The betrayal of the Greek middle class

"Our parents' generation have benefited from the corrupt political system that favoured nepotism and patronage, leaving the future generations to foot the bill"

The scene has become all too familiar. Greeks lining up at soup kitchens for bags of free vegetables – simple sustenance to survive. Anger and despair, in a country where everyone has a story to tell about a relative or friend who has lost their job and now struggles to survive.
Greece seems to have been caught in a vicious spiral of debt, self-defeating austerity measures, rising fascism and growing poverty. Akin to a Greek tragedy, yet the prospect of catharsis seems so far away; at times invisible.
But tragedy in Greek drama implies some kind of complicity; misfortune does not come as a result of malevolent fate or as a conspiracy of an obscure God against the individual. Tragedy requires a measure of freedom to make our own choices. Often those choices determine – to a certain degree – our fate.
Among the many readings of the crisis that seek to regulate public discourse, two seem to prevail.
One – propagated by the Greek mainstream media and the intellectual elite with strong ties within the political system – posits that all Greeks share responsibility. They used to live above their means – overspending, not paying taxes and working no more than a few hours per week.
The second paints a picture of a country fighting against foreign forces and the greedy markets and seeks to identify an external enemy to blame for Greece’s demise and agony.
Oversimplifications aside, the financial crisis in Greece has become a battleground of interests and political ideologies, with the real victims – the ordinary Greeks – caught in the middle.
As Greece enters its sixth year of recession, the numbers divulge some bitter truths: In just two years – from 2009 to 2011 – the number of poor people increased by 200,000, skyrocketing to over 2.3 million people in a nation of ten million, with one third of the population being unemployed. The economic crisis is draining Greece’s middle class financially. Greek households have seen their income slashed by almost 30 per cent since 2009.
And this is the reality, not only for the major urban centres, like Athens and Thessaloniki, but for the smaller urban areas in the countryside and the coastal regions – despite the lower cost of living and the income that tourism and agriculture can still generate.
Yorgos Koutsogiannis, 43, doesn’t have time for politics. He is too busy trying to save the family business – a retail shop in one of the oldest streets of Herakleion, the administrative capital of the island of Crete and the fourth largest city in Greece.
Signs of Greece’s decline are visible in Herakleion. Empty stores with shuttered windows and people searching the trash bins are not a rare sight any more, in this city of almost 200,000 people.
Koutsogiannis took over the family shop from his late father in 2005, but now struggles to keep the business running.
“Sales started to drop gradually from the second half of 2009, but the real problems began in 2010. Then we had an approximate 90 per cent drop in sales. I cannot afford to pay contributions and liabilities to my insurance fund any longer. So I just don’t pay. My monthly expenses, including rent, utility bills and insurance payment are more than 1,300 euros per month. In a good month, I am lucky if I earn 500 euros.”
Data from the Pan-Hellenic Federation of Organisations of Social Policy indicate that non payments of contributions incurred losses to the insurance funds of 6.5 billion euros. Of the 774,000 insured people at the Freelancer Insurance Organisation of self-employed professionals – including owners of small- and medium-sized businesses like Koutsogiannis – some 400,000 failed to pay their contributions and liabilities in 2012. The politics of poverty – brought about by salary slashes, massive layoffs and a rising tax burden – have left irreparable damages in the country’s social fabric.
Koutsogiannis’ coping strategy was to move back to his parents’ house and live with his elderly mother – together with his wife and their three children, aged eight, five and two.
“Living with my mother at the age of 43 makes me feel incompetent,” he says. “I feel like my life has slipped through my hands. We cut down all expenses, buying milk twice a week when it’s on sale, but I am unable to buy such a simple thing as an ice cream for my kids”.
When the question comes to who has to be held accountable for the situation, Koutsogiannis does not think twice. “The incompetent Greek politicians, of course, but mainly Europe,” he says. “We need to decide if we want to be part of this Europe that is causing us such pain. We need to clean up the Greek political scene. Start from scratch with people who care about Greece, not with those who brought us here.”
