by Helena Smith
‘Nobody knows which came first: the economic crisis tearing Greece apart or shisha, the drug now known as the “cocaine of the poor”. What everyone does accept is that shisha is a killer. And at €2 or less a hit, it is one that has come to stalk Greece, the country long on the frontline of Europe‘s financial meltdown.
“As drugs go, it is the worst. It burns your insides, it makes you aggressive and ensures that you go totally mad,” said Maria, a former heroin addict. “But it is cheap and it is easy to get, and it is what everyone is doing.”
The drug crisis, brought to light in a new film by Vice.com, has put Athens’s health authorities, already overwhelmed by draconian cuts, under further strain.
The drug of preference for thousands of homeless Greeks forced on to the streets by poverty and despair, shisha is described by both addicts and officials as a variant of crystal meth whose potential to send users into a state of mindless violence is underpinned by the substances with which the synthetic drug is frequently mixed: battery acid, engine oil and even shampoo.
Worse still, it is not only readily available, but easy to make – tailor-made for a society that despite official prognostications of optimism, and fiscal progress, on the ground, at least, sees little light at the end of the tunnel.’
‘Greece has threatened high school teachers with arrest if they go ahead with a nationwide strike that would disrupt university entrance exams that start this week, the official government gazette said.
It is the third time this year that Prime Minister Antonis Samaras’s government has invoked emergency law to force strikers back to work to try to show foreign lenders who bailed out Greece that the country is sticking to unpopular reforms.’
‘The European Parliament president says measures to revive the European Union’s economy and create new jobs cannot be delayed until Germany’s September elections.
“The European Union has no time to wait until the German elections,” Martin Schulz said on Friday.
Schulz further called on the EU leaders to address youth unemployment, which is especially high in southern Europe, especially in Greece and Spain.’
by Mike Obel
International Business Times
‘Greek youth unemployment in February rose to 64.2 percent, the government’s Elstat statistics agency said Thursday.
The overall jobless rate in the debt-choked euro zone member country climbed to 27 percent from a downwardly revised 26.7 percent in January. That compares with a 24 percent unemployment rate for the monetary union as a whole and Germany’s best-in-class 7.6 percent unemployment rate.
Greece’s 64.2 percent jobless rate covers youths ages 15 to 24.’
by Helena Smith
‘The mayor’s office in Athens is poised for a major stand-off over food handouts in Syntagma square on Thursday after the far-right Golden Dawn party vowed to press ahead with the distribution of Easter treats to “Greeks only” amid mounting European pressure for the group to be outlawed.
Pledging to defy a ban by the capital’s mayor, the extremists said they would go ahead with the handout of traditional Orthodox Easter fare, including lamb and eggs, to Greeks afflicted by draconian austerity.
“It is food that is aimed for the thousands of Greek families blighted by the genocidal policies of the memorandum,” said the party, referring to the loan agreement Athens has signed with international creditors to keep the debt-crippled country afloat.
The neo-fascist organisation said the event was aimed solely at those Greeks who could not afford to enjoy Easter because of budget cuts and record levels of unemployment.’
‘The Greek parliament has passed a bill which will see 15,000 state employees lose their jobs by the end of next year.
The bill passed by 168 votes to 123, and had the support of the three parties making up the ruling coalition.
It is part of continuing moves by the centre-right government to cut costs and ensure more bailout money from international creditors.
But it was vociferously opposed by protesters outside parliament.’
A former Greek defense minister strongly denied felony charges of money laundering against him Monday, the first day of a corruption trial against him and another 18 defendants, including his immediate family.
Akis Tsochadzopoulos, his wife Vicky Stamati, daughter Areti and another five of the suspects have spent the past year in jail awaiting the trial on felony money-laundering charges stemming from allegations of kickbacks in defense contracts.
In March, the 73-year-old Tsochadzopoulos was sentenced to eight years in prison in a separate but related trial after being convicted of filing false income declarations. The case has been a dramatic fall from grace for the former political high-flier who served as defense minister from 1996 to 2001 and development minister between 2001 and 2004. The Socialist PASOK party he belonged to dominated Greek politics for decades but saw its public support hammered over its handling of a severe financial crisis that broke out in late 2009.
