Bring €, don’t panic
You’re probably not thinking about much while you anticipate your sexy sunny Greek holiday. But here’s what is really going on behind the caffe freddo on the island of your dreams. Or that cold beer in Glyfada on the “Athenian Riviera”. The protracted Greek debt crisis is coming to a head, and unlike the froth neatly contained in your cold drink, it looks messy. But don’t panic.
- Take € with you because the banks are closed while capital control measures are set to be implemented.
- Expect long lines at ATMs which are stocked. Others could remain empty until next week.
- Play it safe. Dust off that old fashioned bum bag, fanny pack or whatever you call it, and use it.
- Be aware that thieves will know people are carrying more cash than usual.
- Credit cards are good, but not used everywhere.
- Public transport will be free in Athens for a week to ease difficulties created by the closure of the banks and a rush on petrol stations, Transport Minister Christos Spirtzis has announced. Locals and tourists will be able to ride buses, metro trains and trams for free in the country’s capital and surrounding suburbs, reports Ekathemerini. The offer is set to last until July 7, when in principle banks will re-open.
- Demonstrations pro and anti EU will continue in the centre of Athens, so avoid areas around Parliament and Syntagma Square. Rallies are contained, and several streets away, life goes on as usual.
- The Greek government is clearly nervous that tourists are nervous and issued this media release from its London office. Note the reassuring phrase “a smooth and fun stay”.
- As mentioned, banks are closed until July 7, at least.
- Greek debit cards/cash cards will have a withdrawal limit at ATMs for the rest of the week. Bank branches distributing part pensions will open on Wednesday.
- Cash/debit cards from foreign banks are unaffected.
- Some businesses relying on solely or mostly cash transactions may not operate temporarily. Islands will be affected quickly as credit cards are used less there.
- Greek debit cards may not work as the banks aren’t open to process transactions.
- Although transactions within the country can still be done online, no payments are permitted to recipients abroad in order to stop capital being transferred overseas. That means that Greek businesses can’t pay for any imported goods in the coming week. Or, as Constantine Michalos, president of the Union of Greek Chambers of Commerce and Industry, puts it: “We are stuffed.” – The Telegraph
- Stock markets everywhere are tanking, but they also start to correct after initial shocks. Rating agency Fitch cut Greece’s rating by one notch from CCC to CC (high default risk).
Greek debt crisis
in a nutshell:
For decades Greece’s bloated, antiquated bureaucracy ran on nepotism, sucking up massive amounts of money to keep it running. The increasing number of civil servants had cushy jobs, cushy pay conditions and generous early pensions. Tax collection was haphazard and open to corruption. Avoidance was a national sport. Bribes were commonplace.
Despite Greece being a largely cash economy, cash flow became a problem. Greece turned to the EU for loans, which were freely given in huge amounts. They were halcyon days, of a sort. On a basic level, people earning modest wages got elastic credit for the first time in their lives. They didn’t understand the impact these loans would have. There was no history of credit so no lessons learned. Then they started to spend most of those wages paying interest on the loans but not actually paying back the money itself.
Truth about the
Meanwhile, Greece’s debt soared, but no one was worried initially because the government continued to report a national deficit of 3.4 per cent of the GDP.
It was a lie. A longstanding deceit hidden in a complex system helped along by Wall Street powerhouse Goldman Sachs. The Global Financial Crisis exposed the truth. Creative accounting at its most audacious.
In late 2009 the deficit was revealed to be 12.4 per cent. Boom! Greece had ignored the rules of responsible spending and failed to observe common sense in responsible borrowing. The result was catastrophic debt that the country was unable to repay. Due to worldwide tightened lending policies (post-GFC) it became impossible for Greece to repay its debt without taking out further loans.
Austerity and taxes
and more damn taxes
The troika of the ECB, European commission and the IMF stepped up with an emergency loan package in 2010, as long as Greece tightened its fiscal belt. Successive austerity measures put in place to recoup the money owing have crippled the country. The Greek debt crisis hit everyone – except for the rich. Shops closed, people couldn’t afford to even buy coffee at a cafe, heat homes or pay mortgages. Tax reforms began to clamp down on evaders, but it was a herculean task. The unemployment rate soared to 27 per cent. The young and the old were hardest hit in the shrinking job market. Arbitrary new taxes to raise revenue, dreamed up in the Ministry of Nightmares, caused widespread despair. The suicide rate increased.
Riots in the centre of Athens and widespread strikes kept tourists away. Another bailout became necessary. But bailout money was largely going to private creditors.
Signs of recovery have been taking place amid the gloom. Tourists are back, in greater numbers than ever before. Cafes, bars and tavernas are busy again, shops have reopened. Cushy pensions are gone, but barely there pensions have been cut as well. Hospitals receive inadequate funding. Some folk are living so far below the poverty line they’re homeless, or dumpster diving for food and can’t afford basic medicines.
Should Greece stay
or should it go?
Greece’s membership in the eurozone looks fragile. Negotiations with creditors have broken down. Greece’s radical left wing Syriza Party government (elected only in Jan) has disputed even more austerity measures in return for another bailout, saying Greeks are humiliated and exhausted. Not wrong there. Greece was supposed to make a June 5 debt payment and didn’t. Greece faces a debt default on its expected €1.5bn payment to its creditors, within 48 hours. The ECB says Greek banks may be solvent for five days, should the default go ahead and there’s no injection of funds.
June 30 is Deadline Day.
Greece will hold a referendum on Sunday, to clarify the wish of the people. Some say the government is passing the buck and it’s too late for this. Will Greeks vote “Yes” in the plebiscite on whether it should have accepted the terms of a bailout deal from the eurozone? If they do, Prime Minister Alexis Tsipras will resign. However, Tsipras is urging Greeks to vote “No”, claiming latest bailout terms were simply too harsh for the country to bear. Huge rallies in front of Parliament are saying “YES!” and “NO!”
If he wins his “No”, EU heavyweights believe Tsipras has burnt the bridge and will say adios to the euro. If he loses to “Yes”, the eurozone would look at doing a new deal but not with him.
Update June 30: Greece has become the first developed country to default on an IMF loan. It’s almost bankrupt after five years of €240 bn in European bailouts. This is uncharted territory.
Yes, that was a big nutshell, but no one said it was simple!
Meanwhile, Greece looks as beautiful as ever.