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Eurofighting zone: riot police clash with protesters in front of the Greek parliament on 6th May

30 · prospect · june 2010

image s me ssinis/afp/get ty aris

© how the greeks broke europe The inclusion of countries like Greece in the eurozone was a triumph of political will over economic reality. Now the laws of economics have reasserted themselves and opened the biggest crisis in EU history bronwen maddox

On Friday 14th May, Greeks read in their newspapers a list of 151 doctors alleged to have declared improbably low income to avoid tax. “The ‘poor’ doctors of Kolonaki,” jeered the front page of Ethnos, referring to the exclusive Athens district overlooking the Acropolis.

“Tax-dodging doctors named and shamed,” said Kathimerini, adding that the finance ministry had found 57 who failed to issue receipts or record patient visits (and one who declared income of just €300 a year). Fourteen have been fined a total of €4.3m (£3.7m); four will also face criminal charges.

he ministry, which is raiding doctors’ and lawyers’ offices across Athens, has turned to Google Earth to scan the summer villas in Kifissia, the affluent Athens suburb, to count the swimming pools which tax inspectors use as an indication of wealth. If the government of Prime Minister George Papandreou keeps up the pressure, then it will go some way to calm fears that Greece is bankrupt and unreformable. The crackdown “is, I believe, an essential element of catharsis,” said Loukas Tsoukalis, a professor at Athens University and adviser to José Manuel Barroso, European commission president. “If Greeks see that the right people are punished, they are more likely to perceive the austerity programme as fair.”

If the crisis had been limited to Greece, it would already be over. Greece is tiny, its economy only 3 per cent of the EU.

Bronwen Maddox is the Times chief foreign correspondent and author of “In Defence of America” (Duckworth)

But just as the world appeared to be clawing its way out of financial turmoil and recession, Greece reminded the markets that countries, as well as banks, can go bust. “Lehman Brothers surrounded by turquoise water,” was one description. “Contagion,” that laconic metaphor of the markets, hardly captures the speed with which fears of insolvency spread along the rim of Europe, to Portugal, Spain, Italy, then Ireland and even Britain. For one climactic weekend in May, the race to put together the gargantuan rescue deal of €750bn (£640bn) commanded the urgent attention of all the leaders of the EU, President Barack Obama and the IMF.

he bailout has saved the euro for now, although the currency has reached an 18-month low against the dollar. But it has torn up the rules by which the European Central Bank (ECB) runs the bloc of 16 countries which use the euro. (The bank reluctantly agreed to start buying eurozone bonds, even though that might trigger inflation and expose the ECB to big losses if Greece does write off part of its debt.) The crisis has also shattered the principle that eurozone countries should not be bailed out by others. Moreover, it has sharply divided France and Germany, who have been on opposite sides of the argument throughout the crisis, left Germany in rare isolation within the EU and even raised questions in Berlin about its own longer-term participation in the currency.

or is the crisis over. It remains unclear whether Greece and its Mediterranean neighbours can make the changes that Europe is finally demanding of them. The comparison with Ireland, which faced similar problems, but has handled june 2010 · prospect · 31