At least 28 immigrants shot at Greece strawberry plantation after not being paid for six months ~ RT
Greek police are hunting three strawberry plantation foremen, who are suspected of shooting nearly 30 workers, mostly Bangladeshi, after immigrants demanded wages they had not been paid for six months.
Officials have promised “swift and exemplary” punishment for the three foremen who disappeared after the incident that took place on April, 17 in Nea Manolada, about 260km (160 miles) west of Athens.
So far police arrested the owner of the farm, in the rural south of the country and a local man on suspicion of hiding the three foremen.
The violence allegedly occurred when one of the supervisors opened fire on a crowd of about 200 foreign workers gathered to request their unpaid salaries.
According to one of the immigrants, they were promised wages of 22 euros ($28.70) a day.
by Tyler Durden
“We have reached a point where children are coming to school hungry,” as with an estimated 10% of Greek elementary and middle school students suffering from ‘food insecurity’, the troubled nation has fallen to the level of some African countries. As the NY Times reports, unlike the US, Greek schools do not offer subsidized cafeteria lunches. Exacerbated by the austerity measures including cuts in subsidies for larger families, the cost has become insurmountable for many. With 26% of Greek households on an ‘economically weak diet’, children are starting to steal for food and picking through trash cans as they proclaim, “our dreams are crushed.” What is frightening is the speed at which it is happening, “a year ago it wasn’t like this,” as one family talks of the ‘cabbage-based diet’ which it supplements by foraging for snails in nearby fields. Programs are being started to help from wealthier Greeks, but as one parent said, “unless the EU acts, we’re done for.”
A German man has been arrested at Athens International Airport after allegedly trying to smuggle nearly half a ton of gold and silver out of Greece, according to airport officials.
The suspect was preparing to board a Lufthansa flight for Germany.
The airline uncovered silver tablets in a cargo container and customs officials then found gold and banknotes.
This follows claims by Greece that Germany still owes it war reparations stemming from the Nazi occupation.
Greece’s Skorpios Island, which belonged to legendary Greek tycoon Aristotle Onassis, has reportedly been sold for £100 million (€117 million) by his only heir. The identity of the alleged buyer, a Russian billionaire, has not been revealed.
Farhad Vladi – whose company Vladi Private Islands appraised the territory – told the Daily Mail that while he had not heard of the deal, it was possible the tycoon’s granddaughter had decided to sell the island. “These Russian oligarchs have billions, so it may be that one of them came along and said ‘I will give you 100 million or 200 million euros for it.’ Anything is possible.”
He said that Skorpios Island’s water comes from a nearby mountain also owned by the Onassis family, so that anyone who bought the island would need to also buy the mountain, which he estimated would cost upwards of €100 million.
Vladi describes the island as picturesque and covered with forests, with three villas, a helicopter pad and a wharf.
by Tyler Durden
There was much hope in the feudal states of Europe that the monthly December drop in Greek unemployment – the first in years – was the beginning of the end for local misery. Alas, it appears the Greek statistics office learned a thing or two from the BLS and it was all seasonal adjustments. As reported earlier today, things just got much worse again, with January unemployment surging by 1.5% in one month to a new all time record high 27.2%. More importantly, the number of employed people in Greece, which dropped to a new record low of 3.617,771 compared to 3,888,400 a year ago (and down 11,653 from December), is now nearly as much as the entire inactive population at 3,346,423 and far below the ranks of the unemployed (1,348,694 – an all time high as well) and inactive.
Spread by gender, the unemployment rate for males was 23.9%, while a record 31.4% of eligible women had no job in January.
Finally, youth unemployment once again hit a record high 59.3% in January, even as unemployment among those aged 65-74 has soared from 0.9% in 2008 to 6.9% in 2013.
A wave of corrosive political scandals at a time of economic woe is exacerbating the outrage of European citizens, who are channelling resentment into street protests or at the polls.
Italy, Spain and Greece have all been hit by fraud or graft cases allegedly involving the top brass. France joined the ranks of scandal-hit nations this week after its former budget minister was charged with tax fraud.
“Everything is coming together to reinforce populist theories — the theory that ‘they’re all rotten’,” said Eddy Fougier, a researcher at the Paris-based IRIS think tank, which analyses international issues.
In France, outrage over the budget minister scandal has yet to erupt into popular protests.
But in some countries of southern Europe, which for several years have been hit by austerity measures more severe than in France, fury has coiled into potent blowback.
