Episode 527: The Amazing Shrinking Economy Might Stop Shrinking : Planet Money Greece, the country we all worried might take down the euro and Europe, may finally be ready to turn around.

Episode 527: The Amazing Shrinking Economy Might Stop Shrinking

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When your economy is shrinking year after year after year, it helps to have a sense of humor. A couple of years ago, our colleague Chana Joffe-Walt went to Greece in the darkest days of Greece and the European debt crisis. And she met a very charming couple - Katerina Margaritou and Elias Tilligadas.

CHANA JOFFE-WALT, BYLINE: You know how couples often have a routine they perform for other people? Katerina and Elias's shtick is really basic. She says something hopeful and optimistic, and he craps on it. She laughs and then ignores him. They'll do this with small stuff all the time. The weather is nice, she'll say. No, it's cloudy, he'll grumble. It's, like, the worst day all month. What are you, blind? Laugh. Ignore. Repeat. But it's not just small stuff. They do this routine at dinner with friends, with stuff that seems kind of intimate, like their dreams for the future.

KATERINA MARGARITOU: He was married twice. I'm going to be his third. (Laughter).

ELIAS TILLIGADAS: No, no, no, no, no, no.

JOFFE-WALT: Elias is mumbling no from across the room. And then he turns to the friends to say, the Greek Orthodox Church only lets you have three weddings.

TILLIGADAS: I haven't decided yet if I'm going to waste that with her.

MARGARITOU: (Laughter) Then you must think (unintelligible).

KESTENBAUM: In Greece, the last six years have been like that movie "Groundhog Day" - "Groundhog Day" if the screenwriter had made the bad decision to make the narrative about economics. Every year, it has been the same thing over and over. Every year, the official statistics come out, and the news is always bad. The economy shrunk. Oh, it shrunk. Again, still shrinking. Yep, shrunk again. It's this amazing thing.


But new official forecasts - and, by the way, I should say you need to be wary of anything called official forecasts when it comes to Greece - but these official forecasts are that the amazing shrinking economy will finally stop shrinking. Greece, Greece, the country that we all worried might take down the entire Euro in Europe and send the U.S. back into recession - Greece may be finally ready to turn around.

Hello, and welcome to PLANET MONEY. I'm Robert Smith.

KESTENBAUM: And I'm David Kestenbaum. Today on the show, we check back in with Elias and Katerina, an ordinary middle-class couple trying to get married while everything around them is falling apart.


NO: (Singing) I'm only human. I'm full of mistakes. I know you're looking out your window.

KESTENBAUM: Life in Greece back then, a couple years ago, was pretty surreal. Katerina's job - she worked in a chemistry lab. Her job had stopped paying her. But every day, she got up and she went to work anyway. What else were you going to do?

MARGARITOU: They don't pay us because they have no money.

JOFFE-WALT: So do you think that you'll get paid the back pay?



MARGARITOU: Yes, I'm sure.

SMITH: No, Elias says, shaking his head. Elias started talking. I was never clear if he was joking about this or not. He started to say that they might have to start growing their own food. Elias, a government safety inspection officer, was thinking about learning how to farm.

TILLIGADAS: Veggies, probably animals, as in, you know, chicken, geese, that sort of stuff.

MARGARITOU: (Laughter) No, no, no, no, no.

SMITH: I'm trying to survive and trying to sell a little bit of the things I'm going to produce to others, you know, to get cash or exchange products. So that's it.

JOFFE-WALT: So you're going to, like, have a barter economy?


JOFFE-WALT: I have to...

TILLIGADAS: Yeah, can you rephrase that? Because it doesn't sound good.

MARGARITOU: Actually, I want to leave Greece - to leave from here, from Greece.

TILLIGADAS: No, I'm not going to leave Greece for the second time.

MARGARITOU: I'd like to leave because we have no future here. I...

TILLIGADAS: No, no, no, no. If I leave now, there would be nobody else left behind to save this country.

MARGARITOU: Ha. I think that nobody can save Greece now. I'm so disappointed.

KESTENBAUM: So that is where we left things a couple of years ago. Last week, I reached out to Katerina and Elias again. They did get married. I asked how the wedding went, and they dropped into their usual roles.

MARGARITOU: It was lovely. Great.

TILLIGADAS: The weather was OK.

KESTENBAUM: Katerina upbeat, Elias less so. They have not left Greece. They are still there in Athens. And that thing that Elias said would never happen - it happened. Katerina's paychecks started coming again.

