7 - 13 February 2002
Issue No.572
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Al-Ahram Weekly Online 7 - 13 February 2002 Issue No.572 |
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Greeks bearing euros
It has been a month since the citizens of the European Union's easternmost member-state ditched their drachmas for the euro. From Athens, Iason Athanasiadis assesses the euro's impact on Greece
Central Athens on a sunny January morning. A taxi-driver, snarled in traffic, complains about his mother.
"She's been asking me for money again. I told her, 'Didn't you get your pension only last week?' and she said, 'Yes, but it was paid to me in euros. They're new to me and I'm scared that people will cheat me when I go shopping.'"
Despairing, the driver recounts to his passengers his reply: "So I told her, 'what will you do after 28 February when you can no longer use drachmas?'" And the reply, delivered with aching panache, "'I will give you the list and you can do my shopping for me.'"
Conversations such as this have resounded up and down the country since 1 January 2002, when Greece entered the brave new world of the common European currency.
They reflect both the ease with which the majority of Greeks have taken to the euro, as well as the confusion it is causing to elderly people who have lived with the drachma for a whole lifetime.
For months in advance, the Greek government had done its utmost to ensure that the currency's introduction into Greek tills would be a success, even enlisting the help of the influential Greek Orthodox Church in the drive to accustom people to the change in currency. On the whole, the switch-over has been smooth.
By 9 January, 9 in 10 Greek wallets had euros in them, while 7 in 10 Greeks were using the new currency in their daily exchanges. Such Greek institutions as the souvlaki (shawerma) and the koulouri (smiit) were dragged, kicking and screaming, into the 21st century, their prices converted into euros. As early January moved towards its half-way mark, Greek confidence was boosted by the first reports that Greek consumers were being rivalled only by the Dutch in their consistently high Euro-usage -- 80 per cent were conducting their transactions in the new currency.
The Greek press, having primed itself to unleash its usual stinging criticism of the government, gradually realised that it was witnessing, perhaps for the first time, a resounding success. This sense of triumph was made all the more intoxicating for the fact that it was accomplished on the European level, a stage where Greece is more accustomed to humiliation than success. From its mishandling of the Ocalan affair to the embarrassing spats it regularly has with fellow NATO member Turkey and its long-held status as the northern European neighbours' country-bumpkin cousin, Greece has drawn the European Union's ire more often than its praise.
The Greeks' take-up of the euro has, in fact, been so successful that, within a week, newspapers went from sharpening knives to boasting of the congratulations that Loukas Papadimos, director of the National Bank of Greece, received in Frankfurt from Kim Duisenberg, head of the European Central Bank. In a country where ambitious plans are often derailed by ideological infighting and financial scandals, the swift and efficient take-up of the euro has dumbfounded a population used to corrupt politicians, poor planning and shoddy execution.
Of course, the transitional period has not been without its unexpected events. The period of acclimatisation was bound to throw up a few anecdotes, such as the Greek farmer who complained to one TV station that, "Some madman came to me this morning with a E500 note and expected me to give him change for two cabbages."
A government hot-line, set up to answer questions about the euro and deal with complaints, was inundated with over 90,000 calls in one month. The flood of enquiries contained several eyebrow-raising specimens, such as the complaint that a certain restaurant had not accepted German-issued euros insisting, instead, on 'Greek' euros. Another person took his fascination with the new currency to a bizarre conclusion, reporting that his euros had lost their colouring after being washed. Finally, one concerned citizen was anxious to know whether Interpol will be drawing up a list of 'Euro-offenders,' i.e. those who deface the new currency.
Following the successful completion of one month of euro- usage, the first predictions are now being made as to how it will affect the country and its inhabitants in the long term. Most columnists are convinced that the new currency will be a psychological passport into Europe, bringing Greeks closer to their wealthier neighbours. For a nation-state that is less than two centuries old and which has a history of conflict with and domination by its Turkish neighbour, Greece is anxious to shake off the feeling that it is more Eastern than Western. With the initial Euro-euphoria subsiding, there is a growing realisation that the euro's success will be proven only when Greece can confidently meet the tough economic and social convergence criteria imposed by the European Central Bank (ECB), measures intended to pave the way for the upward standardisation of living across the European Union (EU).