Cyprus Parliament President Says “No Future” Under Troika, Calls For “Iceland” Solution ~ Zero Hedge
by Tyler Durden
Just last week Yiannakis Omirou, Cypriot House of Representatives President, was calling for the nation to accept it is “time for responsibility” as they progressed towards a final solution; and yet today, as Cyprus’ Famagusta reports, he believes the ‘Troika-imposed’ responsibility will, “turn Cyprus into a colony of the worst possible type.” His ‘Icelandic’ solution is to “leave the Troika and EMS behind,” to ensure “national independence, national sovereignty, moral integrity, and economic independence.” He may have a point; judging from the chart below of the Troika’s poster-child Greece, relative to Iceland, things are not going so well. As Omirou ominously concludes, “if we remain bound by the Troika and the memorandum Cyprus’ destiny is already foretold and there will be no future.”
There is no other alternative but to free Cyprus from the bonds of the troika and the memorandum, House of Representatives President Yiannakis Omirou has said.
Omirou also expressed his conviction that no Attorney General would dream of not following through with the results of an investigation led by an independent committee to apportion blame on those responsible for bringing the country’s economy and banking sector near collapse.
Omirou talked about the troika demands, which according to him will multiply and will turn Cyprus to a colony of the worst possible type and warned “I would like to send a message to the Cyprus people that there is no other way, there is no alternative apart from freeing (the country) from the troika’s and the memorandum’s bonds”.
He noted that certainly, “this road will demand sacrifices”, adding that “by leaving the troika and the EMS behind us, we will ensure our national independence, our national sovereignty, our moral integrity and our economic independence”.
“If we remain bound by the Troika and the memorandum Cyprus’ destiny is already foretold and there will be no future”, he pointed out.
Greek Prime Minister Antonis Samaras on Saturday promised his recession-weary nation that there would be “no more austerity measures” as international creditors prolonged an audit of crisis reforms.
“There will be no more austerity measures,” Samaras said in a televised speech to his conservative party’s political committee.
“And as soon as growth sets in, relief measures will slowly begin,” Samaras said.
But he noted that Greece’s ailing economy was “out of intensive care, not out of the hospital.”
Representatives from the so-called troika of Greece’s creditors — the European Union, the European Central Bank and the International Monetary Fund — are currently reviewing the steps Greece has taken to meet its multi-billion bailout obligations.
The devil is in the details. In this case, the details require Greece to give up all 111 tonnes of its gold in exchange for the latest bailout. Which means that should Greece ever decide to do what they should have done in May 2010 and default on the banksters, they will now be SOL as far as international trade is concerned.
As far as the banksters are concerned, Greece with its 111 tonnes of gold are merely a practice run for the main event: Portugal with 382.5 tonnes of gold, France with 2,435.4 tonnes of gold and Italy with 2,451.8 tonnes of gold.
But down there in the small print of the Greek deal lies the nasty side for Greece. There lies a heavy penalty clause; Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal. Greece has 111 tonnes of gold. In other words Greece has given up on its “money in extremis”, gold. If they default they will have nowhere else to go.
Its international assets will be seized and it will not be able to trade internationally at all.
Today we are watching both Iran and the Sudan use their gold to buy food for their country as they have nowhere else and nothing else to get it with. Under the terms of this new deal Greece has effectively forfeited that last resort. And if they wanted to pull a last card from the pack by insisting on a Greek jurisdiction for any final arbitration, they have forfeited that too, by agreeing that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors.
The option of leaving the Eurozone and surviving independently has now gone. If they do default [and many think the shrinking economy will force them down that road] they will have to accept whatever terms they can scrape together from the E.U. in order to survive! Greece is now a colony of the E.U. not a member!
by Prokopis Hatzinikolaou
After representatives of the country’s creditors published a report blasting the inefficiency of Greece’s tax collection and monitoring mechanisms, the Finance Ministry announced on Thursday additional measures to combat tax evasion, including accessing the bank accounts of depositors suspected of tax evasion, corruption and money laundering, among other crimes.
Within the year, the ministry hopes to be able to have direct access to bank account information without having to go through the banks themselves, reducing delays to a minimum in the processing of demands by the Financial Crimes Squad (SDOE) and other monitoring mechanisms, and allowing authorities to open the accounts of those suspected of tax evasion.
