The Next Greek Crisis Is Coming

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A refugee holds an umbrella as he tries to light a fire during rainy weather at a makeshift camp in the northern border village of Idomeni, April 8. Bulent Kilic/AFP/Getty

As you approach the northern Greek city of Kozani, which stands on a plateau surrounded by mountains, you start to see smoke—thick white clouds floating above the knotty shrubs and sun-dappled hills of Western Macedonia. This is the heart of Greece’s coal industry; the plumes come from the chimneys of power stations dotted around the region.

When most Greeks think of Kozani, they think of coal. In the 1950s, the Public Power Corp. (PPC), now Greece’s biggest electric company, took over the mines here and brought prosperity to this poor, largely agricultural corner of northern Greece. Locals soon abandoned their traditional ways of making a living: saffron cultivation, marble production and fur-making. Mining was not easy, but the workers were well-compensated. The city’s businesses flourished.

Those days are long over. Kozani, a small city of 75,000, has gone from providing 70 percent of Greece’s electricity to less than 40 percent. Fifteen years ago, the PPC employed about 9,000 people. Now that number has dropped by a third. Unlike the slow and steady decline of other coal towns in Europe, Kozani’s slump has been rapid, accelerated by the Greek debt crisis that began in 2010. In Western Macedonia, the region where Kozani lies, roughly one in three citizens is unemployed, twice the rate of 2001. Among 15- to 24-year-olds, that number soars to more than 70 percent, the highest of any region in Europe. All of Greece has suffered through the financial crisis—within the past decade, it has experienced the biggest drop in happiness of any country in the world—but in rural areas like Kozani, Greeks say they have been hit especially hard.

“We built our lives around the coal mines,” says Ioannis Kostarellas, 35, who grew up in Kozani. “The energy from here powered the whole country, but now we are being left to deal with our problems alone.” Those problems kept mounting: unemployment, environmental damage left by the mines, an exodus of young people. Residents felt things could barely get worse in Kozani. And then, in February, the refugees arrived.

Europe has been beset by so many woes recently that its leaders and citizens almost seem to have forgotten about the country that demanded so much attention over the past few years (other than Greece’s role as a way station for refugees). In the past six months, homegrown extremists have carried out attacks in Paris and Brussels that claimed 162 lives. Over the same period, the largest migration of people since the end of World War II prompted Hungary, Slovenia, Austria and others to suspend the open internal borders of the Schengen zone and build new fences, calling into question one of the founding values of the European Union—freedom of movement.

Brussels is also facing growing Euroskepticism from many of its partners, including the U.K., which may well vote to leave the union in June. Europe has had a lot to worry about beyond the economy of the little country to the south whose debts seemed to threaten the EU’s existence.

04_29_Greece_11 Young boys play at a refugee camp at the Greek-Macedonian border on March 05, 2016 in Idomeni, Greece. The transit camp at the border is becoming increasingly overcrowded as thousands of refugees continue to arrive from Athens and the Greek Islands. Macedonia's border with Greece has been sealed since March 9. According to local authorities approximately 11,000 refugees and migrants now remain stuck at the border as they wait to enter Macedonia to continue their journey North into Western Europe. Dan Kitwood/Getty

But while Europeans are worrying about suicide bombers and hundreds of thousands of refugees crossing the continent, a two-pronged new crisis has been building in Greece. In early March, the Republic of Macedonia sealed its border with Greece, leaving tens of thousands of refugees trapped in Greece, which until then had mainly been a passageway for asylum seekers leaving Turkey for new lives in Northern Europe.

And here’s the other bad news no one has been talking about: The Greek economy is showing little sign of improvement. In June and July, the country faces more than 10 billion euros ($11.3 billion) of debt repayments, money it will not have unless Prime Minister Alexis Tsipras can negotiate with creditors to access more money from its third bailout package. The four other eurozone countries that were bailed out by their European partners a few years ago are now recovering relatively well.

Greece is not. It’s tempting to pose the same binary question that has been asked for several years now: Can Greece survive? Of course it will; countries generally don’t just go away. Greeks, though, have another, more pressing question: Will this ever end?

