Rhodes Town, Greece - Sitting in a Greek café, one would be hard pressed to understand the disconnect between what is being written about Greece and what is actually happening on the ground.

Compared to constant media-reports of an economy in ruins, massive political unrest and a bloated welfare state, the biggest unrest in Rhodes Town, Greece today is between football fans watching a match between Athens-rivals Olympiakos and AEK.

The feeling is very similar to any major City in Canada: businesses are open, people working, eating etc.  Despite what the papers may say, Greece does not give the appearance of a country in crisis.

This is largely because Greece is not really in a crisis, at least not of its own creation.  

Almost all major media outlets discuss the Greek financial crisis as being centered around three key issues: Greece’s addiction to debt, its bloated welfare state and its lack of competitiveness.

Finance ministers and economic writers constantly write as if Greece is a child, refusing to go to its room.

Martin Wolf in The Financial Times: “It is not the case that the countries in Difficulties had irresponsible fiscal policy before the crisis.  Greece did.”

EU finance ministers, mainly from Germany and France have repeatedly castigated Greece for being slow in cutting jobs and spending in the public sector and not raising revenues quick enough.

Even Jim Flaherty has been nay saying Greece’s policy: “It’s easy for politicians to say, ’I will spend less money,’ but then of course they actually have to do it.  [Greece has] a plan to control deficits and debt. They have to implement it and as I said earlier, that’s not always popular with the people.”

What they almost unanimously fail to discuss is that Greece didn’t seem to have a problem 4 years ago.

Greece does have a high debt-to-GDP ratio which currently stands at 189%.  But Japan’s is much higher and has been higher for a lot longer, with interest rates staying stable and a credit-rating well above junk status.  Belgium has also remained fine despite being in Greece-territory.

The Greek welfare state is by no means bloated compared to Northern European countries.  And Greece’s ‘lack of competitiveness’ currently has more to do with it current default worries and the resulting lack of credit than with its underlying fundamentals.

Greece’s economy definitely has problems. But their current situation has more to do with private companies in the US and bond traders than Greece itself.

About 2 years ago, in the wake of the financial crisis US private ratings agencies (see the Media Co-op Investor Series for more detail on rating agencies) decided that they were going to start grading sovereign (state) debt more rigorously.  Essentially they were saying that certain countries which had been able to raise money easily in the past, would no longer have the benefit of doing so unless they submitted themselves to neo-liberal reforms: cutting state-spending, privatization of state assets, raising taxes on the middle class, cutting corporate taxes and deregulation of industries.  

Four countries were specifically targeted at that time as facing a future downgrading in their debt: Greece, Ireland, Portugal and Spain.  

Why they did this all of sudden and why they chose to pick on these four countries isn’t clear.  What is clear is that these companies (and the bond-traders that follow their advice) are given more power over these country’s economies than their populaces.  

When a ratings agency downgrades (rates-lower) a countries debt, this usually means that the cost of borrowing money for the country will rise.  In Greece’s case this has meant that the cost of short-term borrowing has produced unheard of interest rates – recently as high as 50%.

Because the Greek state and much of the populous relies on debt to pay its current bills, the country has been put between a rock and a hard place. With the cost of borrowing going through the roof, access to money becomes harder, as fewer companies and states believe that Greece or its population will be able to pay the money back.  Going this route means doing things that will satisfy the bond-traders and privately owned credit-rating agencies.

The alternative, a bailout package (really, a low-interest loan) from the EU, also comes with strings attached.  The EU has authorized loans to Greece only if they undergo a series of neo-liberal adjustments: namely reducing their deficit and debt, cutting public spending and privatizing state assets at fire-sale prices.

Of course, none of this makes sense to the Greek populace. Discussing the crisis with the Toronto Media Co-op, several Greeks readily acknowledge that the deeply unpopular austerity measures currently being pushed through parliament are not being done for the benefit of the Greek economy, but simply to appease lenders.  

Many believe that Greece is simply being strong-armed into following a right-wing agenda and that because a ‘disorderly default’ (ie. Greece saying all of a sudden that it won’t pay back its debts) would be a disaster for the global economy, they feel that Greece can resist the austerity measures being required of it.