The legal clause will be submitted in Parliament in the coming months so that the Central Bank Registry can start operating, forcing lenders to respond immediately to inspectors’ demands for the opening and monitoring of the banking transactions of those under investigation.
SDOE has already requested access to some 4,000 bank accounts, but lenders have only agreed to half of the demands. A ministry official says that at a later stage the interconnection of SDOE with the banks will be in real time, with transactions monitored as they take place.
by Andy Dabilis
With 20 percent of Greeks pushed into poverty by crushing austerity measures while tax evaders who owe $70 billion continue to largely escape paying, despair continues to rise and media reports said three more people killed themselves on March 5 – all in Thessaly – including an 80-year-old woman who was found dead in Pineios River.
The suicides were in a largely agricultural area where unemployment is reported to be 24 percent, a little lower than the overall record rate of 27 percent across the country. A 45-year-old man was found hanged in his home by his mother in the Larissa suburb of Averof, while a 50-year-old man also hanged himself in the garden shed of his home in the village of Valanida.
There were no details on whether any of them were related to the country’s economic crisis although health care analysts have previously said the stress put on many people who find themselves destitute is a major contributing cause to the reasons why more Greeks are killing themselves in a country which used to have one of the lowest rates in Europe.
There has been a sharp rise in the number of suicides in Greece since the beginning of the crisis in 2009, with official sources putting the figure at over 3,100 from the start of 2009 to August 2012, though experts say that deaths by suicide are often not documented as such because of the social stigma attached to them.
by Robert Stevens
Former high-level Greek diplomat Leonidas Chrysanthopoulos told the UK’s New Statesman last week that discussions had taken place between senior Greek politicians and the armed forces on the military’s response to what Chrysanthopoulos described as an “explosion of social unrest” expected to occur “quite soon.”
Chrysanthopoulos said that in the coming months, “There will be further increases in armed actions. There will be bloody demonstrations.”
Without giving details, he said, “There are contacts by certain politicians with elements in the armed forces to guarantee that in the event of major social unrest, the army will not intervene.”
This last claim was likely made for public consumption. Even if such a request had been made, any assurances from the Greek military would be worthless given the recent history of the country, in which the “regime of the colonels” seized power in a military coup in 1967 that lasted until 1974. Since the onset of mass austerity in Greece in 2010 there have been constant rumours of coup discussions among high-ranking military personnel.
The most significant aspect of Chrysanthopoulos’ interview is the revelation of discussions between politicians and the military on how to respond to the threat of social revolution.
Greek ruling circles are working on the assumption that insurrectionary struggles are inevitable because of the intolerable level of suffering they have imposed on the working class. Within less than four years, the social position of the Greek working class has been reduced to levels not seen since the Nazi occupation during World War II.
Brutal poverty is a fact of life for millions. One major aspect of the assault on living conditions is the removal of public health provisions.
by Yiannis Baboulias
Last Sunday, 50 masked men armed with Molotov cocktails stormed a gold mine in northern Greece. After torching bulldozers, trucks, and portacabins belonging to Canadian mining company El Dorado and its Greek subsidiary Hellenic Gold, the group used tree trunks to block police and firefighters from reaching the site. If all that destruction of machinery and reliance on the bountiful gifts of Mother Nature for protection sounds like the work of an incensed rattan basket of ecocampaigners, that’s because it was. In fact, it was just one of many recent moments of drama unfolding around the opening of a gold-mining site in Skouries, one of the oldest forests in Greece.
In 2003 Hellenic Gold, followed by El Dorado, obtained the rights to mine the $12 billions’ (£7.8 billions’) worth of gold and copper snoozing beneath the mountain area. The deal saw the Greek state receive just €11 millions’ (£9.5 millions’) worth of compensation for the mines, and, in addition to losing the government some money they could have probably done with, pissed off all the local residents. Besides a part of the ancient forest being uprooted, residents are also worried about the mine’s effect on tourism, agriculture, and fishing. They’re all pillars of the local economy, and they’re all at risk of being devastated by the pollution a mine tends to churn out.
Last October, in the largest protest yet against the proposed mine, riot police attacked demonstrators, broke the windows of parked cars, dragged old women to the ground, attacked a left-wing politician who was protesting outside the police department, and threw tear gas at the crowds, the canisters of which ended up burning down part of the forest. Unsurprisingly, these tactics did little to appease the demonstrators.