A Broad Sense of Defiance

Greece is not a dominant player in the EU, which it joined in 1981, but its place in the project was never in question. In a nod to the roots of European civilization, inspiration for the euro symbol ( €) even came from the Greek epsilon; the two parallel lines were intended to represent the euro’s stability.

But in late 2009, Greece very much became the focal point of the EU—for all the wrong reasons. It emerged that year that Greek governments had long been misreporting debt levels and spending carelessly. National debt had risen to 299 billion euros ($338 billion), 130 percent of its gross domestic product, and Greece had no apparent way to pay it back. A 2011 European Commission report revealed that Greece had also failed to collect 60 billion euros ($68 billion) in taxes.

Under the laws that govern Europe’s monetary union, Greece could no longer simply print its own money and stimulate growth. In May 2010, the European Commission, the European Central Bank and the International Monetary Fund (IMF)—collectively known as the troika—offered Greece a 110 billion euro ($124 billion) bailout, with strict austerity conditions: The Greek government would have to hike taxes, implement huge spending cuts and dramatically shrink its bloated public sector.

04_29_Greece_09 A woman walks past graffiti entitled "The Death of Euro" by street artist Goin in Athens on February 20, 2015. Louisa Gouliamaki/AFP/Getty

Bad quickly became worse. In the summer of 2011, Greece veered to the brink of default, and creditors agreed to a second bailout worth 130 billion euros ($147 billion). Since 2007, the Greek economy has contracted by 25 percent; a quarter of all companies have gone out of business, and wages are down 38 percent since 2009. The average monthly pension payment is 833 euros ($941), down from 1,350 euros ($1,526) in 2009, and nearly half of all pensioners receive pensions below the poverty line of 665 euros ($751).

Between 2008 and 2011, reported depression rates increased from 3.3 to 8.2 percent. One in four working-age Greeks—1.17 million people—is unemployed, most of them for more than 12 months.

And then, last year, for a heady, slightly surreal six-month period, the people of Greece dared to believe things were getting better. In January 2015, the country elected Tsipras, the young leader of the radical left-wing Syriza party, on promises to overturn austerity, force Greece’s creditors to renegotiate bailout terms and crack down on corruption and tax evasion. He ignited hope, an emotion all too rare after so many years of crisis.

Tsipras’s patriotism-infused rhetoric created a broad sense of defiance that united elements at both ends of the political spectrum. In a referendum held in July, 61 percent of Greeks voted no on a bailout deal that would have imposed more austerity measures; crowds gathered jubilantly in Syntagma Square, waving flags and setting off firecrackers. “You made a very brave choice. The mandate you gave me is not the mandate of a rupture with Europe but a mandate to strengthen our negotiating position to seek a viable solution,” Tsipras said in a televised address.

The following month, after bumping up against political reality, the man who led the “no” campaign said yes to the strict conditions attached to Greece’s third bailout. The 85 billion euro ($96 billion) deal Tsipras had agreed to came with more of the same: spending limits, tax increases and the sale of state assets.

04_29_Greece_05 Members of Greece's far-right Golden Dawn party protest against a refugee relocation camp in the suburbs of Piraeus, Greece on February 8. Gerasimos Koilakos/LUZ/Redux

Young people were particularly disillusioned by Tsipras’s concessions to the troika. September’s snap legislative elections—the third time Greeks had been called to the polls in 2015—made it clear that the Greeks had grown disenchanted with any promise of change; turnout dropped to 56 percent, the lowest in Greece since the fall of its dictatorship in 1974. An April 13 report from the Foundation for Economic and Industrial Research , an influential Athens-based think tank, predicted that the recession will deepen this year, with Greece’s economy shrinking a further 1 percent, despite an expectation of some growth in the year’s second half.

“People don’t know if they are going to get paid next month, if there will be a new tax, another cut in salaries, an extra cut in pensions,” says Stefanos Loukopoulos, 32, who moved back to Athens two years ago after studying in England. “If you were a young couple thinking about starting a family, would you have a baby right now?”

