Page last updated at 10:27 GMT, Wednesday, 20 January 2010

The dark side of Greece's economic ills

By Paul Moss
BBC News, Athens

Woman walks past a shop window advertising sales in Athens, Greece, 15 January 2010
Greece's finances are in a critical state, with its total debt exceeding the country's annual GDP

He was a rather gentle-looking man - kind enough to meet me late in the evening, and he even helped me find my hotel.

But the world described by the architect I spoke to in the centre of Athens, was shabby, dishonest, and shameless.

His company helps design government buildings. And being chosen to do this work requires, he said, a certain bending of the rules.

"To win the contract for a public building, you do a favour for the public officer," he said.

"You can give a job to someone that is related to them, or you may help him construct his own property. This is the way things work here in Greece."

That is a commonly expressed sentiment here, that this is "just how things are done".

But what is new is a sense that there may be terrible consequences to Greece's rampant corruption.

Tax dodging

Greece's finances are in a critical state. Its total debt now exceeds the country's annual GDP. Its credit rating is slipping. And now the European Union is keeping it under a close watch.

Corruption and our economic difficulties - they are bound together
Constantinos Bacouris
Transparency International

As a member of the euro, Greece is supposed to stay within strict deficit boundaries. At the last count, the country was more than four times over the limit.

"Corruption and our economic difficulties - they are bound together," said Constantinos Bacouris, chairman of the Greek branch of Transparency International.

His organisation campaigns all over the world against government and business malpractice.

But in the case of Greece, Mr Bacouris argued that corruption, and also widespread tax evasion, have been crucial in dragging the country into its present mess.

"We estimate that 30% of GDP is not declared," he said. "We would be in a much healthier situation if our citizens declared all their income, we wouldn't have this huge economic problem."


The Greek government is all too aware of this issue. Indeed, tackling tax evasion and corruption are central pillars of its latest economic plan.

George Papaconstantinou, Greece's finance minister
Papaconstantinou is attempting to impose austerity measures

The problem is that this administration is only the latest that have made similar promises, but to little effect.

"I understand the cynicism," said Greek Finance Minister Giorgos Papaconstantinou.

But he insisted that this time things will be different.

"People will be watching us - the international markets, our European allies, to see if we are serious about tackling the problems," he said.

The difficulty Mr Papaconstantinou has is that he is not only trying to change widespread habits. He is also attempting to impose swingeing austerity measures in order to cut the country's deficit as quickly as possible.

'Squeeze the fat cats'

There will be reductions in the allowances awarded to public sector workers, and a change to the way pensions are funded. And the government is also planning to cut back public spending.

These would be hard to get past the Greek public at the best of times. But the fact that they are being introduced by the socialist Pasok Party, has provoked widespread fury.

It will be a big struggle within the Greek government trying to regulate things, but also a struggle within the Greek psyche
Miltos Frangopolis
Novelist and commentator

"We will go the streets all of us, with very big demonstrations," warned George Panagatis, a left-wing activist in the north of Athens. "We will demand from the government to stop these measures."

I suggest to his friend Ilias Janopolis that the measures might be necessary for Greece to avoid bankruptcy. But he has an alternative.

"The government should tax the rich instead," he insisted. He quoted approvingly a British slogan: "Squeeze the fat-cats!"

Mr Janopolis and Mr Panagatis are not alone.

Next month, public sector workers are planning to down tools for a day in protest at the cutbacks.

People walking past a closed shop in Athens
Greece has seen debt levels rise sharply

Private sector unions are considering whether to join in, and turn the event into a full-scale general strike.

For the novelist and commentator Miltos Frangopolis, this is just one sign of the obstacles faced by any government, when it tries to alter a way of life that is deeply-rooted in history.

"Greece developed very quickly, and it makes it much easier for fast development when you don't have many rules," he said.

"And this became a habit. It will be a big struggle within the Greek government trying to regulate things, but also a struggle within the Greek psyche. At this time, it's hard to be optimistic."

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