Since then, areas of the forest have been cordoned off with barbed wire, checkpoints are everywhere, and private security guards wearing full-face masks patrol the area harassing locals, demanding to see their identification. That last bit is illegal under Greek law, but minor issues like what’s legal and what’s not don’t seem to faze El Dorado. The company claims that the mines will create more than 1,000 new jobs, their investment billowing much needed oxygen into the gasping lungs of an ailing local and national economy.
The mine’s critics, however, claim that more jobs will be lost than gained due to the pollution and environmental destruction that comes from digging into a mountain and building a mine. And they may be right. Unfortunately for the Greco-Canadian gold panners, the numbers just don’t add up. From the potential $12 billion to be made, Greece only gets the $11 million it secured in 2003 and a mere ten percent of revenue tax. So, once the millions of tons of waste start to pile up and the local economy is devastated, Greece stands to lose far more than it will make.
Seeing as the Greek subsidiary company is owned by Giorgos Bobolas, Greece’s mini-Murdoch—a man who owns little chunks of pretty much every mainstream media company in the country—reporting on the story has been spotty at best. Bobolas’s political connections are what secured the involvement of police in such large numbers, and operations in the area over the last few months are on a scale that only tends to be bankrolled if the beneficiary holds the kind of political sway that Bobolas does.
What did get reported was that Greek Minister of Citizen Protection Nikos Dendias’s going to Skouries and demanding arrests after Sunday’s attack. This resulted in the detention of 33 local activists with little justification other than their politics. Among them was Lazaros Tsokas—a member of SYRIZA, a Greek left-wing party—who was labelled an “abettor” and arrested. Those detained accuse the police of taking DNA samples from them even though they were only charged with misdemeanours, which—again—is illegal under Greek law.
The police also attempted to detain the two people who run antigoldgreece, a blog that aims to expose Hellenic Gold’s corrupt dealings with local officials. The authorities have so far been unable to detect them, but one of the bloggers, Maria Kadoglou, told me:
“The accusations are unfounded. The atmosphere here is already polarized between those who believe that the mine will be good for the area and those of us who oppose it. We’re trying to use legal methods to stop the mining operations, but the local authorities take months to answer our petitions. When they do, the answers are irrelevant and laughable. In the meantime, the company has already set up camp and intimidates the locals with the draconian security methods it uses.”
Many foreign companies are leaving Greece, looking abroad for access to capital and more stable tax codes. But if you have the right insider connections, then tax exemptions and access to European funding schemes present an opportunity to get into Greece, exploit its shitty financial situation, and get out again significantly richer. While the news media feeds Greek families a jolly TV dinner of xenophobia, imminent financial meltdown, and dog-eat-dog party politics, the real crimes—the ones ripping everyone off—take place in the background, in places like Skouries.
by Elizabeth Sukkar and Helena Smith
Greece is facing a serious shortage of medicines amid claims that pharmaceutical multinationals have halted shipments to the country because of the economic crisis and concerns that the drugs will be exported by middlemen because prices are higher in other European countries.
Hundreds of drugs are in short supply and the situation is getting worse, according to the Greek drug regulator. The government has drawn up a list of more than 50 pharmaceutical companies it accuses of halting or planning to halt supplies because of low prices in the country.
More than 200 medicinal products are affected, including treatments for arthritis, hepatitis C and hypertension, cholesterol-lowering agents, antipsychotics, antibiotics, anaesthetics and immunomodulators used to treat bowel disease.
Separately, it was announced on Tuesday that the Swiss Red Cross was slashing its supply of donor blood to Greece because it had not paid its bills on time.
Chemists in Athens describe chaotic scenes with desperate customers going from pharmacy to pharmacy to look for prescription drugs that hospitals could no longer dispense.
The government list includes some of the world’s leading pharmaceutical companies, such as Pfizer, Roche, Sanofi, GlaxoSmithKline and AstraZeneca. Pfizer, Roche and Sanofi all said a few products had been withheld. GSK and AstraZeneca denied the claims.
“Companies are ceasing these supplies because Greece is not profitable for them and they are worried that their products will be exported by traders to other richer countries through parallel trade as Greece has the lowest medicine prices in Europe,” said Professor Yannis Tountas, the president of the Greek drug regulator, the National Organisation for Medicines.
