Greece’s road to economic recovery will be long and hard; public unrest rises

Greece is a country where the shelf life of the prime minister and other political leaders is measured in months, rather than years, where the work ethic of the Greeks has been questioned and where tax cheating is viewed as a right of citizenship. Thus, skepticism abounds over the ability of that ancient land to come to grips with modern-day economic realities.

Although the Greek parliament has adopted austerity measures that will continue – and even exacerbate – the pain and suffering that the people have experienced for the last several years, there’s no guarantee of recovery. That’s because the systemic problems that brought about the collapse of the Greek economy are so deeply rooted, it will take years to address.

Indeed, strict limits on cash withdrawals from the banks that reopened Monday after a three-week shutdown and higher taxes on everything from coffee to diapers point to a bleak outlook.

But, such draconian measures were demanded by European creditors in return for a short-term loan to pay more than $6 billion euros ($6.5 billion) owed to the International Monetary Fund and the European Central Bank. Nonpayment would have derailed Greece’s latest bailout request.

Cuts in pensions

But the pain doesn’t end with the tax increases and the limits on cash withdrawals from the banks. Pensions are being cut, a move that has triggered widespread dissent and rioting. Indeed, the package of economic reforms, described by many Greeks as a modern-day financial coup launched by Greece’s eurozone partners, was harshly criticized by the head of the left-wing Syriza party, Alexis Tsipras, who rode his nationalistic message to victory.

However, Prime Minister Tsipras, faced with the very real possibility of his country being tossed out of the euro- zone, was forced to yield to pressure from the 18 other countries that use the euro as their currency. While Tsipras was between a rock and a hard place, many of his political allies have accused him of breaking his campaign promise of standing up to the bullies in Europe led by Germany.

Here’s how the Guardian newspaper of Britain described the situation in Athens as parliament debated the austerity measures:

“A draconian austerity bill designed to pave the way for a new bailout of Greece has been passed in the Athens parliament against the backdrop of deep splits in the ruling Syriza party and the most-serious violence on the city’s streets for months. Tear gas filled the air outside the parliament as the debate took place with riot police clashing with anarchists, and demonstrations against the bailout deal were joined by members of Syriza’s own base. Greece’s prime minister and Syriza’s leader, Alexis Tsipras, has been under pressure from other eurozone states to ensure that the raft of tax rises and spending cuts was passed.”

The anger is understandable, given that the sales tax has increased from 13 percent to 23 percent and is imposed on basic goods, such as cooking oil, and basic services, including taxi rides, eating out in restaurants and ferry transport to Greek islands.

But from the perspective of other eurozone members, such bitter medicine is the only hope to cure Greece’s ailing economy. Since 2010, after the country was locked out of the international money markets, bailout loans totaling 240 billion euros were approved. In return for the cash, successive governments have had to enact harsh austerity measures to try to get public finances in shape.

Debt burden rising

And while the annual deficit has been reduced dramatically, the country’s debt burden has risen to around 180 percent of Geece’s annual GDP. Meanwhile, the country’s economy has contracted by about 25 percent.

And so the question: Is there reason to believe that the latest recovery proposals will succeed? The answer, unfortunately, lies within the realm of politics. If Prime Minister Tsipras isn’t able to calm the troubled political waters, he will be toppled, and the country will be thrown into disarray.

He would do well to ask the members of the eurozone to appoint a commission of experts who would analyze every aspect of Greece’s economy, especially the widespread tax cheating, and make recommendations. Such a panel would give the prime minister the political cover he so desperately needs.