Marianna Foustagiannaki opened her small accounting company together with a partner in 2010. Her company offers financial advice to professionals and small- and medium-sized companies in Herakleion that, like that of Koutsogiannis, struggle to survive the crisis.
“In my work I deal with many cases of small- and medium-sized enterprises that are forced to shut down because they can no longer pay utility bills and their contributions to insurance funds,” says the 30-year-old mother. “Fear plays a major part here: people are more afraid of what is coming than of what they actually experience. As there is no prospect of exiting the crisis in the near future, most professionals prefer to close their business, rather than wait for the situation to deteriorate. More than one third of small businesses in our city were forced to shut down.”
As Foustagiannaki put it bluntly, the real victims of this crisis are the young people, who – over-protected by their parents – were not prepared for what was coming. “Our parents’ generation have benefited from the corrupt political system that favoured nepotism and patronage, leaving the future generations to foot the bill. We need to break the patterns of corruption and change the bent political system that has been ruling the country over the past decade.”
Change the “bent system” and “start from scratch” is something you hear often in Greece today. But real change in Greek society cannot be effected without a clear understanding of what has happened and why.

Social consolidation and clientelism
Greece is in the epicentre of a broader crisis of global capitalism, together with other indebted, peripheral eurozone countries that experience their own respective crises. But media tend to promulgate their own partial storyline on the Greek case, focusing only on corruption, malfeasance and the country’s bloated public sector. Indeed, Greece has a dysfunctional public sector which reflects the way Greek ruling parties have been conducting politics over the past 40 years: handing government jobs to their supporters, regardless of their qualifications.
The reasons for the country’s woes are not to be found in the deep past: the Ottoman inheritance and its supposed impact on Greek attitude about the state have little to do with this – unless we want to engage in an elitist historical debate. Instead, we should focus on the way the Greek middle class – which now pays the heavy price of the crisis – was shaped as an integral part of the economic growth model that prevailed in Greece after the mid-1970s.
The milestone in Greece’s recent history is 1974, when the seven-year rule of the military junta ended and the country enjoyed political stability for the first time. However, any attempt to understand the socio-economic development of Greece and its impact on its middle class has to be placed into the social-historical context of the 1970s. Those were the times when the local political elites needed to consolidate their electoral basis. They soon realised that, in a country long traumatised from political tensions and just coming out of a military junta, social legitimacy through strong popular support was the key to obtain power.
It was this specific political context of the mid-1970s that set the stage for clientelism and populism to become entrenched.
The first elected government of Konstantinos Karamanlis in 1974 undertook a number of nationalisations in the banking sector, transport and shipyards. As a result of his economic policies, a large state-run sector was created. The clientelistic trend of Karamanlis was expanded by Andreas Papandreou, who took office in 1981 on the back of pledges to bring radical social reform to the country.
“The international economic context of the 1970s, characterized by high inflation and fiscal stagnation, the breakdown of the Bretton-Woods system in 1973, the two oil crises (1973, 1979), the integration to the European Communities and the de-industrialisation of the 1980s, set the economic framework in which Greece had to deal with the consequences of the 1970s crisis and its own domestic shortfalls,” says Eustathios Tsotsoros, Professor of Economic Development and Social Transformation at Panteion University in Athens. “The economic elites of the country fuelled economic inefficiencies, to the detriment of a competitive economy and to their own personal benefit. They profited from the clientelistic nature of the state to create ties with the politicians and exchange their support with government contracts.”
In an increasingly globalised world, the Greek political elites did not do much to achieve competitiveness, boost investments, and establish fair taxation. Instead, they chose the populist path that ensured their power. While handing fat government contracts and cheap credits to their friendly businesses in exchange for their support, they encouraged low-level corruption among their electorate and created dependencies.
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In its best part, the Greek upper middle class did not derive its wealth from profitable production. “The Greek middle class has been shaped by the politicians that hampered competition and created inefficiencies with the support of the economic elite that was handed over government contracts and state permits”, Tsotsoros continues. “The very same economic elites that own the media and the banking sector of the country.”