The regulator has investigated 13 pharmaceutical companies that have reduced supplies and has handed the names of eight to the ministry of health so they can be fined. Tountas did not disclose the names of the companies, saying this was the responsibility of the ministry of health, but added that they were “big multinational companies”.
A Greek court sentenced a former mayor to life in prison on Wednesday for embezzling about 20 million euros ($26.15 million) – half of his city’s public works budget – underlining the depth of corruption that helped tip Greece into a debt crisis.
Vassilis Papageorgopoulos was mayor of Thessaloniki, Greece’s second city, from 1999 to 2010 after serving as deputy sports minister in the early 1990s.
Prosecutors began probing the city’s accounts after complaints that millions of euros were missing. One of the main suspects gave evidence against the former mayor.
In the first big corruption trial since the debt crisis erupted, Papageorgopoulos was convicted along with Thessaloniki’s former treasurer, who was found guilty of money laundering and forgery, and three other officials.
Papageorgopoulos “was found guilty of being a direct accomplice in the embezzlement”, a court official said on condition of anonymity. The sentence was tougher than usual for financial crimes since the money was stolen from the state, the official added.
Papageorgopoulos has denied any wrongdoing.
Hundreds of Greek pensioners have staged a protest against the government’s austerity measures. The elderly have faced two pension reductions since 2010 and demonstrators also say they are suffering problems obtaining medicines as the national social insurance fund is lacking funds.
by TIMUR MOON
Tens of thousands of black-clad neo-Nazis have rallied in Athens in support of Greece’s far-right Golden Dawn party, in the movement’s biggest show of support since it emerged from obscurity to win 7 percent of the vote in last June’s general election.
Billed as a remembrance rally, the event in central Athens on 2 February attracted a crowd of 30,000 to honour three “fallen heroes” of the party. Men dressed in military fatigues, baseball caps and swastikas lit torches and fired flares, chanting anti-immigration slogans.
“We are winning the hearts and minds of the people, because we say it as it is,” Golden Dawn spokesman Ilias Kassidiaris told supporters.
“These politicians who have ruled us for decades are crooks. They have betrayed our national interests. They have led us to humiliating defeats,” he said, referring to a 1996 dispute with fellow Nato member Turkey, when three Greek air force pilots were killed in a dispute over an Aegean island before the US intervened, forcing both sides to back down.
Kassidiaris added: “This is a day of remembrance. It’s a day to remember that Golden Dawn is here to stay. And so long as it does, there will be hope for the country.”
But for hardcore Golden Dawn supporters, the retreat was seen as a capitulation, and the party gained traction with the country’s young and unemployed in the context of economic disaster at home, and the increasing control wielded by foreign creditors over Greece’s failing finances.
“They calls us fascists, thugs and criminals,” says Vassilis, a 23-year-old recruit who joined the party because of his disenchantment with the country’s political elite.
“We’re nationalists. We’re patriots. And if these guys who ruled the country for decades had a fibre of the nationalism we’re running on, they would have never brought the country to its current predicament.”
Hundreds of riot police and security officials were deployed on the march, which took place near the prime minister’s office and the Turkish embassy in Athens. Surrounding roads were cordoned off by police, bringing traffic to a halt.
“For a nation that suffered dearly under the Nazis, neo-Nazi gatherings like these should be banned,” said Sofia Laniti, a 47-year-old saleswoman.
The Golden Dawn party has begun aggressively targeting teenagers and schoolchildren in a bid to consolidate its recent extraordinary rise in support.
The vigilante far-right movement has begun spreading its anti-immigration message in schools and youth clubs, and through online social media networks, according to recent reports in the international press.
The party has been able to capitalise on the harsh austerity that has been imposed as a condition of Greece maintaining its Eurozone membership. As Greece’s economic fortunes have plummeted, so Golden Dawn’s fortunes have soared.
by Howard Schneider
Consider it a mea culpa submerged in a deep pool of calculus and regression analysis: The International Monetary Fund’s top economist today acknowledged that the fund blew its forecasts for Greece and other European economies because it did not fully understand how government austerity efforts would undermine economic growth.
The new and highly technical paper looks again at the issue of fiscal multipliers – the impact that a rise or fall in government spending or tax collection has on a country’s economic output.
