As of this month, more than 120,000 Greek homes stand to be repossessed as tenants and owners find themselves unable to shoulder a taxation burden that far exceeds their 10,000 euro total annual income. To make matters worse, a series of cutbacks in pensions — pensioners now being the most active investors in Greece, due to the country’s massive youth unemployment — have began to put even homeowners without any considerable debt in dire straits. How did we get to this point, and where will Greece go from here?
A Little Recent History
Stop me if you’ve heard this one: In 2008, the EU economy finally failed in the aftermath of the U.S. housing market’s collapse, toppling from its perch after the banks, which had tried to salvage themselves from decades of investment in toxic assets, allowed consumer lending at an unprecedented, unregulated scale.
The lending created an economic feedback spending loop that accounted for the European banks’ exponential growth in the past decades — and for their increasing investment recklessness. But when the worldwide economy came to a screeching halt and the house of cards tumbled down, it collapsed on top of the indebted consumers, who were suddenly forced to scramble to make up for their past debts, which by then had swollen to gargantuan proportions. This served to hobble any further economic growth across the entire EU.
In the wake of the disaster there was an epidemic of foreclosures, bankruptcies and property seizures across Europe, with Greece at ground zero. In 2010, the ailing Greek banks found themselves in dire need of a bailout. Then, again in 2012, and again in 2015, with each subsequent aid proving increasingly ineffectual. The bailouts failed to protect the Greek taxpayers and instead rescued the country’s banks, which exploited the “same risk” debt clause that has been in place since the economic union’s formation.
How Home Ownership Went Toxic
Much like in the U.S., Greeks were compelled into home ownership and the idea of owning substantial real estate holdings; entire generations devoted their working lives to building houses and buying farmable land for their children, which they could either use or sell for a hefty gain.
The unregulated lending from Greek banks allowed consumer to go on a real estate spending frenzy, buying newly built homes at reduced cost, using housing lawns that they could acquire over the phone without any credit rating checks involved. The housing boom of the 1990s and early 2000s put up a smoke screen of plenty, which quickly dissolved as soon as the crisis hit and the new property taxes rolled in, turning any real estate assets toxic within two years’ time.
The massive wave of home repossessions became so dire that a coalition of opposition parties forced a ban on home repossessions, in 2013, in an attempt to stop the banks’ frantic scramble to save themselves from bankruptcy. The ban was later lifted, in 2015, when the Syriza Party’s Alexis Tsipras came to power, promising Greece’s international creditors that he would allow the auctioning of homes belonging to people who couldn’t pay their debt to the state. A string of anti-repo protests headed by the Den Plirono (I Don’t Pay) movement, which operated under the ruling party’s auspices, managed to stem the tide. But it has failed to produce any substantial results, mostly due to the fact that the movement was infiltrated by Greek business owners and investors who sought to hijack the party’s message and skip out on their social contributions.
The Greek administration of Syriza went on to make matters worse, piling up further taxation and costs to buying and renting property — from nebulous “energy certificates” to civil engineer assurances that caused the real estate markets to freeze and deterred Greeks from claiming any inherited real estate en masse. After all, how can an unemployed couple be expected to shoulder the burden of a home when that home could cost them twice their yearly salary in taxes alone?
Following the ineffectual and directionless — but very popular — tide of the anti-repossession movement, Syriza’s government followed up with a series of increased austerity measures this past September, enforcing further salary and pension cutbacks. While this motion was heavily criticized by the Greek taxpaying public, the administration tried to place a favorable spin on it, presenting the measures as fodder to negotiate another bailout later in the year. Whether the bailout will manage to pull the country’s banks out of their self-imposed financial mire remains to be seen.
At the moment, a new bill has been voted into effect that will allow debtors to openly record and access conversations made between indebted citizens and their relatives. It’s important to note that this bill will assist debt collection agencies that have sprung up across the country, allowing them greater access to citizens’ personal lives. This report has not yet made it into the international media, which have primarily focused on the announcement that Greece’s haphazardly enforced capital control measures might be lifted soon, in an effort to ease the ailing Greek economy back into the international markets.
For the time being, Greek citizens are caught between a rock and a hard place: Homeowners have to face the harsh reality of being kicked out of their own houses, as government officials impose regulations that seem to lack any basis in reality or even a rudimentary understanding of the country’s financial situation. And meanwhile, the creditors are baying at the gates.