Trickle-down Debt

The discussion of debt in Greece's current economic crisis has centered around the problem of sovereign debt, rather than the consumer debt that was so central to the U.S.'s 2008 financial crisis and subsequent recession.  And yet, there are some significant similarities between Greece's debt and its citizenry's personal debt: a banking industry that, because of a new context of deregulation, was eager to lend; a difficulty in determining credit-risk because of a lack of reliable economic information about the borrower; a determination that, despite risk, certain social groups are hopefully “too big to fail”; and an ideology that links easy access to cheap credit with economic growth.

The financialization of everyday life in Greece has increased dramatically from the end of the 1990s through this most recent decade. Investment products, various types of loans, plastic monies of all sorts, internet banking: these were created and introduced with the deregulation of the banking sector required by Greece's membership in the E.U. It was only in 2003 that the last state-imposed limit to the consumer credit market was eradicated -- a cap of 10,000 euros on individual consumer debt -- and banks could lend as much as they wanted to whomever they found “credit-worthy.” A rapid, “healthy” expansion of the market for consumer credit in Greece was predicted on the idea that consumer debt there would grow to equal the “E.U. average,” bringing a harmonization both structural and symbolic, as Greeks could buy, and owe, like Europeans.

And expand the market they did, until the banking crisis of 2008 that started in the U.S. reached European shores, and the banks in Greece began to lend less easily.  The billboard and bus shelter ads for credit card deals, holiday loans, and consolidation programs that had come to continuously litter the city of Athens began to disappear.  Even the posters in bank windows no longer advertised credit lines and introductory interest rates.  Less obvious to the casual observer, some banks were retraining employees who had been in telephone sales, and relocating them in telephone collections; instead of marketing new products, they would be calling on customers whose payments were past due.

Greece is not the only country in which this has occurred over these past few years.  But there are a few problems specific to Greece, and specific to its current “crisis,” that lurk behind the contraction of the consumer credit market.  First and foremost: what happens to consumers who can no longer pay back their debts?  In the first years of market expansion, there was no bankruptcy law or formalized debt resolution system that individuals could utilize if their debts became more than they could repay. In the flurry of deregulation and market expansion, “we don't need those yet” was the answer I heard from both the industry and the state when I was researching overindebtedness.  That “yet” says much about the logic of market growth.

By 2004 the banks turned their customers' practice of paying off their maxed-out credit cards with consumer loans into a type of loan product, and soon those who were juggling more payments than they could manage could put them all together into one consolidated loan.  Turning old debts into new types of debts, keeping the cycle of debt accrual rolling, Greece's consumer credit numbers did progress ever upwards until the market contraction that followed 2008.  Not surprisingly, it was after this that the idea of a consumer bankruptcy law began to gain some serious momentum; it was one of Prime Minister George Papandreou's pre-election promises in 2009.  And indeed, a law did eventually get passed, one that would protect the debtor's primary home and allow for a restructuring of their debt over a set repayment period.  With this law an individual files an application with a lawyer or consumer association; that intermediary then proposes the repayment to the various lenders; and then those lenders can either accept the repayment plan or take it to court.  The largest banks seem to be systematically ignoring the applications and opting to go straight for a court judgment; so far, only 50 such claims have been decided on as the court system doesn't move with any significant speed.  In a context where there is some immediacy to the pressing need for individual debt relief, that number is a concern. Around 30,000 applications have been filed so far, estimated to reach 40,000 by the end of this year, to put that number of 50 decided claims into perspective. 

This brings me to the second problem specific to Greece and its current crisis: of the applications filed, almost a third of them have been filed by government employees. Greece's civil servants are often discussed in the international news coverage of the financial crisis.  Most press mentions the enormity of the sector, the issue of political hires, the trading of jobs for votes, the favorable retirement ages, and other “costly benefits.”  While I don't have room here to address why that image is problematic, I do need to point out one “privilege” that never gets talked about.  In the midst of the job cuts and wage reductions that austerity measures have required for this group, there's been no coverage of the time bomb caused by a lesser-known perk civil servants have had access to: namely, they've been considered low-risk borrowers.  In a credit market where credit scoring is brand new and still under formulation and where access to credit history only began in 2003, banks have relied on civil servants as the most stable category of “salaried” consumers, offering special loan products and remarkably large credit lines to this group.  I've met individuals who had been lent three times their annual salary in consumer loans and credit lines – that's unsecured debt, not mortgages on homes or property.  The nature of their employment was considered to be security enough.  Austerity measures have eradicated any such notions of security; the debts, however, remain.

To come back to the parallels between defaulting consumers and a defaulting state, both have been subject to the condemnation that follows from not repaying one's debts -- only ever partially a financial issue, and nearly always a moral one. Although loans to Greeks and Greece alike contained within their structure a consideration that these loans might not be paid back, as interest rates and terms are based on just that calculation, some other forces at work beyond financial rationality kept that possibility from being openly discussed, imagined, or planned for.  This willful blind spot is a prime spot for anthropological exploration, where "market logics" intersect with other ideologies of a European Union and a European Greece.

Aimee Placas holds a PhD in Anthropology from Rice University, and teaches at the College Year in Athens program of the International Center for Hellenic and Mediterranean Studies.  She's currently writing an ethnography about Greece's consumer and national debt.  She can be found at aimee.j.placas@gmail.com.