News from the front

Lost archives, originally uploaded by Teacher Dude's BBQ.

This week has proven to be an unending litany of disappointments and bad news as far as the Greek economy is concerned. Wherever you look in the media the news keeps on getting worse and worse. Unemployment figures for August show that the official rate has reached 12.2% and is set to rise still further as thousands of small business close down every month.

Also the long awaited government deficit figures proved to be just as bad as everyone predicted with the official figure set to go from 13 to 15.5% of GNP in 2009. Eurostat will make public the final figures on Monday, just one day after the polls close.

This came at the same time as newspapers reported that Athens attempts to raise tax revenues were in deep trouble, plagued with technical problems and organisational confusion. Instead of the predicted 700 million euro addition to state coffers, just 40 million has so far been found. With the economy shrinking at an unprecedented rate (down 4.5 % in the third quarter) businesses and professionals are refusing or resisting payment of what is widely considered to be an arbitary and unjust attempt by the government to grab whatever revenue it can.

Higher than expected debt levels combined with a falling tax revenues mean that finance minister Giorgos Papakonstantinos will have to cut spending even further if Greece is to meet the goals set down by the IMF, EU and European Central Bank. While prime minister, Giorgos Papandreou has repeatedly said that there will be no new austerity measures, few even in his own party are convinced that he will be able to convince Greece's lenders to renegotiate terms, no matter how unpopular the measures have become.

Beyond the numbers the reality of the situation is that ordinary Greeks are being hammered by the effects of the changes which have hit the vulnerable hardest and left the richest relatively untouched. People are being called upon to make impossible choices; Can we pay the electricity bill AND the motgage this month? What comes first; car insurance or new clothes for the kids?

Fear of what the future is almost palable with worry and anxiety drawn on people's faces as they queue in the supermarket or ride the bus. In cafes the talk is more often than not about money, or rather the lack of it. In Greece with its weak social safety net the family still serves as a buffer against the worst, yet even that institution is struggling to seal with the worst economic figures since the 50's. If the situation does not change in the near future even family may not be enough to get people through.

Perhaps the worst aspect of the pesent situation is the awful feeling that there seems to be no end to present financial woes. There is the fear that the future offers nothing and that all that lies ahead is more poverty and stagnation. This view is particularly stronge amongst the young who are suffereing the worst in terms of unemployment with 1 in 3 of 15-24 year olds unemployed and only a small minority employed in jobs that match their qualifications.

In 2008 the whole country went up in flames following the shooting of a 15 year old by police in central Athens, the violence and duration of the unrest were fuelled in large part by the anger and frustration felt by young Greeks over the nation's dire economic situation and disgust at a political system in which corruption, nepotism and patron client relations stiffle development and lavishly reward mediocrity and incompetence.

Since then the situation has grown so bad that 2008 can almost be considered part of a golden agewhen work, even though badly paid and unrewarding was at least available.

The Memorandum of Economic and Financial Policies - Greece

Greeks angry over price hikes in wake of austerity package, originally uploaded by Teacher Dude's BBQ.

"Dear Messrs. Juncker, Rehn and Trichet,

In the attached update to the Memorandum of Economic and Financial Policies (MEFP) and the Memorandum of Understanding on Specific Economic Policy Conditionality of 3 May 2010, we describe the progress and further policy steps towards meeting the objectives of the economic program that is being supported by financial assistance provided by the euro-area Member States in the context of the loan facility agreement.

The policies of the government of Greece remain fully oriented toward securing fiscal sustainability, safeguarding the stability of the financial system, and boosting potential growth and competitiveness.

We have made a vigorous start with our economic program. The fiscal program is progressing well, financial policies are being strengthened, and structural policies are ahead of schedule in key aspects:

The end-June quantitative performance criteria have all been met, led by a strong implementation of the fiscal program. Not unexpectedly, it has proven difficult to fully control expenditures at some entities, and in anticipation of such problems we significantly under-executed budget implementation at the state level, thereby ensuring that targets for the general government were met. Going forward, we are redoubling our efforts to strengthen controls at all levels of government and are determined to continue to over-perform at the state level until such controls become fully effective.

Reflecting the weaknesses in expenditure controls at some entities, the indicative target on the non-accrual of domestic arrears has not been observed as the monitoring system for general government commitments, accounts payable, and arrears is still being developed and implemented. We commit to bringing these arrears down to zero by year-end, so that only a normal level of accounts payable is carried over into 2011.

While the financial system continues to feel the effects of tight liquidity, sentiment indicators are gradually beginning to improve, and policy progress has been made by establishing the Financial Stability Fund to backstop any capital needs that banks might have in the future owing to an expected increase in impaired loans as the

The government has made significant progress in structural reforms with far-reaching pension and labor market reforms being approved ahead of schedule. Parliament has also already adopted important budgetary reform and reforms of local government. Other major reforms that are at an advanced stage aim at liberalizing the trucking industry and restructuring the railroad system, while reforms of the energy sector, protected professions, the licensing and business regulatory framework and preparations for implementation of the services directive are gaining momentum, as foreseen in our program.

On this basis and the completion of the prior action, we request the disbursement of the second instalment of financial assistance by the euro-area Member States in the amount of EUR 6 500 million, in line with the loan facility agreement.

We believe that the policies set forth in the 3 May 2010 Letter of Intent, MEFP and MoU, and the attached updates, are adequate to achieve the objectives under the program. We stand ready to take any corrective actions that may become appropriate for this purpose as circumstances change. We will consult with the European Commission and the ECB, as well as with the IMF, on the adoption of any such actions and in advance of revisions to the policies contained in this letter.

We are copying this letter to Mr. Strauss-Kahn, Managing Director of the IMF."

For the full text of the memorandum click here