The initial blush of success is also giving way, for most Greeks, to an awareness that they earn far less than their wealthier European counterparts. Hristos Varelas, the Greek Central Bank's head of distribution, best summed up this feeling by saying:
"A E200 banknote, let alone a E500 one, has no place in the Greek wallet. Don't forget that the highest denomination banknote a few days ago was 10,000 drachmas, equivalent to just E29.35."
This is confirmed by the fact that a 500 euro note amounts to over 40 euros, more than a Greek civil servant's average monthly salary. In fact, Greeks are the worst-paid workforce in Europe, and state employees' salaries amount to just 70 per cent of the European average or 42 per cent of what Danish civil servants, who head the league, earn in a month. Greek doctors are, similarly, the worst-paid in Europe. Their annual incomes range from a paltry E8,052 to a somewhat meatier E39,360, but these figures pale before the pay packets enjoyed by German doctors -- they earn as much as E166,000 per annum and certainly no less than E114,000.
Along with the realisation that Greece is lagging behind the rest of Europe in terms of income, there is the recognition that, in order to survive, Greece will have to learn to compete. In recent days, those voices of reason beginning to sound the alarm have increased. They say that taking up the euro is not the tough part; achieving convergence is. And, as respected columnist Dimitris Papadokostopoulos noted in the Kathimerini newspaper, Greeks may have taken to spending euros with glad abandon and polished zeal but they still remain little more than a province of Europe, forced, in order to survive, to produce high-quality products that are cheap and competitive. This is of paramount importance given that it is the sole way by which the country can earn the currency that will enable it to buy consumer goods and maximise its industrial capacity. Zezas Zikos, writing in To Vima, notes that Greeks will be called upon to make the most painful sacrifices over the crucial issues of reforming their ailing social welfare system and reducing unemployment, areas in which the present government has lagged behind its promises. We may have become Europeans, Zikos suggests, but let no one be fooled; we are poor Europeans.
Adopting the euro has imposed upon the Greek government a commitment to maintaining the country's high rate of economic growth -- currently the highest in Europe at 3.8 per cent -- alongside low levels of inflation so that, within five years, Greek salaries can reach 85 per cent of the EU average, compared to 70 per cent today. Until then, Greece remains the cheapest and poorest country in the EU, a condition that is compounded by its lack of competitiveness. Greece's capacity for competitiveness, meanwhile, is not likely to improve significantly, given that the drachma has, from the start, been pegged to the euro at what many economists feel is an unrealistically high exchange rate.
Unfortunately, prospects for a rapid improvement in the Greek economy are not rosy. The country's impressive 3.8 per cent growth rate is a chimera fuelled by massive cash flows from the EU, without which growth would languish at 1 per cent-1.5 per cent -- the lowest rate in the EU. Given this, and given that Greek exports declined instead of rising, between January and August 2001, by a stunning 11.5 per cent, it is likely that not only will Greece fail to achieve convergence within the next 10 years but will actually float further and further apart from its European neighbours. Today's confidence- inspiring economic situation owes much to a tangle of factors, chief of which are the consistently low credit rates that have fuelled the Greek market's boom in the past few years. The writing is already on the wall, and it has become de rigeur among Greek economists to quote Lenin's dictum that the economy is taking one step forward and two steps back.
The disadvantages, however, are offset by some short-term advantages, most notably in the cost of living. A Coca-Cola costs half a Euro in Greece but double that in Finland. A Big Mac costs E2.11 in Greece but a wallet-busting E4.50 in Finland. While meeting convergence criteria on consumer goods is sure to put an end to these imbalances, the final compromise is more likely to be closer to the Finnish high than the Greek low. But even there, Greece will not be given substantial relief, with economists predicting that prices will converge, i.e. go up, before salaries. Inflation, currently double the rate of the wealthier northern European countries, will also be increasing at higher levels due to the greater increase in prices. This is a problem that is faced by countries with a high rate of development in their economies, Portugal and Ireland being other examples. And the final nail in the Greek economy's coffin, should Greek economists have learned anything from the salary increases of the 1980s, is that sudden increases in income lead to galloping inflation and a stagnant economy. The problem was then solved with three successive devaluations of the Greek drachma -- in the age of the euro, this is no longer an option.
The current mood of buoyant optimism may well evaporate in the coming months or years. But, as a brief glance through the Greek media will tell one, Greeks have begun to shake off their old complacency and are finally asking themselves serious questions about their future in the EU scheme of things.
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