MARGARITOU: I have my job. I'm getting paid. I'm getting paid every month.

KESTENBAUM: Have you gotten all your back pay?




MARGARITOU: Yeah. Yeah. They don't owe me anything.

KESTENBAUM: When we talked last time, Katerina, you said, yes, yes, I will get paid. And Elias said, no, no, you will never get the backpay.

MARGARITOU: Well, they did (laughter). He was a pessimist.

SMITH: This little miracle - Katerina getting her paychecks - this happened because of this bigger, equally miraculous thing that happened in Greece. The government actually balanced its budget.

KESTENBAUM: Katerina works at a government lab where they test toys, actually, that are imported. The government, before, did not have enough money to send out her paycheck. Now the money it collects through taxes, et cetera, is enough to pay Katerina and its other bills.



SMITH: Yeah.

KESTENBAUM: It's a little less yay when you realize how the government has achieved this feat. So there are two ways you can balance a budget, right? You can bring in more money, or you can spend less. And the Greek government did both. It cut spending by getting rid of a bunch of jobs. And for the workers it did keep, it cut their salaries. Elias and Katerina both worked for the government, and both of them took pay cuts - not small ones.

TILLIGADAS: Forty-five percent.

KESTENBAUM: Your salary was cut 45%?



MARGARITOU: Mine only 30%. I was very lucky.

SMITH: That's the first thing the government did - cut spending. It also found a way to bring more money in - it raised taxes.

KESTENBAUM: Now, Greece has a pretty troubled history with collecting taxes. A lot of people don't pay. They hide their incomes. Tax enforcement is often regarded as a joke. So one of the things that's changed is that the Greek government is trying an unusual way to collect some of its revenue. It set up a new emergency property tax that got tacked on to people's electricity bills.

SMITH: Now they had a way to enforce that property tax. If you don't pay it, your electricity could get cut off. Family plunged into darkness - it was clever. And as you can expect, it was hugely unpopular.

KESTENBAUM: Nicholas Economides is a professor at NYU. He says this does not really fix the bigger problem of tax evasion. It is still far too common for a dentist to get paid in cash and just never report it on his income tax.

NICHOLAS ECONOMIDES: The real problem in Greece in taxation is expanding the tax base to include those who traditionally and for decades have not paid any taxes or have paid a very small percentage of what they should be paying.

KESTENBAUM: And the electricity bill trick doesn't fix that?

ECONOMIDES: No, it doesn't. It really doesn't. But it does provide enough revenue for the government to keep going.

KESTENBAUM: Just enough to keep going. That is progress in Greece.

SMITH: Because in the Greek economy the biggest problem was the Greek government itself. The government spent too much. It lied about it. It lied about it some more. It wasted huge amounts of money. It borrowed huge amounts of money - money they couldn't pay back. And all of these government mistakes took down the rest of the economy, too. The banks who lent money to the government, they were on the brink of failure. Private businesses couldn't get any money.

KESTENBAUM: So when we say that the Greek government balanced its budget, is not such a basket case anymore, that is good news for all of Greece. That is a large reason why people are predicting that this will be the year that the economy as a whole finally starts to turn around. The Greek government is predicting that the International Monetary Fund has a similar forecast. So does the European Commission.

SMITH: In general, the rest of the world seems a lot less freaked out about Greece. People are even OK lending the Greek government money again. Economides points out that the yield on Greek government bonds right now is, like, 7%, meaning investors are saying, hey, Greek government, I will loan you money, but you've got to pay me 7% interest.

KESTENBAUM: Which is totally OK (laughter).

SMITH: That is perfectly normal in this world. And there for a long while, it was over 20%.

KESTENBAUM: Economides says, yes, it has been six years of pain in Greece, but the country is in a better place now.

ECONOMIDES: I'm very optimistic that the Greek economy will expand this year. We're just not sure how big this expansion is going to be - if it's going to be half a percent, 1%, 1.5%.

SMITH: Now, any amount of growth, even that small, is something hopeful for the Greek economy. But you have to remember how big a hole the country is in. The economy has shrunk by something like 25%, which is a huge number. But let's give you a picture of what it actually looks like. Now, just last week there was a news story that said in downtown Athens, nearly one-third of all businesses had closed. That's lights out - boarded up in the capital.