Since the crisis, Greece’s birthrate has fallen by more than 10 percent to 1.1 to 1.3 live births per woman, one of the eurozone’s lowest. Analysts attribute the trend to rising poverty and women fearing that they will lose their jobs if they get pregnant. Greece’s native-born population has begun to rapidly decrease. “Most people cannot make dreams,” Loukopoulos says. “Forget about dreams, actually. They cannot even plan ahead.”

A Warehouse of Souls

For over a year, Greece was at the front line of the refugee crisis without really feeling its impact. The 1.2 million Syrians, Afghans, Iraqis and others who arrived in 2015, fleeing conflict, persecution and poverty beyond Europe’s borders, put pressure on Greece’s southern islands, particularly Lesbos, where around half of all boats leaving Turkey land. But once the refugees made it to the mainland, they headed north, hoping to reach Germany or other Northern European countries.

Outside the islands or the Greek-Macedonian border, it was difficult for most Greeks to grasp the scale of the crisis. A January survey conducted by Greek polling company Public Issue showed that only one in five Greeks was aware that more than a million migrants had passed through the country. This is perhaps why, as the Public Issue poll showed, two-thirds of them had positive feelings toward the refugees and did not want Greece to close its borders. Greece was just a transit country, receiving only 0.9 percent of the EU’s total share of asylum applications in 2015.

In late February, that began to change. On February 22, Macedonian officials at Greece’s northern border in Idomeni stopped Afghans (the second-largest group of refugees) from crossing and began imposing stricter controls on Syrians and Iraqis. On March 9, refugees found that the border was now closed to them all. The number of people stranded in the fields of Idomeni soared from a few hundred up to 14,000 in just a few weeks. More than 53,000 people are now trapped in the country, creating what Tsipras has called “a warehouse of souls.”

04_29_Greece_03 Refugees and migrants receive free food handed out by volunteers at the port of Piraeus, near Athens, Greece on March 8, 2016. Michalis Karagiannis/Reuters

The effects of the border closure were felt immediately, as a bottleneck of buses began to build up along the 340-mile highway that runs from Athens to the Republic of Macedonia. In the early evening of February 22, Lefteris Ioannidis, Kozani’s mayor, was at home with his family when he received a phone call from the police. They told him that five buses, carrying 380 mostly Syrian refugees—half of them children—had been diverted to a gas station 20 miles from Kozani.

Ioannidis, 39, who is tall with graying hair and glasses, was unruffled. He quickly decided to house the refugees overnight in an unused sports stadium on the edge of town, and his office put out a statement on social media asking citizens for their help. Within a few hours of their arrival, people had arrived to lay down mats in the gym and clean the bathrooms; they brought food, water, baby food, clothes and shoes for the refugees. Initially, the mayor expected them to stay only one or two nights. Nearly two months later, more than 2,000 refugees have been sheltered in Kozani before moving on, either to Idomeni or to government-run centers in the region. 

While a growing number of refugees found themselves stuck in Greece, the EU, led by German Chancellor Angela Merkel, was trying to stem the flow of refugees into Europe entirely. On March 18, the EU signed a controversial new deal in Brussels with Turkey. Under the terms of that deal, migrants who arrive in Greece after March 20 would be sent back to Turkey; in return for every one sent back, EU member states would eventually accept one Syrian refugee from Turkey. But there are more than 2.7 million Syrian refugees in Turkey, most of whom would like to come to Europe, and the resettlement scheme is capped at a mere 72,000.

In the past few weeks, Turkey has cracked down on the smugglers’ boats leaving its shores, leading to a dramatic drop in the number of migrants and refugees reaching Greece. On average, just 94 people arrived in Greece per day from April 4 to 10, down from an average of 1,213 in mid-March. Critics of the deal argue that blanket returns violate the non-refoulement principle of international law, which prohibits states from returning people to places where they would be exposed to the threat of persecution and violence. But the EU-Turkey agreement stipulates that each new arrival has the right to seek asylum and will be held in a detention center while waiting for his or her claim to be processed; if rejected, only then can the migrant be deported. The number of people applying for asylum in Greece has consequently surged, well beyond the capacity of Greece’s Asylum Service, says its director, Maria Stavropoulou.

