While economists and political analysts exchange views on the deteriorating economic situation in Greece and what it means for the future of the euro, the European Union and the global capital markets, often overlooked is the effect the chaos is having on the social fabric of the nation. Average citizens are demoralized and angry. Many are increasingly fearful of unrest and crime.
What are the trigger points that have caused a backlash over more austerity to qualify for additional bailout funds from creditors to avoid default? They include outrage over cut pensions, high unemployment, no access to capital, long food and gas lines and security concerns. Here are snapshots of a nation at its breaking point—pushed to the brink of despair.
—By Lori Ioannou, senior editor, CNBC.com
Posted 30 June 2015
Greeks have withdrawn 90 billion euros ($100 billion) from banks in Greece as the future of the country's financial system becomes increasingly questionable. On Sunday, Prime Minister Alexis Tsipras announced banks will be closed to avoid the collapse of the banking system. The capital controls—issued after the ECB said it would not expand an emergency loan program—allow citizens to withdraw a maximum of 60 euros a day this week. The goal is to fortify the 128 billion euros remaining in the Greek banking system.
A referendum on July 5 on the fiscal agreement the international lenders are offering to the country shifts the burden of the decisions not only to the Greek people but also to the broad shoulders of the European Central Bank. In the meantime, Greeks have lined up at ATMs for cash withdrawals, and many are hiding cash in their homes.
Greece has slashed average pension payments by more than 40 percent since 2010 as part of spending cuts required by the Troika of the IMF, European Central Bank and European Commission. In the latest round of negotiations, creditors are insisting on pension and wage savings worth 1.8 billion euros ($2 billion) as a condition of continuing to help Greece pay its debts. The commission has sought the gradual elimination of early retirement and more cuts to even the lowest pensions.
This is a politically charged issue, since pensions function as the Greek equivalent of Social Security. With unemployment so high, many pensioners are supporting their adult children. The average main pension: 713 euros a month. Recent government data indicate nearly 45 percent of 2.65 million Greek retirees live at or below the poverty line.
Today Greek pensioners surround bank branches only to learn they cannot cash their retirement checks until further notice.
With ATMs running dry and many businesses, including hotels, no longer accepting credit cards, many foreign visitors are in a bind. Many are opting to cut their vacations short. This could have serious consequences on a debt-ravaged country that relies on tourism as a main source of earnings. Last year it directly contributed 17 billion euros, or close to 20 percent of Greece's gross domestic product, as well as 45 billion euros in indirect benefits to shops, restaurants, etc., according to the Association of Greek Tourist Businesses.
At press time, the Ministry for Economy, Infrastructure, Shipping and Tourism reported that capital controls do not apply for those foreign visitors wishing to withdraw money from an ATM, or carry out transactions using a credit card issued from abroad.
Long lines are also forming at gas stations, since many drivers want to fill up their tanks while credit cards are still being accepted and some cash remains in hand. Many people are hoarding gasoline supplies, since they are worried about what each new day will bring. "People are confused and desperate," said Nektaria Petrakis in Athens, an administrator at the pension fund for the journalists' union. "Many have not gotten paychecks."
Vangelis Kotsos, the president of gas station owners in Chania, Crete, an island in southern Greece, stated that half of its petrol stations have no gasoline after people carried the extra fuel away in cans.
According to the Union of Gasoline Vendors, there has been a 300 percent increase in gasoline demand since Saturday.
Awaiting the results of the July 5 referendum, Greece closed its banks and stock market this week to limit the ability to process transactions on exchanges. The Athens Stock Exchange will most likely not open until the banks do.
Over the last eight years, the market capitalization of the Athens Stock Exchange (ASE) has plunged dramatically. In late 2007, at the beginning of the financial crisis, the valuation was 196.39 billion euros. Today it is 49 billion euros. On Friday, June 26, the ASE closed at 797.52. Through the Hellenic Financial Stability Fund, the Greek government has large holdings of four of the five banks in the Athens Stock Market Index. It owns 57 percent of the National Bank of Greece, 66 percent of Alpha Bank, 35 percent of Eurobank and 66 percent of Piraeus Bank.
Seven years of depression has wiped out 25.9 percent of Greece's GDP. In the process the unemployment rate has soared to 25.6 percent as 1 million jobs have been lost over the last six years, according to the Hellenic Statistical Authority and Endeavor analysis. That is a big number, considering the total population is only 11 million people.
Hardest hit: Greek youth. The unemployment rate is now running a whopping 49.7 percent.
As a result, there has been an exodus of talent as college-educated skilled professionals have ventured worldwide in search of job opportunities. The brain drain is a huge issue for a country trying to turn around its economy and jump-start business development.
—Additional reporting by Christine Lenzo, special to CNBC.com