbone in dealing with the Covid-19 crisis, by acting quickly and effectively in the early stage of the pandemic. Mass events such as carnivals were banned as early as late February, before anyone in Greece had died from the virus. Schools and universities were closed on 10 March, and cafés, restaurants and tourist attractions a few days after that. Non-essential travel was banned from 23 March.
The Greek population proved to be more disciplined than their reputation suggested and were surprisingly diligent in following the government’s regulations. For this reason, the pandemic in Greece was brought under control faster and with fewer casualties than in several other European countries. By the end of May, confirmed cases numbered a mere 3,000, with fewer than 200 deaths. Greeks have been especially baffled by the actions of Sweden—the land of their dreams—in handling the coronavirus situation. Sweden and Greece are similar in terms of population, but Sweden already has over 35,000 confirmed cases and about 4,200 deaths caused by Covid-19. Sweden has previously been a model for Greece in many ways.
Professor Sotiris Tsiodras, spokesperson for the Ministry of Health and an expert in infectious diseases, became the face of Greece’s good management of the crisis. He appeared on television every day until the end of May to give the people a clear overview of the situation.
The success of Greece, and especially Tsiodras, has been noticed elsewhere too. For example, the German daily Frankfurter Allgemeine Zeitung has praised Tsiodras as “the doctor for all Greeks”, whose calm presence and expertise persuaded the population of the need for the quarantine and protective measures.
The US think-tank New England Complex Systems Institute also ranked Greece as one of the world’s top countries in dealing with the pandemic.
The Debt Crisis Reduced the Economy by a Quarter
Greece has a history that stretches back millennia, and it has taught the people how to survive and restart their lives. One of those new beginnings was underway just before the start of the coronavirus crisis. Greece was about to find its feet again after a decade-long debt crisis, and the economy was growing by several per cent a year.
The destructive effects of the debt crisis can be seen everywhere. Almost a quarter of Greece’s economy has been swept away, and the country has the biggest debt in the eurozone. Unemployment is still high, around 17–18%. Real estate has lost 40% of its value. Some 400,000 Greeks, mainly the young and educated, have left Greece in search of a better future abroad. Healthcare had collapsed in practice, and the education system had been hit. One person in three in Greece lived on or below the poverty line.
However, people remained hopeful. The cafés and restaurants in central Athens were packed, and several small businesses reopened after years of inactivity. Sales of new cars increased. Real estate prices had risen by 10% since the beginning of the year, and in some parts of Athens had already reached pre-crisis levels. Winter sales got people moving again, for the first time in a long time.
In the autumn of 2018, Greece had been freed of the eight-year-long loan programme, and the country finally had control of itself again, although international creditors still kept a close eye on Greece’s actions. In July 2019 the country elected a new government led by Kyriakos Mitsotakis, who promised to build a new Greece and put wind in its sails.
Expulsion from the Eurozone Hanging by a Thread
Mitsotakis’ centre-right New Democracy (Néa Demokratia) party defeated the left-wing Syriza in the summer 2019 elections. Alexis Tsipras, the leader of Syriza, had been prime minister since 2015, but he lacked the silver bullet to defeat the debt crisis. In place of Tsipras, the Greeks gave their votes to Mitsotakis, a member of a powerful dynasty in Greek politics; his father had led New Democracy in the past.
New Democracy is one of Greece’s two old powerful parties alongside the left-wing Pasok; they have been switching leading positions for decades. Both attracted support by expanding the public sector and financing expenditure with borrowing. When Greece was accepted into the eurozone in 2001, the value of the loan decreased, and weak handling of the economy finally went out of control. Greece fell into a debt crisis in 2009. By the summer of 2015, the country was on the verge of being expelled from the eurozone.
Two Greek journalists, Viktoria Dendrinou and Eleni Varvitsioti, describe in their book The Last Bluff: How Greece came face-to-face with financial catastrophe and the secret plan for its euro exit how the German chancellor, Angela Merkel, had already risen from the negotiating table, saying: “This is it. Greece is leaving the eurozone.”
The book goes on to say how Donald Tusk, president of the European Council at the time, had gone to the door to prevent Merkel from leaving by asking: “Do you really want the eurozone to collapse over a few billion euros?” Merkel returned to the negotiating table.
Greece got to keep the euro and the eurozone did not fall apart, but the price to be paid was steep. The money used to save Greece and the eurozone has gone down in history as being the world’s largest bailout so far—almost 300 billion euros. The subsidies were double the size of those given to Europe by the US as part of the Marshall Plan after World War II.
A total of three different support packages for Greece were put together, the last of which ran out in August 2018. In return, Greece agreed to tighten its belt in almost all sectors. Taxes were raised. Fuel prices doubled. Pensions and wages were cut. Almost one public-sector job in three has disappeared in the last 10 years.
Greece got to keep about 15% of the bailout money. The majority of the finance was used to save mainly German and French banks that had given loans on terms that were too generous; this was something ordinary Greeks found unfair.
The Migration Crisis in the Shadow of Coronavirus
Kyriakos Mitsotakis had only been prime minister for half a year before facing his first serious challenge. In February 2020, Turkey essentially renounced its migration agreement with the EU and allowed asylum seekers to the border at the river Evros, across which people tried to access Greece.
