How Greeks were driven back to the land

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While politicians decide the fate of the eurozone's most stricken economy, the people are being forced to turn back the clock to make ends meet. Patrick Cockburn reports from Naxos

"People are coming back to farms around here that they abandoned years ago so they can grow potatoes, cabbages and vegetables to help them survive the crisis," says Petros Citouzouris, as he pruned his vines high in the mountains of Naxos, the largest island in the Cyclades. The financial catastrophe in Greece is engulfing the most isolated parts of the country.

Pointing to newly cultivated terraces close to a long derelict leper colony at Sifones, Mr Citouzouris says that since the crisis began "unemployed builders, miners and pensioners have started returning to family farms they inherited a generation ago, but never worked". He reckons that 10 out of 20 nearby farms belong to the new arrivals. "They don't see any light at the end of the tunnel," he says. "They won't be able to grow enough to live off farming alone, but it will help them get by." He says he is happy that he himself never left the land during Greece's boom years.

Economic disaster affects every part of Naxos, creating a mood that varies between half-hidden anxiety, open despair and a general dread that, however bad things are today, they will be a great deal worse tomorrow. The island remains extraordinarily beautiful, filled with ancient Greek remains and Venetian towers, its whitewashed villages and well-watered terraces clinging to the sides of mountains that soar above deep green valleys. Olive trees and vineyards flourish in the fertile soil that for 5,000 years has attracted settlers.

Tourists still came this year, much to the relief of the owners of hotels and tavernas, but the rest of the economy is shrivelling by the week as Naxiots prepare for the worst. Katarina Sideri, who runs vocational training courses in the mountain village of Chalki, says: "People here think that their children will be worse off than they are." She has 48 places in her training course and has received 200 applicants, many of them highly trained people speaking two foreign languages, but who have not been able to find a job.

Contrary to the self-serving north European myth about Greeks fecklessly wallowing in comfort at the expense of foreign banks and EU loans, what is most striking about the 18,500 people living on Naxos is how hard they work. Many have always had more than one job, none of them very well-paying.

Construction workers have traditionally also been farmers, owning sheep, goats, olive trees and vines. The extra money often goes on paying for tuition for their children so they can go to university and get better jobs than their parents.

These expectations are now collapsing. Naxos is full of highly qualified but unemployed young people who cannot find a job of any description. "Young people beg for work," says Manoulis Koutelieris, a builder who still employs 10 people. "Last night somebody called me to ask for a job and was crying over the phone." He says that the official unemployment rate for the island is 20 per cent but he believes the real figure is higher, at about 35 per cent.

Ms Sideri says the impact of the crisis is gradual but inexorable.As the tourists depart, nobody is spending money and shops and tavernas are depressingly empty.

Ten years ago Ioanna Verikokou opened a successful business catering for tourists wanting to live the life of a Greek villager. "We had people from all over the world," she sighs, as she recalls the good times, but in the last couple of years bookings have dried up.

As she was speaking, her husband Manoulis came into the room with a churn of milk from a goat he had been milking. With a weary, defeated air he says: "I've worked for 22 years at a cement plant, but I have not been paid since February. When we do get an order nobody pays the company I work for, so they can't pay me."

The hopes of the aspirant middle class may be dissolving, but others are in worse trouble. Cuts in government spending hit those who previously could only barely make ends meet. In a cramped house in the old town of Naxos, Irene Polykretis explains that she and her fisherman husband Panagiotis have always been poor. "When I was growing up we could not afford an aspirin," she says. Thanks to her dowry, which was a small fishing boat, Panagiotis had made just enough for their family to survive because he also had a job sweeping up around the harbour.

But recently a series of disasters has hit the family. The boat was damaged by the wave from a speed boat and Panagiotis cannot afford repairs. His son was injured in the same accident and could not work. Then the government decided it had been overpaying Irene's child benefit and ceased payments until the end of the year. Panagiotis is filled with bitterness. "Nobody offers to help," he says. "To them we are like rubbish."

The number of Naxiots whose lives have been shattered by the financial crisis is still limited, but there is a pervasive sense of dread about the future. The deputy mayor of Naxos, Dmitris Lianos, is in charge of promoting tourism and is optimistic about the high number of tourists coming to the island, though they spend less money than they used to. He says that Naxos may be better off than the rest of Greece but "every day we expect to hear worse news from Athens".