The bulk of Stavropoulou’s funding comes from the EU. “People think that if money is given, we should be able to handle the situation, but it doesn’t work like that,” she says. “In a structure with 260 staff, you can maybe double it, but you can’t increase tenfold or twentyfold. At a time when the public sector was shrinking, we needed to grow. If there had been no austerity, it would have been much, much easier to build the service.”

The Love of Strangers

On the face of it, Greece’s two crises seem unconnected: One was decades in the making, the product of fiscal recklessness, the other an accident of geography. It initially seemed that Greece might be able to use its pivotal role in the refugee crisis to win concessions on budgetary targets from the troika, but the migrant situation deteriorated so rapidly that the two crises look more likely to exacerbate each other. If Germany, Europe’s economic powerhouse, has been stretched to its limit by the refugee influx, there’s little chance Greece can host tens of thousands of refugees in humane conditions, thus increasing the risk of clashes between migrant communities and the authorities. And if Greeks see their local authorities spending much-needed resources on newcomers, there may well be a rise in xenophobia.

04_29_Greece_10 Police forces separate far-right demonstrators holding Greek flags—protesting against the construction of a new transit camp for refugees and migrants—from pro-migrant demonstrators near the port of Piraeus, Greece on February 8, 2016. Louisa Gouliamaki/AFP/Getty

In the Greeks’ view, the two crises are becoming increasingly intertwined, reinforcing a popular narrative that, for the second time in eight months, the EU is turning its back on Greece and neglecting its principles. Analysts say that perception could make Greece less likely to cooperate with the EU when it comes to implementing the EU-Turkey deal. “If Greece feels betrayed once more by its EU brethren, it will be less likely to work with the EU and the refugees and migrants. Nobody wins,” says Demetrios Papademetriou, president emeritus of the Migration Policy Institute, based in Washington, D.C.

For now, though, most Greeks continue to demonstrate remarkable solidarity with the refugees. The first time I visited the Kozani stadium, on March 9, 440 Syrians and Iraqis were being sheltered there. Outside, T-shirts and trousers hung over the rails to dry in the sunshine; a black plastic banner strung between trees fluttered in the breeze (“Open the borders, stop the war,” it read in English and Arabic). Every day, some 30 or 40 volunteers from Kozani and surrounding villages came to the stadium to help out: providing five meals a day and offering first aid care and dental checks. Inside, drawings of doves covered the walls; half of the refugees in Kozani are children, so a group of volunteers come every day to do activities with them, including painting and putting on plays.

Scenes like these are taking place all around Greece. A nationwide poll conducted by Public Issue in January found that 58 percent of respondents had actively shown solidarity with the refugees—more than a third had provided food, 31 percent had given clothing, and 10 percent gave financial aid. Those numbers would suggest that more than 5 million Greeks have actively helped refugees.

The tradition of welcoming strangers has ancient roots; Greeks believe in the principle of philoxenia, which literally means “the love of strangers.” In Homer’s Odyssey, Odysseus returns home disguised as a beggar to test the hospitality of his swineherd. In ancient mythology, Zeus was, among other things, the god of travelers. He wore rags and disguised himself as a poor man to see how his people treated strangers. “We are not uniquely good, but we are certainly better than how we have often been portrayed in the global media in recent years,” says Ioannidis, Kozani’s mayor. “This has been an instance for our citizens to show our good side, our kindness.”

