• As Greek economy collapses and the politicians refuse cuts for themselves, the Greeks take it out on -- Germany

The front page of last Thurday's Greek newspaper Demokratia was clear: "Dachau!" it headlined over the paper's full length. Also on the front page was a picture of German Chancellor Angela Merkel in a Nazi uniform. Demokratia is a right-wing newspaper. Leftist Greek papers and organizations are even stronger in their anti-German feelings. During a trade union protest in Athens last week, flags of the Federal Republic of Germany were burned alongside flags of Nazi Germany. Next April, Greece is holding general elections. Bashing Germany promises to yield electoral rewards.

The Greeks are blaming Germany for their present economic predicament. That is hardly fair given that Greece is virtually bankrupt and only manages to survive thanks to Berlin's generosity. Two years ago, Germany and the other countries of the eurozone, the group of 17 European nations using the euro as their common currency, bailed out Greece with €110bn ($145.2bn). Germany provided the bulk of the money. Today, German Chancellor Merkel is prepared to bail out Athens again, with an even more staggering €130bn ($171.6bn). She is doing so despite the unpopularity of the bailouts with her own German electorate. In return for her generosity, however, Merkel wants the Greeks to implement a credible austerity program. But the Greeks are not grateful and shout abuse at Merkel and the Germans.

Greece seems to be a bottomless pit. Even if Greece's private creditors write down 70% of the country's debt and the Greek government implements all the austerity measures which it has promised to take so far, the Greek debt of 170% of GDP will only fall to 136% by 2020, while Germany and the eurozone demand that it be reduced by that time to 120% of GDP. Hence, the eurozone demands that the Greeks adopt additional austerity measures. If not, more aid will not be forthcoming and Greece will go bankrupt by the end of next month when it needs to refinance existing debt. A so-called "troika," consisting of representatives of three organizations – the European Commission, the European Central Bank and the IMF – regularly visits Greece to supervise the seriousness and the progress of the Greek austerity efforts. The troika's reports are hardly encouraging.

The Greek state is collapsing rapidly. Its failure to collect taxes is an indication of the unraveling of the government apparatus. Last week, the Greek authorities admitted that they systematically fail to collect tax penalties. Over the last two years, the Greek authorities issued a total of €8.6bn ($11.3bn) in fines for tax evasion and other tax-related offenses. However, only 1% of this sum ended up in the public coffers. Corruption has exacerbated the Greek problems. It is estimated that the country loses an amount of €15bn ($19.8bn) in unpaid taxes every year. More than 60,000 Greek households have investments exceeding €1m ($1.3m), while only 5,000 Greeks declare annual incomes that exceed €100,000. Tax officials often agree to an under-the-counter payment in exchange for not imposing penalties. There is a backlog of 165,000 pending tax cases, representing about half of the total arrears of €60bn ($79.2bn), according to a European Commission report.

Being unable or unwilling to collect taxes and keep its austerity promises, Greece has lost international credibility. The eurozone countries are skeptical about Greek declarations that more austerity measures and economic reforms, such as privatization, will be implemented and tax revenue will be raised. Germany and the other eurozone members are tired of the continued failure of Greece to keep its promises. If the eurozone countries do not provide additional billions within the next four weeks, Greece will default, possibly dragging the euro down as a consequence. Merkel insists that if the German taxpayers bail out Greece again, the Greek politicians must stick to their part of the deal and deliver, after the April elections as well.

The Greek population, however, after two years of austerity is rebelling. During this period wages were cut, pensions slashed, income and property taxes doubled (though probably not collected), unemployment rose to 20%, thousands of businesses – 111,000 last year alone – closed down, half a million of the 11 million Greeks left the country looking for a better life elsewhere, and half a million claim they have seen almost all their savings evaporate. Suicide rates have gone up 40%, the fastest increase in Europe.

Anger among ordinary Greeks is rising. Last Friday, Greece's largest police trade union threatened troika inspectors with arrest. According to the union, the troika, through its insistence on harsh austerity measures, are "trying to overturn the Greek democratic order, violate national sovereignty and steal essential goods from the Greek people."

Every other country in Greece's dire situation would devaluate its currency. However, as Greece is a member of the eurozone, it cannot devaluate. This leaves its politicians no other option but to subject the people to ever harsher austerity measures. The Greek government is currently proposing to cut wages by an additional 22% and dismiss 150,000 civil servants, including 15,000 this year.

Significantly, however, the Greek politicians are sparing themselves. The members of the Greek parliament refuse to lower their own salaries, which can amount to the net sum of €8,500 ($11,200) a month – excluding an expenses allowance of €4,900 ($6,500) – and are among the highest for parliamentarians in the entire eurozone. In contrast, the average minimum wage in Greece is €871 ($1,149) and will be cut by 22%. As the Brussels based blog Open Europe writes "There is clearly something wrong in a place where 'normal' citizens have either lost their jobs are faced a series of pay cuts over the last two years, while the political class – which certainly bear a good deal of responsibility for the conditions Greece finds itself in – continues to ignore the option of substantially reducing their own salaries. It wouldn't do a whole lot to solve Greece's debt problems, but it would surely be the right thing to do."

And yet, ironically, the Greeks are taking their anger out on Germany rather than their own politicians. Perhaps they realize that Merkel's obstinate insistence that Greece remain in the euro – and, hence, will never be able to devaluate – is dooming ordinary Greeks to ever more austerity. The only solution to the Greek tragedy would be a return of Greece to the drachma. This would, however, imply an admission by the ruling European establishment that their experiment of imposing a common currency on the continent has failed.

Unless the straitjacket of the single currency is removed, the Greeks will face a dismal and prolonged future of stagnant living standards. It is not surprising that ordinary Greeks are not eager to accept it. Last October, in an op-ed piece on the euro, Norman Lamont, Britain's former Chancellor of the Exchequer, who kept Britain out of the eurozone, wrote "As Winston Churchill once observed, if we do not face reality, reality will face us," and added: "It would be better to recognize that the euro experiment has failed. Europe, Britain and the rest of the world would be better off if the euro had never happened. It would be preferable if it were now dismantled in an orderly manner."

Merkel's refusal to face reality is making her extremely unpopular. Not just in Greece, but soon also in Germany.

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