Greece Welters while Europe Waits Anxiously
By Dr Syed Amir
Bethesda, MD
Of late, Greece has been much in the news, not for its scientific achievements or contributions to human civilization. It has attracted attention mostly for its dire financial plight and the unremitting sufferings of its people. The descent of the country into its present state happened over a long period, but for the past two years especially, it has been tormented by the specter of imminent financial insolvency.
Greece was once the cradle of a glorious civilization, and reputedly the birth place of democracy. In the sixth century BC, city states, with Athens as their center, established an embryonic form of democracy in which all free men -- no women or slaves -- voted to elect their rulers. The three most illustrious philosophers of antiquity, Socrates (469-399 BC), his friend and biographer, Plato (427-347 BC) and Plato’s student, Aristotle (384-322 BC), were Greeks, who spent most or part of their lives teaching or engaging in scholarly polemics in Athens. In the field of philosophy and mathematics, the Greeks produced Euclid, Archimedes and Pythagoras, names familiar to almost every school-going child.
Greeks gained fame as indomitable warriors, when in 490 and 480/479 BC they repulsed two expeditions from the much more powerful Persian Empire. Subsequently, in 331 BC, Alexander the great defeated the Persian Emperor Darius, capturing Persepolis and extinguishing the Achaemenid Empire. Alexander conquered vast territories, including part of what is now Pakistan. Traces of Hellenistic culture and its signature hereditary traits can still be found in the population of the northern areas of Pakistan and Afghanistan, dating back to the remnants of Alexander’s Greek army.
Ancient Greece witnessed a spectacular fluorescence of the sciences of physiology and medicine, with physician-philosophers Galen (Jalinus, 129-200 AD), Hippocrates (Buqrat, 460-370 BC) and Plato (Aflatoon), laying the foundation of medicine on experiential knowledge and recorded observations, rather than anecdotal evidence. Their writings remained the basis of all therapeutic and clinical practice until the fourteenth century, and had a powerful influence on Indo-Islamic and Medieval European medicine. In South Asia, the Eastern system of medicine is still referred to as Tibb-e-Yunani.
Today, modern Greece, with a population of 10.7 million, comparable to Lahore, is a very different country. It has become emblematic of financial sickness plaguing many euro-zone countries of Europe. Founded in 1998, the 17 members of the euro-zone agreed to replace their currencies with a single currency, the euro. While these countries forged monetary union, their political and financial structures remained unchanged, often pursuing discordant fiscal policies. Moreover, no oversight was exercised by a central institution, such as Federal Reserve Board in the US and Bank of England in Britain.
The euro-zone countries started with a wide disparity in their financial status, with Greece (GDP $271 billion) and Portugal (GDP $229 billion) grouped together with countries with far larger economies -- Germany (GDP; 3.28 trillion) and France (GDP; 2.56 trillion). It was assumed that the financial unification would propel the less affluent countries to a higher level of productivity and prosperity. Only, it did not turn out that way.
In 2001, Greece replaced its currency, the drachma, with euro, and initially experienced a period of booming prosperity. It could raise large sums of money from international investors who trusted the euro much more than the old, weak drachma. Foreign investment surged from 53 to 275 billion. The country borrowed and spent recklessly. Salaries of Government employees doubled in a decade and their numbers climbed substantially. In his recent book, Boomerang, author Michael Lewis estimates that the average Greek Government employee was paid three times the salary paid by private companies for equivalent work. While the railways ran a huge deficit, the average employee was paid nearly $82,500 a year. Retirement came with generous pensions and benefits, and some Government employees became eligible for retirement at age 55. Tax collection was so lax that even plastic surgeons earning millions paid little or no taxes to the treasury.
The unchecked profligacy, tax evasions and rampant corruption resulted in huge budget deficits. As the deficits grew, reaching 153 percent of the GDP, investors became nervous, moving money from Greece to Germany and France, countries with much stronger economies. Ultimately, it became very difficult for the Greek government to raise money to meet its obligations and the Greek economy shrunk by almost 7 percent last year. Worried that Greece would be forced to leave the euro-zone, causing a financial upheaval across Europe, the richer countries, mostly Germany, extended two bailouts worth nearly $300 billion. The money came with demands of drastic reductions in expenditures.
The austerity measures the Government was forced to adopt have led to severe hardships. The unemployment rate among the youth soared to 50 percent and many households ran out of money. In Athens, thousands are reportedly sleeping in the open since they have no shelter. Soup kitchens, where food is distributed free to the needy, are attracting many who were previously self-supporting. The misery has even affected the sick, many of whom cannot afford vital medicine. The punishing austerity measures designed to reduce Greece’s debt have not worked thus far. The banks have no money to lend and commerce is at a standstill. The measures have caused widespread resentment and fierce civil unrest.
Why should problems of a small country like Greece threaten the global economy? The world financial systems have become closely intertwined as never before, and trouble in one region quickly affects others. The Greek contagion has already spread to Southern European countries as the economies of Portugal, Spain and Italy are teetering on bankruptcy. It seems likely that sans greater political and economic integration of the Euro-zone, its problems would multiply, threatening a global recession.