KESTENBAUM: The unemployment rate is around 25%, which means you've got previously middle-class people now earning nothing or very little lining up every week at soup kitchens, lining up at medical clinics. To save money, some people are using wood logs to heat their homes. Our translator over there told me, the other day she smelled heating oil and was like, wow, I'd totally forgotten what that smelled like. It's been so long.

SMITH: Yeah. Things are grim in that sort of grinding, it's never going to end kind of way.

KESTENBAUM: Which is why Katherina had talked about leaving, why Elias was thinking of growing his own food - Elias, when we talked to him a couple of years ago, he mentioned this one economist who he thought captured his personal sort of world view. The guy is famous in Greece. He was quoted all the time saying things like, the Greek economy is finished. Elias was a fan.

TILLIGADAS: Oh, that half baldy guy, the economist - Varoufakis - the half baldy one. Yeah, about 40 years or 45 years old, right?

JOFFE-WALT: Wait, what are you calling him, half baldy?

TILLIGADAS: Half baldy - has a receding hairline.

JOFFE-WALT: (Laughter).

KESTENBAUM: Varoufakis was famous in Greece. He had written the most unusual of things - a bestselling book that was a dictionary of economic terms, though, you know, in a crisis, that kind of thing can sell. The book did very, very well, though his publisher was never (laughter) able to pay him. We want to see how Varoufakis was, so I called him up again last week. And I asked if he'd ever gotten any money from the book.

YANIS VAROUFAKIS: Last summer, I did receive a small amount in lieu of the payments, a fraction of what I was owed. But after that, that's it, you know? I mean, I consider this to be a boon (laughter). This is the state of Greece. You get a fraction of what you're owed, and you're happy.

SMITH: Varoufakis is not optimistic that Greece will turnaround this year. Even that tepid forecast of half-percent growth, 1% growth, that seems very unlikely to him.

KESTENBAUM: The Greek economy has been shrinking for how long?

VAROUFAKIS: Six years.

KESTENBAUM: That's a really long time.

VAROUFAKIS: It is, indeed. It is the longest slump in any peacetime economy in the last 200 years. I don't see any sign of recovering. An economy that has been in a tailspin, like the Greek one has over the last six years, in order to be able properly to recover or to be talking about meaningful recovery, you need - the first sign of recovery is a pickup in investment.

SMITH: That's the only way people are going to get back to work, he says - someone invests in a new business - foreign companies invest and open up shop. He just doesn't see that happening yet.

KESTENBAUM: Greece, he points out, still has all these huge bailout loans from the international community, from the European Union, from the European Central Bank, from the International Monetary Fund. It's got to repay those loans. He is not a fan of the electricity bill tax or of the huge job cuts or this whole austerity approach to trying to fix the Greek economy. I said, do you see any good news? And he said, well, the government has fixed this one small but superimportant thing.

VAROUFAKIS: Over the last few years, what we've had is a very significant improvement in the capacity of government to know what it is doing (laughter). Up until 2010, 2011, the government didn't even know what it was doing. It had - didn't have a proper system of accounting. Its information technology systems were ridiculous. I know it for a fact that the minister of finance back then had to struggle in order to find out what the liabilities and the assets of the Greek state were. This is one area where we are far, far better now than we were back then. Greek statistics are no longer a joke.

SMITH: In other words, a year from now, we will know with great precision and confidence just how bad things are in Greece. Are they worse? They stopped getting worse? Are things finally turning around?

KESTENBAUM: Before I said goodbye to Katerina and Elias, I asked them what they thought about the state of things there.

What do you make of all these predictions that the Greek economy is going to turn around this year?

MARGARITOU: I want to answer to this. Ha, ha, ha, ha, ha. That's my answer (laughter).


MARGARITOU: It's funny to joke (laughter).

TILLIGADAS: The numbers are getting better. The people are getting worse. Our lives are getting worse.

KESTENBAUM: We will check in again a year from now and see how things actually turned out. Elias, by the way - he has started farming on a friend's land outside of the city. He's growing olives and vegetables - says it does make him feel a little bit better.


NO: (Singing) Please don't let worry put those lines on your face. You'll be all right, all right.

SMITH: As always, we love to hear what you think of the show - our email address - planetmoney@npr.org.

KESTENBAUM: We're also on Facebook, Spotify and Twitter. I'm David Kestenbaum.

SMITH: And I'm Robert Smith. Thanks for listening.


NO: (Singing) Stay with me. Wasn't there a place for me inside your heart? Stay with me. We were never meant to be apart. Stay with me. Won't you run away with me when life gets hard?

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