The Bitter Fruits of Greece's "Stabilization"
According to the Center of Planning and Economic Research, the Greek economy has grown in the second quarter of this year — the first indication of economic expansion for the country in five years. With a consensus that includes even conservative forecasters, such as Citigroup, the international financial community is starting to feel that the crisis that started with the collapse of Greece’s bond market may be stabilizing and even starting to correct itself.
However, this stabilization has came at the cost of the Greek government privatizing much of the country’s state-held facilities, including rail and road transportation systems, air and seaports, utilities and publicly-held real estate holdings. Under the proposed privatization plan, the Greek government would sell 49 percent of the stakes in state railway operator OSE; sell off all state-run casinos; sell off minority stakes in the Hellenic Post, Thessaloniki water utility EYATH, and Athens water and sewage utility EYDAP; create new private-public partnerships for infrastructure projects, such as the construction and operation of new highways; and issue new gaming licenses toward developing the “gaming and Internet betting industry.”
The European Commission, the International Monetary Fund and the European Central Bank are insisting on these privatization schemes as a condition for much-needed loans to bail out the Greek government. Since Greece’s 2010 near-bankruptcy, the nation has been dependent on the international community and the Eurozone to keep it afloat. Rampant tax evasion and an economy built nearly exclusively on the public sector and tourism have made it difficult for the conflict-torn nation to internally raise the needed capital. Hoping that Greece’s economic situation would not damage the Eurozone, the European Commission and European Central Bank agreed to bail out Greece, but only if the country could demonstrate that it could potentially stabilize its economy and repay the loans.
These austerity measures have hit Greece particularly hard, considering that Greece had one of the most developed public sectors among the European Union nations. With the Greek government formerly being the largest employer in Greece, austerity actions — which include the privatization of large segments of the public portfolio, cuts to social services and “safety-net” benefits, and increases in taxes and tax collection — have left Greece with an unemployment rate of 27.3 percent — the highest in the EU. While the unemployment rate has improved slightly from the 28 percent seen earlier this year, researchers at the University of Portsmouth have found a correlation between the austerity measures and Greece’s suicide rate, with 551 men killing themselves “solely because of fiscal austerity” between 2009 and 2010.
“That is almost one person per day. Given that in 2010 there were around two suicides in Greece per day, it appears 50% were due to austerity,” said Nikolaos Antonakakis, co-author of the study.
As pointed out by C.J. Polychroniou for Truthout, the Greek privatization plan’s administrator — the Hellenic Republic Asset Development Fund (TAIPED) — resembles Germany’s Treuhandanstalt, the agency charged with the privatization of East Germany’s state-owned enterprises following unification. Treuhandanstalt was accused of turning over to West German big business hundreds of billions Deutsche Marks in national property for little or nothing. This created a deficit of 300 billion Deutsche Marks (equal to over $206 billion today) that dragged East Germany’s 1992 industrial production down to a third of 1989’s figure. Meanwhile, one in every two industrial jobs was lost, female unemployment hit 65 percent, the crime rate spiked by 300 percent spike, and the national birth and marriage rates dropped to 55 and 50 percent, respectively.
The net result of the German privatization plans at the close of Treuhandanstalt were no proceeds or assets and 230 billion Deutsche Marks in liability. The plan to issue bonds to every East German citizen for their eventual share of the residue of the property was quietly abandoned. A number of Treuhandanstalt managers were ultimately indicted for corruption and embezzlement
With TAIPED being an extra-legal organization imposed upon the Greek government by the international community, its authority is not based on Greek law, but on international treaty. And as TAIPED’s board of directors also has close links with the financial sectors, the possibility of gross economic misconduct, cronyism, and illegal transactions are higher than they were in East Germany under Treuhandanstalt, according to Polychroniou.
“Prior to 2010, the value of Greek state-owned assets was estimated to be worth 280 billion euros,” wrote Polychroniou. “The first bailout plan estimated the value of Greek state-owned assets to be worth 50 billion euros. Three years later, the Greek government seems to have found the troika’s estimates extremely high and expects that the revenues generated through the privatization efforts of TAIPED will reach about 20 billion euros by 2020.”
With plans to privatize much of Greece’s public trust continuously being developed and debated — such as a bill submitted in May that would convert much of Greece’s protected coastal areas into “composite tourist villages,” questions concerning the side effects of austerity are being ignored. One such side effect is the Greek government’s plan for building new maximum-security prisons that resemble “white cells” — prison cells designed to induce sensory perception deprivation — to house “dangers” to the state. These “dangers” theoretically would include tax frauds and other perceived “threats” to Greece’s economic recovery.
As demonstrated by last month’s 24-hour public service strike, Greeks are increasingly asking who, exactly, is benefiting from Greece’s newfound stability.
[Frederick Reese is lead staff writer for Mint Press specializing in race, poverty, congressional oversight and technology. Most recently, Frederick received a data journalism award from the International Center for Journalists for his minimum wage coverage for MintPress. Follow Frederick on Twitter: @frederickreese]