While technocrats haggle, ordinary people feel the pain

Greece: The debt crisis is getting worse, not better, and Greeks are wondering how much more they can take

A new Greek tragedy is being written.

Five years of economic chaos have torn great holes in the social fabric of the country. There has been a surge in the number of children abandoned by their parents. A kindergarten teacher in Athens found a heartbreaking note about one of her four-year-old pupils in the weeks before Christmas. "I will not be coming to pick up Anna today because I cannot afford to look after her," it read. "Please take care of her. Sorry. Her mother."

It is just one snapshot from a nation in pain. More than 878,000 people are unemployed – 18 per cent of the workforce. Athens officials say that the numbers using the city's homeless shelters and soup kitchens is up by 25 per cent since the economic crisis began. Hospitals are reported to be understaffed and starved of supplies. And, as became all too clear when talks with bond-holders stalled yesterday, there is no end in sight to the agony. The International Monetary Fund expects the economy to shrink by a further three per cent in 2012. Others are still more pessimistic. One forecaster has predicted a whopping 7 per cent contraction.

A "Troika" of inspectors – made up of officials from the European Central Bank, the European Commission and the International Monetary Fund – will return next week to check that the government is delivering on its reform commitments, slashing public spending. They will receive updates from the prime minister, Lucas Papademos, and the finance minister, Evangelos Venizelos, and decide whether to release the next slice of funds that Greece needs to redeem €14bn of its bonds in March.

The last visit from the Troika prompted mass demonstrations. Crowds chanted slogans such as "Don't let capitalism kill you" and "Now or never: time to revolt". Greek unions – which are preparing another strike next week – argue that the massive public austerity being demanded of the Greek government by the Troika is driving the economy into the ground, making the situation worse, not better. A growing number of economists outside Greece agree.

But the fate of ordinary Greek citizens also resides in the unsentimental clutches of private sector financiers. Germany, the biggest single contributor to the EU/IMF Greek bailout, began pushing hard last year for something called "private sector involvement" in the bailout. This meant that the holders of Greek bonds would write down the value of their investments. Germany did not like the idea of pumping ever more money into Greece merely so that the country could pay out those funds to private bondholders. In October, a 50 per cent bondholder "haircut" was announced. Eurozone leaders agreed the deal with the Institute of International Finance (IIF), the lobbying group of the global banking industry.

But the IIF only really speaks for the large banks of the continent. A number of small hedge funds have also bought up cheap Greek bonds and are refusing to take a haircut on their investment. So now there is a stand off. The German Chancellor, Angela Merkel, warned at a press conference in Berlin this week that Greece will not receive the next instalment of its bailout funding unless the deal is reached. Charles Dallara, chief executive of the IIF, flew to Athens this week for meetings with Greek ministers in the hope of brokering a deal between the country and its creditors. Yesterday those talks broke down. Some believe Germany will get its way. Others expect the hedge funds that are holding out to be paid off. No one really knows.

Yet even if the deal is ultimately done, many say that Greece needs to be let off more than 50 per cent of its debts. And the number of economists who take the view that Greece can only return to sustained growth if it leaves the eurozone, defaults on its debts and introduces its own devalued currency are growing.

Every new month of economic misery brings the prospect of Greece leaving the euro closer. The great unknown, though, is whether a eurozone exit would mark the beginning of the end of this tragedy for Greece, or a new, darker act.

The Downgrade: What it means for Europe


Credit downgrade is an embarrassment for President Nicolas Sarkozy. But the move was long expected by markets.


Economy still contracting. Social unrest rising. Athens needs to redeem €14bn of debt in March.


Sold €5bn of debt yesterday, but market demand was subdued. Later its credit rating was cut. Mario Monti’s government faces high costs for long term borrowing.


Issued debt this week so popular it had a negative yield – means Germany makes profit by borrowing.


UK debt regarded as a safe haven, like Germany's. British 10-year bond yields have been hitting all-time lows.

Suggested Topics
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

KS1 Teacher

£95 - £150 per day: Randstad Education Birmingham: Key Stage 1 teacher require...

HR Business Partner - Essex - £39,000 plus benefits

£32000 - £39000 per annum + benefits + bonus: Ashdown Group: Generalist HR Man...

Trainee Recruitment Consultant

£18000 - £30000 per annum + uncapped: SThree: Do you feel like your sales role...

Foundation Primary Teacher

£100 - £140 per day: Randstad Education Birmingham: We are looking for Founda...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?