In some nondescript street in the middle of Athens, two siblings are hard at work. For the past 12 months, they have run their hairdressing enterprise- a business that was once located in a prime location in the city. Their move to the newer, smaller location was purely financial: In the summer of 2015 as it became clear that Greeks faced more austerity measures to foot the bill in order to save their country from economic ruin, they realized that their business was likely to go bust if they continued operating legally.
The siblings did their math and understood that staying put in their fancier location made no sense at all. If they avoided tax, social security contributions, and failed to provide customers with receipts, they would just about make ends meet. And they are far from being the only ones.
Aftermath of the Greek Financial Crisis
- Survivalist techniques
A year on after debt-stricken Greece received €86bn- its third financial rescue from international funding- the foregoing survival techniques have become even more common. For a middle class that has been eviscerated by endless rounds of tax rises and cuts (the price that Greeks have to pay to avert bankruptcy), the draconian conditions which are attached to the latest bailout are cited by Greeks who are now reneging on energy bills, property taxes, and loan repayments. Measures ranging from indirect duties- slapped on fuel, beer, and almost everything you can imagine, the overhaul of the pension system, and a controversial increase in VAT are invariably invoked in their defense.
Also, since the crisis began, close to half a million Greeks have migrated, largely in part to the searing effects of unemployment (currently at 24% and the highest across Europe) and coupled with an economy that has shed close to a third of its total output since 2010. Greek has been assigned over €320bn in bailout loans since 2010- undoubtedly, the largest rescue program in financial history- yet the fear remains that it is locked in an economic death spiral as evidenced by falling exports and consumption of 7.2% and 6.4% respectively in the 2nd quarter of 2016. The depth and duration of this recession is such that the World Bank now equates it to the slump experienced by eastern European countries in the early 1990s.
- Rise of anti-EU sentiment
In October 2015, shortly after the 3rd bailout two months earlier (August 14), 70% of Greeks thought it better for the country to remain in the EU. Fast forward to July 2016 and those backing to remain in the single currency had dropped to 50%. Real recovery can only be achieved if the country’s staggering debt is reduced. Without debt relief, global financial institutions such as the International Monetary Fund (IMF) – which was not involved in the latest rescue- believes that interest payments on the growing pile should account for over 60% of the budget by 2060. In fact, in a candid assessment of its own role in the crisis, the IMF’s internal watchdog recently admitted to numerous mistakes, including the failure to foretell the recessionary impact of austerity measures on an economy curtailed by vested interests and corruption.