Greece’s history makes its people acutely empathetic to the feeling of not being in control of your future—something nearly all refugees feel. Four centuries of Ottoman Rule ended in the 1820s, followed in 1912-13 by the Balkan Wars, then World War I and a mass population exchange with Turkey that involved 400,000 Muslims in Greece and 1.3 million Anatolian Greeks living on the shores of the Black Sea being expelled from their ancestral homelands. (Many Greeks cite their refugee origins as a reason for their solidarity with the Syrians.) Then came a brutal Nazi occupation in the 1940s that claimed the lives of about 10 percent of the population and ruined the country’s economy and infrastructure. After the Germans left, there was civil war until 1949. In 1967, a right-wing military junta seized power, dissolving political parties. Greece emerged from the military dictatorship only in 1974.

Greeks also know what it’s like to be on the sharp end of cultural stereotyping—another daily reality many of the predominantly Muslim refugees will face in Europe. During the financial crisis, many Northern Europeans saw the Greeks and other people living around the Mediterranean as being too distracted by sunshine and wine to do the hard work necessary to maintain an efficient society. (The numbers do not align with such explanations: According to the Organization for Economic Co-operation and Development, the average Greek has, for the past 15 years, always worked more than 2,000 hours annually. By comparison, the average German clocked in 1,371 hours in 2014, the average Brit 1,677 and the average American 1,789.)

For months, the left-wing Syriza government has encouraged Greeks to feel solidarity with the downtrodden. Many elderly Greeks say the sight of people squatting in Athens’s squares, hungry and fleeing violence, reminds them of the Nazi occupation, a memory that inspires them to feel sympathy for the refugees.

04_29_Greece_02 Refugees from Afghanistan chant slogans in Omonia Square, in central Athens. Anti-racist organizations and refugees held a demonstration against the EU-Turkey deal in Omonia Square on March 30, asking for justice and open borders. Gerasimos Koilakos/Pacific Press/LightRocket/Getty

But will those feelings last? Greece is a remarkably homogeneous country, with more than 95 percent of the population identifying as Greek Orthodox. The country also has little experience integrating newcomers. Although experts point out that Greek culture is much closer to the Middle East than most European countries, the basic measures needed for integration—language lessons, jobs, schooling—are all more difficult to implement in the austerity-ravaged Greece of today. “The question is what happens when people realize that this is going to be permanent, that we are going to have to host tens or hundreds of thousands of people,” says Angelos Chryssogelos, a researcher at the Hellenic Observatory of the London School of Economics and associate fellow at foreign affairs think-tank Chatham House.

Most of those people don’t want to stay. “We just sit here waiting all day. It’s like a big jail,” says Lamia Khalil, a 35-year-old Syrian Kurd from Aleppo, in near-perfect English, the product of 10 years working at Aleppo International Airport. She is one of the 200 Syrian refugees currently living at the stadium in Kozani. “We are all losing time here. I just want to live my life again.”

If the European dream of prosperity seems out of reach for most Greeks, Syrians know it’s unlikely to come true for them. As frustrations build, hundreds of migrants and refugees in Idomeni have tried increasingly dangerous means of crossing the border. Three Afghans, one of whom was pregnant, drowned in a river by Idomeni; in April, Macedonian police have repeatedly used stun grenades, rubber bullets and tear gas to push back refugees trying to scale the border fence.

Everywhere I met refugees on two recent visits—in Idomeni, Kozani and Athens—there was an almost universal awareness that Greece was not the promised land. “Greece has a big enough burden already,” says one young Palestinian man in the Port of Piraeus, near Athens, where 5,000 refugees are camped out.

Chancellor Mercy?

In a turn no one would have predicted last summer, Merkel may well be Greece’s best hope now. Greece and Germany have found themselves with an accidental commonality of interests. Both governments have broadly taken pro-refugee stances. “Do you seriously believe that all the euro states that last year fought all the way to keep Greece in the eurozone—and we were the strictest—can one year later allow Greece to, in a way, plunge into chaos?” Merkel asked in an interview with public broadcaster ARD in late February. She warned that Athens could find itself paralyzed by the huge number of arrivals.

Greeks are hoping Germany’s sympathy extends to further debt relief. The country’s repayment deadlines are fast approaching: In June and July, Athens must repay 10 billion euros ($11.3 billion), money it doesn’t have. On April 1, whistleblowing website WikiLeaks published transcripts of an illegally recorded internal IMF phone conversation from March that showed officials seemingly predicting another emergency in a discussion about what it would take to get Greece’s European creditors to agree to debt relief.

