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Economic Problems Threaten Greece's Place In EU

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Economic Problems Threaten Greece's Place In EU

Europe

Economic Problems Threaten Greece's Place In EU

Economic Problems Threaten Greece's Place In EU

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  • <iframe src="https://www.npr.org/player/embed/123234869/123251622" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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A firefighter holds a flare as others chant slogans i

A firefighter holds a flare as others chant slogans outside the Greek parliament during a protest in central Athens last month. About 2,000 firefighters demonstrated against planned spending cuts by the center-left government, which is struggling to reform Greece's debt-ridden economy and plug a vast budget deficit. Prime Minister George Papandreou has ruled out pay increases for most civil servants this year, citing the state of the public finances, and says public sector hirings will be limited. Petros Giannakouris/AP hide caption

toggle caption Petros Giannakouris/AP
A firefighter holds a flare as others chant slogans

A firefighter holds a flare as others chant slogans outside the Greek parliament during a protest in central Athens last month. About 2,000 firefighters demonstrated against planned spending cuts by the center-left government, which is struggling to reform Greece's debt-ridden economy and plug a vast budget deficit. Prime Minister George Papandreou has ruled out pay increases for most civil servants this year, citing the state of the public finances, and says public sector hirings will be limited.

Petros Giannakouris/AP

Greece is experiencing a budget crisis so severe that the country may lose its footing in the European Union. Athens is reporting a deficit that is four times the EU limit, which means that Greece could be in danger of losing the euro as its national currency.

The government has promised tough austerity measures, but many Greeks say they are in no mood for sacrifice.

Farmers are blocking border crossings, highways and major ports to demonstrate their frustration. They say they're desperate. Cheap imports and middlemen's charges are apparently pushing Greek produce out of major markets.

Pavlos Issaris grows potatoes, wheat and corn. He says the cost of doing business is putting him out of business. He and other farmers want the government to provide subsidies to reduce the price of diesel and other necessities. And Issaris says he also wants the government to more aggressively control imports.

But the new government of Socialist Prime Minister George Papandreou is resisting subsidies. Athens is trying to reassure its EU partners with a plan that includes tax hikes and sharp cutbacks in the country's enormous public sector.

Nearly 1 in 10 Greeks is employed by the government as a civil servant; that's almost 1 million people. But Papandreou's pledge to trim that number has already triggered protests. Civil servants are planning nationwide strikes this month.

The government also has drawn criticism from university students who now doubt that there will be enough jobs for them. Angry posters fill the walls of the entry hall at Athens University's economics department. Students there are skeptical that the government will be able to jump-start Greece's economy.

Valia Floridis, 21, is looking for work abroad. She says many young Greeks feel they have no future here.

"It depends on their dreams. If they just want to have a job and salary to eat and sleep and live without prospects, it's OK. But if you want more, if you want something great, if you have big dreams, no. It's not good here," Floridis says.

Finance Minister George Papaconstantinou says one of the biggest challenges facing the government's austerity plan is that few Greeks believe it will ever be implemented. This is the ninth such effort in 10 years. Previous plans were abandoned after protests from angry workers.

"People have a hard time believing that we're actually going to do what we say we are going to do. We are battling against perceptions, and perceptions change only when people see you are implementing your agenda," Papaconstantinou says.

There are other challenges, too. Athens must find a way to curb rampant tax evasion in the country. It's estimated that one-third of Greek taxpayers do not declare their income.

Widespread corruption also is a drain on both the government and the Greek people. Each year, nearly every Greek family spends about $2,500 in bribes. People call them fakelaki, which is the Greek word for "envelopes." And fakelaki help secure just about anything in the public sector — from a vehicle inspection to a building license.

Papaconstantinou says Greeks pay huge bribes in the health sector, too.

"They have to pay for a doctor, for a hospital operation, which in theory is free," he says. "What has been lost is this bond of trust between the state and the citizen, and this is what we need to put back together."

Many European analysts are skeptical that Greece can put its house back in order on its own. They believe there is a risk of Greece defaulting on its debt payments — endangering the stability of the entire zone of countries in Europe that use the euro as currency. At present, 16 countries are in the eurozone.

Greece is not alone in its economic woes. Spiraling debt also has pushed Ireland, Portugal, Spain and Italy to the brink.

Economic analyst Babis Papadimitriou says the Greek financial crisis has put a spotlight on the inherent weakness of the single currency union.

"It is very hard, and it's very dangerous to create a monetary zone with a unique currency without a common and well-coordinated finance policy and public finance policy," Papadimitriou says.

If the prime minister's austerity measures aren't enough to stabilize Greece's economy, then Athens must rely on help from its EU partners. And reluctantly, EU officials are beginning to discuss a bailout.

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