Greece’s economic crisis

I came. I saw.

It is always good to go and see for yourself. Better to get a first hand impression than constantly listening to what others tell you is taking place. So I jumped at the chance to visit Athens and get a feel for how the Greek capital is weathering its economic storms.

Athens in the summer is a hot, steamy city and usually abandoned by those who live there, anxious to enjoy the islands But this year there is little chatter of “getting away” and a lot of talk about “getting down to it.” The August arrival of the representatives from the EU, ECB and IMF, nicknamed the Troika, ensured anyone important in government was firmly at their desk ready to open the books. The Troika will recommend in the next few days whether Greece gets approval for the second tranche €9 billion loan, contingent on satisfactory economic progress.

On the drive in from the airport it was difficult not to see the very long lines of cars at gas stations. My taxi driver spoke excellent English but he struggled to explain the truck drivers strike which meant car owners were filling up before petrol supplies run out. While the strike was quickly brought to an end, it was not before very damaging pictures of closed petrol stations and angry scenes were shown on the news. Such images are devastating to an economy that relies so much on tourism.

The next thing I noticed was how expensive everything was. Even though there were sales in the shops, prices still felt hefty. Part of this comes from increases in VAT, which has pushed up the prices of meals, taxis and coffees. If the austerity measures are meant to make Greece more competitive it doesn’t seem to be working yet.

I was told hoteliers had reduced wholesale rates to the industry by up to 20 per cent. But if you look at the prices being charged to holidaymakers, a substantial part of that reduction has not been passed on. For tourists, the cost of that hotel room, previously “over priced” has now become “expensive.” Of those holidaymakers I spoke to, no-one said they found Greece the bargain they’d hoped.

One of the huge challenges facing the Greek authorities is the size of the shadow economy. By some studies up to 30 per cent of business is done off the books avoiding regulation and taxes. Having such huge amounts of cash swirling about inevitably counteracts the austerity plans, dulling the effect. If the informal economy remains strong, it will take Greece longer to turn itself around.

Those in the know are well aware Greece still faces many dangers. Here everyone talks of further austerity measures to come. It is a given there will be more government cuts come the autumn. Certainly if Greece is to meet the herculean task of cutting the deficit by 5% this year, keeping the Troika happy.

Perhaps the biggest unknown is when Greece will start tackling its long term debt. The EU bailout has bought the country a three-year breathing space (albeit with a further €110 billion of debt.) The view is Greece should take advantage of this time and, without defaulting, reschedule debts by pushing repayments late into the next decade. It is likely this process will begin once the authorities prove the austerity plan is working, probably in the autumn or early next spring.

Throughout my visit, time and again the biggest worry I heard is whether there would be further unrest as the fabric of social welfare is unwound. As winter arrives, the layoffs will increase, the traditional bonuses won’t be paid, the recession will deepen. Today everyone hopes for the best, but few are prepared to say that the Greek people will stay quiet.

It can be difficult discussing strained economic times with those involved. Rather like talking to distressed relatives who can’t pay the electricity bill or buy food for the fridge. Comments made by visitors often sound smug or patronising. So we must not forget while the rest of us put the immediate crises behind us, Greece will be mired in recession throughout 2010, and possibly beyond. How do I know? I have seen it for myself.

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Richard Quest is a CNN correspondent based in London, host of the weekday one-hour program “Quest Means Business”. For program highlights and more, go to