According to professor Tsotsoros, that system required strong bureaucratic support to be functional. This created a pool of willing executives, consultants, and academics that were given prestigious positions on the grounds of political loyalty, rather than qualifications.
“We went through a period of fake prosperity, reinforced by the stock exchange scandal of the late 1990s. The state became a mechanism for spending money. At the same time, it privileged specific working groups-the so-called closed professions such as notaries, pharmacists, motorists- resulting in huge mediation costs and excluding young professionals from entering them”.
When Greece adopted the Euro in 2001, public and private debt-loan exploded. The borrowing increased by an average 10, 2 per cent of GDP, compared to an average of 4,1 per cent of GDP per year, in the 1990s. The euro brought the illusion of prosperity in Greece but underneath the strong GDP rates, the country continued the same inefficient economic policies that existed since the 1970s. Economists explain that the structured power imbalance of the Euro led to a trade deficit in the periphery of the eurozone and to a trade surplus in the core. Greece could only continue the growth with more borrowing.
However, during the 2000’s Greece’s growth was seen positively by researchers and economists. TIMES in a 2007 editorial praised the Greek economy. It was only when the crisis emerged in the late 2000’s that criticism over the Greeks “lavish life-style” began.
Collective responsibility and collective punishment
Stefania M., who does not want to be identified with her last name, is a head teacher in a state pre-school in central Athens. A single mother of a 15-year-old son, she has seen her living standards dropping abruptly. Her salary was slashed by 20 per cent, falling to 900 from 1,200 Euros. Following the same path as many other Greeks, she had to leave her apartment and move back in with her parents, in a working-class neighborhood of Athens. The 40-year-old woman says that those unpredicted changes have had a very negative impact on her family.
“This crisis has drained us all, not only financially, but also emotionally. This is certainly not an exclusively Greek problem, but a European crisis. But I believe that there is a lot to blame on Greeks as well. We sustained a system of nepotism and corruption with our vote and our tolerance. What we experience today is mainly a moral crisis. We had abolished our values as a society, we had no feeling of social responsibility, we did not care about anything but ourselves. What makes me furious today is that I was not part of this. I had no debts, no loans; I never had a luxury lifestyle, never evaded taxes or sought political favors. But today I pay a huge price for the mistakes committed by others. People like me are the collateral damage of this crisis, but we will never get our lives back”.
The current crisis has left her with a feeling of anger and injustice.
“I am a teacher, I love my work and I know I am doing it well. But public education in Greece has been consistently degraded in recent years. All this talk of merit, assessment and evaluation is just an excuse to demolish public education and suspend teachers.”
International creditors demand from Greece to suspend 25,000 public-sector workers as part of its rescue plan. The names of 2,122 public high-school teachers who will be suspended on reduced pay, to be fired or transferred within the next eight months were published on a government website last month. In August, the ministry of Education announced that it is going to close or merge 118 primary schools and preschools, together with 28 secondary schools, as part of more austerity cuts.
In the context of the current crisis, the demonization of specific parts of the population -e.g. the public employees- fits well with the idea of collective responsibility, generated by former Deputy PM Theodoros Pangalos in 2011, when he claimed that all Greeks “ate a piece of the pie” and are thus responsible for Greece’s unsustainable debt. Collective responsibility implies collective punishment, but it excludes those who set up the conditions for the crisis to emerge: politicians, media barons, the business elite, pampered public-sector trade unionists and a twisted system that many Greeks were excluded from.
In recent years, there have been recurring systemic scandals in the Greek political stage. One of them was the decade-long Siemens bribery scandal, lasting from the late 1990s to 2009. Executives of the German Siemens paid millions of Euros in bribes to government officials, to win state contracts in sectors ranging from telecommunications to transportation. A Greek parliamentary committee has determined that inflated contract prices cost the country more than two billion Euros during the 1990s. However, the case was settled with a compensation of 270 million Euros to the Greek government, out of which 100 million were to be paid in the form of investments.
