Editor’s note: The following is from The Banker’s Editor-in-Chief, aka Mom.
Mom spends a month every year on a Greek island, populated by ex-pats. She has watched the island move from the drachma-economy of extremely cheap living, to a much more expensive, but possibly unsustainable, economic model. All sides blame others for this crisis. In the details of her note are some hints at the causes and tensions of the crisis.
Greece is in the midst of a financial panic, likely the last few moments before they officially leave the euro and default. 1
From Mom, June 28, 2015
Afternoon update – I left the beach and went to the port village hoping to use the ATM to get euros for my return to Athens and then the States. Empty.
Morning update – Two summers ago, at an island luncheon, a Greek central banker remarked that in light of the ongoing crisis, Greeks would have to start paying the taxes they owe. But now, as default looms in a few days, I see little change here. Only about half the restaurants give bills rung up on cash registers; the rest still write them down on paper and presumably do not report them as income. On my way here, one taxi driver from Athens proudly submitted his bill to me with the tax listed, but he is a notable exception. All encounters with bureaucracy, whether at the bank, the town hall, or the ferry ticket office take enough time to infuriate me and that inefficiency may discourage tax-paying. The Greeks, mostly self-employed entrepreneurial taverna owners that I deal with are delightful, helpful, and fatalistic about a bankruptcy over which they have no control. A few consider themselves and fellow countrymen to blame for overspending and over-borrowing, but others talk about the rape and pillage of Greece by the Germans in WWII as a reason for not paying the current debt. The majority of the island residents voted for the current government, which has said the existing debt terms are unacceptable because of the suffering of so many unemployed Greeks.
The Brits, Dutch, and Germans who have summer houses here love Greece and the Greeks they know, but they are very annoyed that their high taxes, funneled here through EU projects, have been wasted by poor planning and execution as well as by outright corruption in Greece. Lots of unhappy jokes about the 22 million euros spent on the new island reservoir that leaks and the small amounts for hiking paths that tourists use that are now overgrown and have rotting picnic tables. The Europeans are keeping only a bare minimum of euros in their Greek bank accounts so they won’t lose much if those accounts are converted to a devalued “Drachma.” A German partner of the retired local priest who lives here year round, however, has resisted that euro flight and proudly kept significant savings in the local National Bank of Greece.
When I first came to the little Greek island – where I spend a month every summer – 30 years ago, the Old Village (high on the mountain) had no electricity, one telephone, no paved roads, but many tavernas with beautiful views and fairly quiet generators. Now, especially since joining the EU, and having years of a huge influx of Northern European cash, we have too many cars and scooters, but tourism has never been truly busy since the conversion to the Euro. When the super-cheap prices of tours using the drachma finished, those tourists moved on to Turkey and Bulgaria. Other Europeans and the few adventurous Americans who can afford the new Euro prices either don’t find Greece “shaped-up” enough or resent the ugly things some Greeks have been saying about them as “pillaging” creditors.
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- Either default ‘again,’ or default ‘officially’ for the first time on their sovereign debt, depending on your view of what happened over the past few years of debt restructuring and debt extension. ↩