Greece’s harsh austerity measures and the subsequent rise in unemployment have forced a growing number of Greeks out of their homes. Our reporters went to a crisis centre in the capital, where desperate Athenians seek refuge, food and medication.

by Natalie de Vallieres and Biodun Iginla, BBC News and France24

Two years into Greece’s devastating financial crisis, joblessness and homelessness are rife. For the first time, the middle class is having trouble making ends meet. More and more Greeks are finding themselves out of work, unable to pay their way, sleeping in their cars or even on the streets.

Resembling a youth centre or backpackers hostel, the independent Klimaka homeless centre is a rarity in Greece, where most non-state assistance is dominated by the church. Funded entirely by donations, even down to the soap and televisions, the centre is today busier than ever. People who have spent their adult lives employed and self-sufficient are now seeking refuge, food, and medication.

IN DEPTH

“We see totally healthy people, with an active working past, sleeping rough,” Efi Stamatoyiannopoulou, a nurse at the centre, told our reporters. Not only individuals but also families, she says, are turning up at the centre in need of food and essentials. In the last month alone demand has increased by around 20 per cent.

Lambros, an unemployed builder who managed to get a bed at the centre, has been homeless since February. He spent six months sleeping in his car before finding refuge at Klimaka. “I have no reason to complain,” he said. “They take good care of me.” But while Lambros is relieved to be getting help, he is also deeply ashamed of his situation. “I don’t want my family to know where I am now, at such a low point in life. I was another person when they saw me and now I’m ashamed to even look at myself.”

Suicide watch

The crisis has not only caused a rise in homelessness, but also in depression. According to a recent survey, 54 per cent of Greeks now say they regularly feel depressed. A state-funded suicide-prevention helpline reported in October that more than twice as many people called this year than in 2010, and one in four of them mentioned the financial crisis.

At the Klimaka centre, a team of nurses, psychologists and social workers welcome a stream of troubled Athenians each day. When our reporters visited, more than 50 people had already turned up before noon.

George Barkouris, a 60-year-old unemployed radio technician who comes to the centre for psychological support, says he has experienced “huge distress” and suicidal thoughts since losing his job in public radio after 20 years of service. “At my age it’s difficult to find a job in anything,” he explained.

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  by Natalie de Vallieres and Biodun Iginla, BBC News

ATHENS | Sun Oct 2, 2011 5:15am EDT

  - Greece was expected to unveil its plan on Sunday to begin laying off state workers, the most contentious part of a reform package demanded by the EU and IMF to free up loans and stave off bankruptcy.

  Without the release of an 8 billion euro ($10.7 billion)tranche of an EU bailout, massively indebted Greece could run out of money to pay state wage bills within weeks.

  European officials are scrambling to avert a Greek debt default, which could wreck the balance sheets of European banks, damage the prospects of the euro single currency and possibly plunge the world into a new global financial crisis.

A senior member of the ruling coalition in Germany, Europe's paymaster, said it may be necessary for Greece to abandon the euro, a prospect European governments officially reject as beyond consideration.

Negotiators from the International Monetary Fund, European Union and European Central Bank, known as the troika, have returned to Athens after walking out of talks a month ago, and have met Greek officials for the past four days.

To persuade the troika to release the loans, the government has promised to introduce new taxes, cut state wages by an average of 20 percent and reduce the number of public sector workers by a fifth by 2015.

The austerity measures are deeply unpopular, and public sector unions hope that strikes and demonstrations can wreck the Socialist government's resolve to enact them.

No part of the package is more contentious than the plan to lay off state workers -- who make up a fifth of the Greek workforce and are guaranteed jobs for life under a constitution that bans firing government employees in virtually all circumstances.

The cabinet was due to meet on Sunday evening to discuss a plan to begin layoffs by setting up a "labor reserve." Under the plan, 30,000 workers would be put in the reserve by the end of this year and paid 60 percent of their salaries for a year, after which they would be dismissed.

The government has yet to announce how the programme would work, including details such as whether it would be used to push out younger workers or only to accelerate the retirement of workers already reaching pension age.

Greek officials said late on Saturday a solution was close.

"We are close to a deal on the labor reserve," one senior official said after several hours of difficult talks on the issue. "We want to conclude negotiations with the troika on the labor reserve by tomorrow and also approve it in a cabinet meeting tomorrow."

The troika inspectors want assurances that the plan will be implemented swiftly and will not only include civil servants close to retirement, the official said.

POOR, MIDDLE CLASS HURT

Greeks hostile to the austerity measures say the harsh cuts will deepen the impact of a three-year recession and disproportionately hurt the poor and middle class.

Labor unions hope to step up political pressure with a campaign of strikes and protests in coming weeks. The government has a majority of just four seats in parliament and could be forced into elections if a handful of lawmakers balk.

Hundreds of black-shirted anarchists marched through the capital's central Syntagma Square on Saturday, chanting slogans and carrying black and red flags. A few women among the crowd pushed children in strollers. Police hope to prevent a repeat of street battles in June when more than 100 people were hurt.

Striking civil servants have tried to block the troika talks. At one point on Friday, transport ministry workers prevented their minister from meeting the negotiators.