The most recent scandal involves the Lagarde List, a list of some 2,000 Greek citizens with Swiss bank accounts. The list was given to the Greek government in 2010 by the then French Finance Minister Christine Lagarde, as a way to help uncover tax fraud. But for more than two years, the list was not made known to the public. Although many politicians seem to have been involved in concealing the list, a parliamentary committee in charge of the investigation decided to prosecute only the former Finance Minister, Giorgos Papakonstantinou. This is not surprising, as corruption in Greece is institutional: the Greek constitution grants broader immunity to government members that cannot be prosecuted or arrested without the approval of the Parliament.
However Greek politicians do not seem to be affected by the public outcry over the reoccurring political scandals. Last March, Government Spokesperson Simos Kedikoglou hired his much younger girlfriend to work at his political office. When, a few months later, the case was revealed at the press, the young woman was forced to resign.
Funny enough, Simos Kedikoglou -a former state TV journalist- was the man who announced the government’s radical measure to shut the national broadcaster ERT and explained it as a necessary step to fight corruption, mismanagement and over-hiring.
In the midst of the devastating austerity measures, the same faction of politicians that represent the system which is partly responsible for many of the country’s woes, is the one who negotiates the country’s reforms with international creditors.
Changing attitudes
Back to Herakleion, where 32-year-old Petros Panagiotidis, a former teacher of mathematics, stands in front of his small business, an alternative comic bookshop and internet café.
He had to rely on his own means, as the government promises of supporting young entrepreneurs never materialized. A small loan from his parents enabled him to start his business in 2009, while Greece was heading headlong into the crisis.
Three years later and statistics still do not look good: every day almost 1,000 people lose their jobs and data from the national Confederation of Greek Commerce indicate that from 2008 to 2011 some 100,000 small- and medium-sized enterprises had to shut down. Any prospect of growth seems too far and bureaucracy is the nightmare of every young and ambitious entrepreneur.
“It may seem like a strange time to be setting up a business in Greece, but even in times of crisis opportunities do exist” he says. “You have to think in a different way, be innovative, and abandon your comfort zone.”
The young man could have chosen a different path. “It all depends on what your expectations are”, he says. “My parents wanted me to work in a bank- a job that I could have easily gotten through a family contact. But this is not what I wanted. Instead, I chose to take risks and create my own future. Back then, this was a very awkward thing to do. If you had capital, then you would probably buy a new car. Everyone’s dream was to get a fancy car and work in the public sector. But this is not the case anymore. That kind of thinking is beginning to change in Greece”.
“Our parents left us a legacy of nepotism, state patronage and clientelism. This is the old conservative façade of Greece that does not wish to see any changes, because there is much at stake. This mentality has polluted the Greek society, it has infiltrated the Universities through the student branches of political parties; university politics did nothing but offer a pool of candidates willing to serve the political system, in exchange for a career in politics. Politics in Greece are shaped by two families that have been ruling the country for the past 40 years”.
Like many young people in Greece today, Panagiotidis believes that the crisis is a European problem and not something that Greece inflicted on itself, despite the chronic structural problems of the Greek economy.
“All that talk of leaving the euro zone if we do not comply with austerity measures, does not scare people any more. Europe already has enough problems; this crisis is a global crisis, not a Greek one. Growth under the present circumstances is not possible. We need to renegotiate a new social contract, a new agreement, if we want to see the end of the black hole we got ourselves in some day”.
In Greece, beyond the questions of who and why, lies the hard reality of ordinary citizens that feel their lives are in a standstill and face a bleak future. As the economic crisis is worsening, there are no easy answers any more. The individual suffering caused by mistaken bailout policies, can easily be overlooked by economists, policy makers and politicians.
But there is an irrefutable truth that cannot be overlooked: Greece’s politicians and lawmakers who continue to live off the Greek state, to act in impunity and to hire relatives and friends in prestigious public administration positions or give away government contracts to their friendly businesses, position now themselves as reformers and negotiate Greece’s bail out policies.