That it comes under the byline of fund economic counselor and research director Olivier Blanchard is significant. Fund research is always published with the caveat that it represents the views of the researcher, not the institution itself. But this paper comes from the top, and attempts to put to rest an issue that has been at the center of debate about how fast countries should move in their efforts to tame large debts and deficits.
If fiscal multipliers are small, countries can cut spending faster or raise more in taxes without much short-term damage. If they are large, then the process can become self-defeating, at least in the short run, with each dollar of government spending cuts, for example, costing the economy more than a dollar in lost output and thus actually increasing debt-to-GDP ratios.
That is what has been happening with a vengeance in Greece, where fund forecasters, as part of the country’s first bailout program in 2010, predicted that the nation could cut deeply into government spending and pretty quickly bounce back to economic growth and rising employment.
Two years later, the Greek economy is still shrinking and unemployment is at 25 percent.
[...] “Forecasters significantly underestimated the increase in unemployment and the decline in domestic demand associated with fiscal consolidation,” Blanchard and co-author Daniel Leigh, a fund economist, wrote in the paper.
That somewhat dry conclusion sums up what amounts to a tempest in econometric circles. The fund has been accused of intentionally underestimating the effects of austerity in Greece to make its programs palatable, at least on paper; fund officials have argued that it was its European partners, particularly Germany, who insisted on deeper, faster cuts. The evolving research on multipliers may have helped shift the tone of the debate in countries like Spain and Portugal, where a slower pace of deficit control has been advocated.
But the paper includes some subtle and potentially troubling insights into how the fund works. Blanchard – effectively the top dog when it comes to economic science at the fund – writes in the paper that he could not actually determine what multipliers economists at the country level were using in their forecasts. The number was implicit in their forecasting models – a background assumption rather than a variable that needed to be fine-tuned based on national circumstances or peculiarities.
Heading into a crisis that nearly tore the euro zone apart, in other words, neither Blanchard or any one of the fund’s vast army of technicians thought to reexamine whether important assumptions about the region would still hold true in times of crisis.
While patrolling on a recent cold night, environmentalist Grigoris Gourdomichalis caught a young man illegally chopping down a tree on public land in the mountains above Athens.
When confronted, the man broke down in tears, saying he was unemployed and needed the wood to warm the home he shares with his wife and four small children, because he could no longer afford heating oil.
“It was a tough choice, but I decided just to let him go” with the wood, said Mr. Gourdomichalis, head of the locally financed Environmental Association of Municipalities of Athens, which works to protect forests around Egaleo, a western suburb of the capital.
Tens of thousands of trees have disappeared from parks and woodlands this winter across Greece, authorities said, in a worsening problem that has had tragic consequences as the crisis-hit country’s impoverished residents, too broke to pay for electricity or fuel, turn to fireplaces and wood stoves for heat.
As winter temperatures bite, that trend is dealing a serious blow to the environment, as hillsides are denuded of timber and smog from fires clouds the air in Athens and other cities, posing risks to public health.
The number of illegal logging cases jumped in 2012, said forestry groups, while the environment ministry has lodged more than 3,000 lawsuits and seized more than 13,000 tons of illegally cut trees.
Such woodcutting was last common in Greece during Germany’s brutal occupation in the 1940s, underscoring how five years of recession and waves of austerity measures have spawned drastic measures.
Smog, on some days visible to the naked eye and carrying the distinct smell of burning wood, has prompted local officials in Athens to discuss mitigation strategies, including proposals to restore heating-oil subsidies.
On Christmas Day, Greece’s environment ministry said, particulate in the air over one of Athens’s biggest suburbs, Maroussi, was so bad that it was more than two times the European Union’s acceptable air-pollution standards.
Any transaction in excess of 500 euros will soon only be allowed via credit or debit card or by check, according to a plan by the Finance Ministry aimed at combating tax evasion.
The ceiling for cash transactions is to be lowered from 1,500 euros today to 500 euros and could be reduced further over in the course of 2013. Ministry sources say that in the first quarter of the new year all companies and certain self-employed individuals will have to obtain the POS (point-of-sale) terminals that provide for card transactions.
This forms part of the government’s plan to contain tax evasion and increase state revenues. Ministry officials stress that public revenues can only grow through beating tax evasion, as there can be no more cuts to expenditure except for procurements.