Finance Minister Evangelos Venizelos told the pro-government newspaper To Vima that the loan tranche was "assured" because "we are taking such difficult decisions and the Greek people are shouldering such great sacrifices."

But there has clearly been a shift in the views of European leaders in recent weeks, with many increasingly suggesting that bailouts may not be enough to save Greece.

The deputy leader of the Christian Social Union, one of three parties in Chancellor Angela Merkel's center-right coalition, said on Sunday Greece may be better off leaving the euro zone if it cannot restore its fiscal health.

Alexander Dobrindt told Deutschlandfunk radio that a Greek exit from the euro would be a last resort measure and Greece would find it easier to recover outside the currency bloc.

"I believe it is a solution, if one wants to bring Greece back into a economically stable competitive condition, that this would be done outside the euro zone," he said.

The finance minister of Slovakia said on Saturday that policymakers need to be ready for the impact of a Greek bankruptcy if the troika concludes that default is inevitable.

"We are now waiting for results of the IMF and EU inspectors. This should be the basis for a clear assessment whether Greece's position is sustainable, or whether bankruptcy and a write-off of part of the debt are inevitable," Ivan Miklos told Czech daily Lidove Noviny.

The pressure on Greece is now tremendous. Market pricing of whatever Greek papers there is shows that there is no longer any uncertainty about Greece defaulting on their debt – at least if the bond market were to decide.

Greek politicians blame the market and speculators for not leaving them in peace. They likely see the reading on the wall as time now is running out.

Greece is a bubble to burst if not some proper action is taken – and now.

Firstly – the country’s overall debt burden is too big for the country to handle. The plan which is agreed between Greece and the Troika will make this debt burden even bigger for some time to come. It will go from really bad to worse. The debt bubble could burst today – it will burst in a year or so.

Secondly - the country will not be able to implement and meet those criteria set forward by the Troika. The Greeks simply do not like to be told what to do and to live as disciplined as the criteria sets out. It’s not the Greek way.

Thirdly - the EURO is too strong for the Greek economy - even without debt problems.

Unions will boycott, general strikes will be part of daily life. There will not be any economic prosperity for years to come. Taxes will not be paid as they should, reforms will be manipulated and people will do whatever suits them best – without any sort of unity to solve the problems. The country risks running into some sort of anarchy.

The Greek problem is big for the Greeks – but small in a European perspective. The amazing thing about this is that the richer and bigger economies allow a small economy like the Greek to threaten the EURO and possibly the European Union. That is a too big risk to take – it is too much at stake – and proper actions should now be taken.

Richer and bigger economies have great benefits from the EURO and the European Union. Let’s use Germany as a sample. If Germany had their own currency – the old German Mark – the value of this currency would likely be 20% higher than the value of the EURO today. German export industry alone - in one year – benefits more from having the EURO than what the cost would be for the German state to capitalise German banks from a 50% default on Greek bonds.

The same goes for all the smaller but richer northern European countries. They all have benefited tremendously from the lower valued EURO than the currency they would have had on their own.

 That Finland has become a sort of obstacle in obtaining European unification on solving the Greek problem is simply ridiculous. That Angela Merkel looses out in regional elections for the same reasons is only because Germans don’t understand what is at stake for them by the EURO being threatened.       

If EURO were to go – Germany and all the northern European countries in the eurozone would be the big looser. And they would lose far more – in one year - than what is needed to be put up for their banks because of Greek bonds defaulting.

This is simple maths for an economist – so why is it so difficult to solve politically?

Politicians should go through the export figures for their country as they are today, adjust them for a 20% revaluation of their own currency and see how much they lose out in terms of export income. Compare this figure to the cost of capitalising your banks from a 50% default by Greece on their bonds. I mean – even your pets will understand that this makes sense.

 Get your acts together and do the following:

Negotiate exit terms for Greece to leave the EURO – but not the European Union.

Capitalize the European Central Bank for the purpose of providing loans to Greece as the capital market will be closed for the country for years to come in terms of borrowing.

Use normal accounting principles – market to market value - for valuing Greek bonds on the balance sheets of banks, not fictive “stress” test scenarios – and you will see their real losses.

Provide sufficient capital to those banks in need of more capital.

Greece should leave the EURO in an orderly way and establish their old Drachma.

Greece should declare default on their present obligations to bond holders – and offer them a repayment only to the level of a debt burden Greece can live with. I would say that such debt burden should be maximum 30% of the one they have today.

Devalue the Drachma to a level enabling the country’s export industries to blossom, ensuring economic growth from day one. I would estimate such a devaluation to be minimum 50% of EURO’s current value.

The total cost for other eurozone members from participating in this restructuring is minimal compared to what the countries will be losing by seeing the EURO break up.

By adding Portugal as a second country doing the same as Greece – is not even changing the overall picture. Again we talk about an economy being very small compared to the overall size of the eurozone.

Ireland is in my view in a different situation. Ireland and the Irish have a “one off” problem, which is their banking sector. Help the Irish by giving them terms and conditions for their present loans which they can live with – and they will be fine.

Having sorted out these three countries in this way, pressure will come off the EURO and it likely will regain confidence for a long time - enough for other countries to sort out austerity measures and have their debt burden reduced to a level financial markets will see as sound and proper. Contagion should then not be a worry for financial markets.