Although none have articulated it directly, they are essentially suggesting a game of chicken with the international financial community at a state level.  

This could prove disastrous, but the alternative is what Greeks are living with today.  

Its not overtly visible when walking down the street, but the effects of austerity measures and the lack of access to credit can be found by digging a little deeper.

Homelessness, specifically youth-homelessness, was clearly visible on the side-streets and corners of Athens.  A number of businesses throughout Athens and the Greek islands have closed down.  Internationally-focused Greek companies and exporters complain of major problems securing short-term loans. Tourism in some areas is down 30 percent.

The effect on the health of populace has been heavy. Anecdotal evidence printed in the Toronto Star suggests a rapid rise in suicide rates for Greece. Unnamed sources speaking in The Financial Times have recently stated that Greeks are also cancelling or deferring large amounts of elective surgery and preventative medical care.

The effect on wages has been heavier. Youth employment has risen to over 40%.  Taxes have been raised rapidly and through the roof.  “Before, for the hotel and my house I paid €3000 in taxes,” says Nikolas, a resident of the island of Santorini.  “Now I pay €5800 for nothing.  The government adds it to the electricity bill and if I don’t pay it, poof, [my electricity gets] cut off.”  

According to Nikolas, the government is also taking the out of the ordinary step to raise taxes retroactively.  “In August the government said they would be reviewing my taxes from 1997-2007.  I should know how much more I will have to pay this month, maybe next.”

Even more difficult has been a series of wage cuts, mainly in the public sector (though private companies have been heavily downsizing and cutting wages as well).  “Most of the strikes are by unions who have seen their wages cut again and again.”

Strikes in Greece and Athens have been constant.  

Garbage collectors have been on strike since Oct. 3rd in Athens leaving huge piles of garbage all over the City.  Students have been holding strikes and sit-ins since August.  Various staff office and government buildings have been holding strikes since September.

Transport has seen some of the heaviest strike activity.  “There have been 4-5 boat strikes ths summer,” says Nikolas.  “Planes…maybe 2.”  Taxi drivers have also protested rising taxes and fuel costs.

With the EU and IMF demanding even more public sector cuts, tax increases and deficit reduction, the situation is becoming even more stressful.  

The past two days have seen a series of strikes: boats, state-banks, state-media, customs agents, doctors, tax-collectors and judges are all participating (or have participated) in some sort of job action.  

October 19th will see the start of a two day general strike.  A full list of strikes can be found at: livingingreece.gr/strikes.

The power of workers has been creating constant problems for the government.  After threatening to cut off electricity if people refused to pay new taxes, the electrical-workers union said they would refuse to cut off electricity. "Electricity ... cannot be used as a means of blackmail against the unemployed, the poor, the wage-earner," the union said.

Greek Finance Minister Evangelos Venizelos recently vented his frustration with the various strikes and occupations:  "You can't occupy the general accounting office, the Social Security IT centre or the national printers. All this threatens democratic legitimacy," he said.

While much has been made on TV of the violent or anarchist nature of the protests, the reality is that mostly unionized workers having been leading the opposition to austerity measures and some of these have been allied with the Communist (KKE) political party, the 3rd largest party in parliament.

Nickolas says that the media have employed a trick similar to the one employed at last years G20 protest: “The violence that you see in Canada or in other countries [in the media] is not like this in Greece.  In a demonstration of maybe 150,000 people in Athens, maybe 500 do stupid things like throw molotovs or fires,” he said.  “In Athens you have lots of unrest because you have lots of people, but on the islands you don’t have this.”

Strikes in Greece continue this week as the government continues to try to pass austerity measures through parliament.

Meanwhile, two days ago the G20 met and issued a statement that Europe should fix the crisis engulfing Greece and the other Euro-states…in eight days.

With no agreement between Euro-power-houses France and Germany on the horizon, the prospect of Greek defaulting on its debt payments and setting off another economic meltdown comes closer.

And if that occurs, it’s anyone’s guess what happens next.