04_29_Greece_01 A woman from Syria holds a sign reading "We do not want to return to death" during a protest at the Port of Piraeus on March 17, 2016. Around 350 people from Syria, Iraq and Afghanistan took part in peaceful protests in the port, where some 5,000 asylum seekers are stranded since border closures sealed off the Balkan route. Gerasimos Koilakos/Pacific Press/LightRocket/Getty

The IMF has declined to comment on the leaked transcript, but the conversation hinted at a political deadlock that could jeopardize Greece’s 86 billion euro ($97 billion) bailout agreed to last year. So far, the IMF and the EU have failed to agree on a joint position. The IMF wants the EU to offer Greece considerable debt relief; the EU, in particular Germany, is reluctant, worried that it might encourage other eurozone countries to push for similar concessions.

The leak sparked anger in Tsipras’s office, which blames the IMF for delaying a review of the progress Greece has made in carrying out the tough austerity terms, a review needed for Athens to receive financial aid. Tsipras accused the IMF of trying to “politically destabilize Europe.” The IMF’s managing director, Christine Lagarde, reacted furiously, saying, “Greece cannot just continuously tag along and expect that things will be sorted out.” On April 14, she added that if Europe does not give Greece some kind of debt relief, the IMF would have to reconsider its participation in the bailout fund. Berlin says if the IMF stops contributing, Germany would too. Given the current impasse, a rerun of last year’s emergency—with Greece risking default on its debts—looks increasingly likely.

For all the new feelings of fraternity that Berlin might have toward Athens, Greece faces a painful reality: It’s hard to rebuild the economy when the people best suited to the task have left. Of the Greek university graduates who worked abroad in the past three years, only 15.9 percent returned to Greece, according to a 2015 Council of Europe international review.

Greece has no choice but to make do with what it has. And financial meltdowns can sometimes be a catalyst for new beginnings. Many Greeks say the economic crisis has boosted solidarity among Greeks, while the refugee crisis has helped give them perspective on just how bad things are at home. “There is maybe economic warfare, but it’s not actual warfare,” says George Ilias, 33, chief technology officer of Athens-based startup ZuluTrade.

People like Ilias—young, educated professionals who have chosen to build their future in Greece rather than abroad—may represent the country’s best chances for economic recovery. Many Greeks say the debt crisis has encouraged businesses to become more innovative and efficient in order to survive. And between 2014 and 2015, Greece made significant gains in its GEDI score, an index by the U.S.-based Global Entrepreneurship and Development Institute that evaluates a country’s entrepreneurship ecosystem.

Greeks who do stay, or return home from other countries, are often extremely successful, creating islands of innovation that defy the country’s broader economic turmoil. According to a Bay Area Economic Institute report, technology does not only drive the global economy; it also creates 1.7 times more jobs in local goods and services than manufacturing does.

Venture capital companies are also trying to make sure Greeks get access to the resources they need to launch their ideas. In January 2009, Georgios Kasselakis and George Tziralis co-founded a small investment fund in Athens, the second of its kind in Europe after London-based Seedcamp opened two years earlier. More than 200 people are now employed in startups that Openfund has backed. Kasselakis, 30, says the world he lives in is a small tech bubble, barely affected by the crisis of the past five years. “Despite the overall situation, we are outperforming most companies in Silicon Valley,” he says over lunch at Philos, a café in an elegant neoclassical building in Kolonaki, an affluent neighborhood of Athens whose streets are clustered with high-end boutiques. “Things have been going splendidly, so much so that I sometimes feel awkward sharing that with other Greeks.”

Entrepreneurs, business leaders and investors like Kasselakis represent the green shoots Greece so desperately needs. And with help from Brussels and Germany, it’s also possible the country could fix its broken economy—and in the process cope better with the refugee crisis. But for now, success in Greece may be something best mentioned only in private.