Greece used draconian methods to deter the refugees, using water cannon and tear-gas and finally building a fence along the border. In this, Greece was assisted by Frontex, the European Border and Coast Guard Agency.
The refugee wave is seen as being organised by Turkey and it was predicted that it would happen sooner or later. Turkey and the EU entered into an agreement on migration in 2016, under which Turkey has taken care of the refugees and in return received billions of euros in EU subsidies. Turkey has criticised the EU for being slow to help and has used the possibility of opening its borders to the refugees as pressure. Some 3.6 million people have fled to Turkey to escape the war in Syria.
The escalation in the migration crisis could not have come at a worse time for Greece. The refugee camps on five islands in the Aegean Sea were already over their limits, as more than 40,000 asylum seekers had been there since the beginning of the year. Greece tried to relieve the pressure on the camps by moving the asylum seekers to the mainland, but the local authorities there were against the move. On the islands, tensions had occasionally escalated to conflict between local inhabitants and people in the camps. Human rights organisations described the conditions in the camps as “inhuman”. There was a shortage of everything, including space, which is why the camps had expanded into local olive groves.
The Greek government’s plans to build new, closed camps to replace existing open ones were halted due to the islanders’ protests. Greece has been desperate to get other EU member states to share some of the burden, but as of May 2020 only Luxembourg and Germany had accepted refugees from Greek camps, mainly children. Other countries sympathetic to Greece’s pleas have been Finland, France, Belgium, Portugal, Ireland and, of the Baltic states, Lithuania.
The coronavirus crisis calmed the situation on the Greek-Turkish border, but it is unlikely that the migration crisis is over. Greece increased surveillance of its border with Turkey in late May, fearing a repeat of earlier events.
Turkey and Greece have been enemies since ancient times and have long fought over their borders in the Aegean Sea. Under a 1923 peace treaty, most of the islands in the disputed area were given to Greece. It acquired additional territory, including some formerly Italian-owned islands such as Kos and Rhodes, after World War II.
In greatest contention have been the small islets of Imia or Kadark, but the two countries also have different interpretations of their airspace borders. Ankara believes Greek airspace ends in the same place as its territorial waters; Athens believes it begins a mere 20 kilometres from the Turkish coast and islands.
Tourism Keeps the Economy Afloat
Greece is once again facing formidable issues since the Covid-19 crisis also struck the strongest part of Greece’s economy—the tourism sector.
Over 30 million tourists visit Greece every year. Tourism accounts for over 20% of Greece’s GDP, one of the highest proportions in the EU. One person in five in Greece works in the tourism sector and it is also responsible for bringing the most foreign exchange into the country. Were it not for tourism, Greece would not have been able to overcome the debt crisis without total collapse.
It is no wonder, then, that Greece is doing everything in its power to salvage at least part of the current tourist season. The country aims to be one of the first to restore flights and intends to extend the season long into the autumn. However, many hotel owners still doubt whether those few clients are reason enough to open. The progression of coronavirus is hard to predict and the situation can quickly change.
“Tourism is a good product, but its quality and diversity should still be improved,” said Nikolas Vettas, an economics professor in Athens in January 2020. Vettas heads the Foundation for Economic & Industrial Research (IOBE). He believes Greece’s one-sided economic structure is a serious issue, as well as its heavy dependence on the domestic market. “We should invest in education and the development of new, export-worthy innovations,” he says. “In this respect, we are one of the weakest countries in the EU.”
Vettas believes that educated émigrés Greeks are a resource that should be convinced to return. Prime minister Mitsotakis has set a goal of “rebraining Greece”. Returners who are active in the field of science and research are promised subsidised wages for two years. High taxes pose a problem. Tax on annual income over 45,000 euros, and certain social charges and pension costs, can take up to 70%.
Hope Amidst the Crisis
The Mitsotakis government has emerged successful from its fight against the Covid-19 pandemic, but a new, deep crisis looms ahead for Greece. The European Commission has estimated that the pandemic will hit the Greek economy the hardest. The budding economic growth could turn into a 10% or even 18% decline.
In addition to the coronavirus, Mitsotakis is struggling with structural issues, which previous governments did not dare to deal with. For example, tax evasion, corruption and bribery are still commonplace. Other problems include bureaucracy and weakness of the legal system. Greece has its fair share of powerful stakeholders, including trade unions and large corporations that direct politicians and influence the activities of the legal system. Trade unions have managed to use strikes to prevent reform and privatisation of large state-owned companies, and local companies have restricted market access to their competition by putting pressure on politicians.
The Greek banking system is also in need of innovation. The country’s four largest banks are the least profitable in the eurozone, due to their being full of bad non-performing loans dating back to the economic crisis.
The social security system could use some freshening up since, if current spending continues, there will not be enough money left for the future. In times of need, Greeks are given a helping hand by their families and small communities, since Greece does not have a social security system similar to that in the Nordic states. Neighbours also helped each other out during the Covid-19 pandemic.
However, the success of their fight against the virus has raised Greeks’ sense of self-worth and created an unprecedented sense of unity. The results published by Metron Analysis show that Greeks have decided to overcome this crisis, too. Some 70% of respondents believe that life will once again “somehow” return to normal by the end of September.
This article was published in ICDS Diplomaatia magazine.