Such bad news has not been slow in coming. Salaries of state employees and pensioners are being cut.

Most Naxiots own their own houses and they are waiting with dread to see how much they have to pay under the new house tax. "The government really has struck gold there," says one householder gloomily. The new tax is to be collected through electricity bills with the implied threat that non-payment means electricity supply will be cut off, though doubts remain about whether or not this will be feasible.

Who do Naxiots blame? Mr Lianos blames the banks for giving cheap loans on easy terms to everybody, saying: "The banks helped the Greek to go crazy. They were offering loans to celebrate Christmas and for honeymoons. We were living in a fake, fantasy world." For the moment the banks are generally not pressing for repayment, but people are fearful about what will happen when they do.

Cheap unsecured credit pumped out by casino capitalism has been a common feature in economic crises from Athens to Lisbon to Dublin and beyond. In suffering its disastrous consequences, Greeks do not differ much from anybody else, but they are at one with foreigners in denouncing their government system as uniquely incompetent, bureaucratic and corrupt. Marolis Margaritis, the mayor of Naxos municipality, who tries not to assume the worst about the future, simply says that "the state is dysfunctional". He is despairing at the way Athens is giving municipalities more responsibility for education and, in future, health, without providing more money. He says: "We have school buses and 62 schools to maintain but we haven't received an extra cent. Without more funds it is almost impossible for the town council to function."

Overall in Naxos there is a sense of less and less money circulating through the body of society. Construction is the only industry to have collapsed, but everything else feels fragile. Much business is done through dubious IOUs that are not cashed and might not be honoured if they were. Manoulis Koutelieris, the contractor, says: "I have €30,000 in cheques that have bounced. What can I do? You can't take everybody to court."

Complaints of Byzantine bureaucracy are everywhere. Yannis Karpontinis, a marble quarry owner, describes ruefully over a glass of raki how he failed over two years to open a quarry that belonged to his family, but, because they had previously rented it out, needed a whole new set of permits. In the face of the crisis he is trying with some success to make himself self-sufficient, making his own bread, olive oil, wine and even soap. Sitting beside him is his friend, Michael Diskalakis, an electrical engineer, who complains that "if you want to get a permit to open a little kiosk to sell newspapers it will take a very long time to get it".

Both Mr Karpontinis and Mr Diskalakis see Greece careering towards an economic and social collapse that cannot be averted. "For the moment the middle class will pay more taxes because they are frightened of state bankruptcy and the loss of their bank deposits," says Mr Diskalakis. "But the moment they feel that the bankruptcy will happen anyway, they will stop paying up and take an axe to the government."

Why the Greek debt crisis refuses to go away

Q: So why is Greece in so much economic trouble?

A: The country has two main problems. The first is excessive sovereign debt levels. The previous government was monstrously profligate. It borrowed excessively from European banks and also falsified the national accounts to conceal the country's level of indebtedness. The result is that Greece now has a debt pile of €360bn (£314bn), more than 170 per cent of annual GDP.

The second problem is excessive wage levels. After Greece entered the single currency in 2001, salaries ballooned, while productivity remained flat. That means that Greek firms are uncompetitive with companies in much of the rest of Europe.

Q: But Greece is being helped by the international community, isn't it?

A: Greece was bailed out in May 2010 by fellow eurozone governments and the International Monetary Fund when the European bond markets finally woke up to the country's appalling public finances and abruptly stopped their lending.

In return for €110bn in emergency loans, these international rescuers are forcing Greece to get its public finances back into order. They have demanded massive public spending cuts and tax rises from the government of Prime Minister George Papandreou which, so far, have been delivered, despite widespread public opposition. The problem is that these austerity measures are crushing economic activity in Greece, pushing it into a depression.



Q: Can Greece make it through this crisis?

A: Not with a debt burden of 170 per cent of GDP. Even with a growing economy, the interest payments on that debt would be unbearable. That is why eurozone finance ministers are working on a plan to reduce this burden by at least 50 per cent.

But even if that debt relief is delivered, the future is still grim. When economies suffer the sort of crash that Athens has been through, their currencies normally plummet in value. This automatically makes a country's imports much more expensive and their exports much more competitive. This combination of austerity and stimulus helps them adjust. But this adjustment mechanism is lacking for Greece because it is a member of the single currency.

Ben Chu, Economics Editor

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