FOREIGN POLICY JULY 30, 2010
The long, hot Greek summer just got hotter. A strike by fuel tanker drivers has paralyzed the country, stranding tourists, causing food shortages, and leaving 70 percent of gas stations without any gas to pump. In the simplest terms, this is about new austerity measures, in this case, higher fees for truck licenses. But more broadly, it is about the government’s assault on a lifestyle Greeks, rich and poor, have come to take for granted. As one Greek businessman put it to me, "the party’s over." Greece is broke.
The signs are big and small. On my visit to Greece, I’ve been inundated with what used to be anathema here: receipts, for every water bottle, taxi ride, and chicken gyro. It wasn’t always this way. Greeks shunned receipts because a paper trail meant taxes. And tax evasion was, until now, a national sport in Greece. An estimated 25 percent of the economy takes place under the table, the largest black market in Europe, bigger even than Italy’s at 20 percent.
But no more tax evasion (or at least less of it). Greece can’t afford it. And to prove they’re serious about enforcement, police are using Google Earth to spot swimming pools and luxury yachts, as proof of undeclared income. Additional tax revenues are expected to amount to $20-40 billion per year.
The changes are scaling back one of the most generous welfare states in the world. The Greek parliament recently voted to raise the official retirement age to 65 from an average of 61, and as low as 45 for police and 55 for professions deemed ‘unhealthy,’ including, comically, hairdressing. The government is also cutting a wide range of benefits, from unemployment insurance to pensions.
The combination of higher taxes and lower spending is squeezing average Greeks considerably. Andreas, who we met at his stall in an Athens fish market, expects to pay about $40,000 in tax this year, up from $20,000 last year, but is selling his sardines and snapper at about half the price he used to due to flagging sales.
“I’m getting hit from both sides. What can I do?” he said. “Just survive.”
As the Greek public digests the new austerity, the streets have occasionally erupted in violence, most recently in May, when three people were killed. But on this trip, what I heard from most Greeks I met was a grudging resignation. The reality seems to be setting in that they have little choice.
Hotel owner Ionnis Retsos told us, “I don’t blame only the politicians. I blame us. I blame the people, the businesses, everybody. Everybody that lived the last thirty years has a portion of responsibility.”
“Everyone must pay” is the mantra of governments across Europe. Saddled with massive debts, Britain, Spain, Ireland, France, and Germany are making some of the biggest budget cuts since World War II. Britain recently announced across-the-board cuts of 25 percent, from cancelling repairs on 700 schools to cutting the Queen’s travel allowance, but many believe the final number will be closer to 40 percent. And like in Greece, many British people I meet are resigned to the new austerity.
So, when they gaze at us across the Atlantic, many Europeans ask when the United States will start cutting. Or, as European Central Bank president Jean-Claude Trichet put it somewhat less succinctly, in a guest column for the Financial Times earlier this month, “There is little doubt that the need to implement a credible medium-term fiscal consolidation strategy is valid for all countries now."
To be sure, state governments in the United States are already deep into austerity measures of their own. Twenty-two states have altered their pension systems. And there is talk of altering the indexing for Social Security, reducing the benefits for early retirees, and tightening up the disability requirements, though what cuts come first and how deep they are will depend heavily on the results of the midterm elections.
In the near term, some American economists are more worried about Europe flooding the U.S. market with cheap imports; that is, while they cut deficits, letting us spend, buying German Mercedes and French wine and British aircraft engines.
But from London to Athens, the rule is cut now or risk bankruptcy later, a message that’s clear in every empty gas station and on every one of those tiny pieces of paper now lining my wallet.
Jim Sciutto is ABC News' Senior Foreign correspondent. He is the author of Against Us: The New Face of America's Enemies in the Muslim World.