Despite debt troubles, Greeks want to keep the euro
By Michael Birnbaum,
ATHENS — To many Greeks, the euro means sky-high unemployment, ruinous debt and shuttered storefronts. Dwindling euro coins in Greek pockets now feel like a curse rather than a blessing. And being welded to the same currency as the rest of Europe is forcing the country to face painful cuts and austerity measures to stave off financial crisis.
But for all the trouble, a wide swath of Greeks wants to keep the euro, fearing that a return to the drachma would be far worse than anything they’ll endure as a member of the broader European club.
For Greece, backing out of the euro — and defaulting on debts both public and private that were denominated in euros — could shut access to foreign bank loans for years, cause difficulty with imports and perhaps put a quick end to the creature comforts that came with the boom that the euro sparked, economists say.
Nor do the strong euro partners such as Germany want Greece to drop the currency, since the economic conflagration it could set off would hit them, too.
“It’s like a very bad marriage where you stay together for the sake of the kids,” said Takis Michas, a journalist at the national daily newspaper Eleftherotypia. “Greece should have never entered the euro. But leaving the euro, at this stage . . . that’s bye-bye for Greece in the world economic system.”
Many Greeks remember the not-so-distant boom years with fondness, as banks that suddenly treated their government as a low credit risk similar to rock-solid Germany lined up to lend money at low interest rates. That fueled a construction boom, access to luxury goods and many more of the better-paying public-sector jobs that the government created to bring down unemployment.
“If we went off the euro, there would be a lot of hunger,” said Kristina Patsalou, 29, who works at a cellphone store. Adopting the euro “helped a lot,” raising the standard of living, she said.
But to Patsalou’s colleague, the choice now seems stark: “Having a strong currency but living like an animal. Or having a currency that is weak and living like a person,” said Konstantinia Gogou, 30. She said she wanted her country to stay on the euro, but she found the austerity measures deeply painful.
One advantage of the euro was supposed to be that goods and services could move more freely throughout Europe, without the uncertainties of floating exchange rates and investments that can disappear if a country prints so much money that its currency becomes worthless.
In practice, the euro, now shared by 17 countries, did foster integration. But it also strained economies that continued to move at different speeds — like 17 drivers trying to work the same accelerator. What made sense for an industrial export economy such as Germany didn’t work as well for the weaker economies of southern Europe, and the European Union never adopted policies to help balance that out.
When a country has its own currency, it can print more money to make its exports cheaper, helping to spark an economic revival. That helped Iceland when it ran into trouble in 2008.
When a country shares a currency, it needs to force down wages and other costs often by more austere measures. That’s part of Greece’s problem now. Red “for rent” and “for sale” signs are spattered across the walls of even the fanciest neighborhoods of Athens, as businesses have closed, people have moved away and economic prospects have faded.
The government has raised taxes and cut services and is announcing tougher steps every other week. So far it has been to no avail; the economic outlook keeps getting worse, not better. The deterioration has continued even since late July, when the latest European bailout plan was proposed.
That plan — which governments around the euro area are approving one by one, though many analysts say it now appears inadequate — was backed in a crucial vote Thursday in Germany that bolstered Chancellor Angela Merkel’s standing in response to the crisis.
But winning support for even more drastic measures by the Greek government to fulfill the conditions of the rescue package could be a hard sell.
Neither Greece’s governing socialists nor the conservative opposition has called for dropping the euro, and even hard-hit Athenians who roll their eyes at their politicians aren’t ready to pull out of the currency. A poll this week in the Athens daily Kathimerini newspaper found that two-thirds of Greeks felt that going back to the drachma would be negative for the country; 63 percent had positive views of the euro.
“It would be disastrous, economically, financially, politically, in every single sense, for Greece to leave the euro and return to the drachma,” said George Pagoulatos, an economist at the University of Athens and a former economic adviser to the Greek government. “The purchasing power of Greece would be devastated. There would be a massive deficit in energy, imports, oil, even agricultural goods. Pharmaceuticals. Basic goods that Greece needs to function would come at a heavy price.”
Even Greece’s main export industry — tourism — would suffer, he said, because it depends so heavily on imported equipment.
A UBS analysis this month estimated that a Greek pullout from the euro could cost the country 40 to 50 percent of its annual economic output in the first year, although it acknowledged that assigning such a number is more of an art than a science.
Still, the patience of citizens such as Gogou and Athanassios Georgiou for more austerity measures appears to be wearing thin.
“Greece is like a mouse in a laboratory,” said Georgiou, 28, who is jobless and was protesting the spending cuts this week in front of Parliament. Pulling out of the euro couldn’t make the situation much worse, he said.
“There are many people here who are close to starving as it is.”
Special correspondent Elinda Labropoulou contributed to this report.