Will a Bailout Be Enough to Save Greece?

ATHENS, May 11, 2010 — -- In the elegant, northern Athens suburb of Kifissia, there is little sign of Greece's mounting economic crisis.

This is the Rodeo Drive of the Greek capital. Designer fashion outlets sit cheek by jowl with sidewalk cafes and expensive bistros.

And despite days of violent protest at the government's plan to slash spending and raise taxes, and dire warnings of impending financial meltdown, life here has gone on as normal.

And that's part of Greece's problem.

Critics of the country's economic shambles say Greeks have been living beyond their means for years.

A bloated public sector filled with civil servants earning too much and retiring too young, is the familiar refrain.

Add to that endemic tax avoidance and a history of corruption in high places and it is easy to see the fundamental weakness of the Greek economy.

Burdened with debt of almost 14 percent of gross domestic product (GDP), the global recession has finally pricked the Greek bubble. While government income has fallen, spending on welfare has soared.

It was our taxi driver and local fixex Tony Tarabe who suggested we visit Kifissia. "This is where rich Greeks live, these are the people who have been breaking the rules and not paying their taxes," he said, a sentiment echoed by the thousands demonstrating against the government in Constitution Square a few miles away.

Greeks don't pay taxes until they earn 12,000 Euros a year, or almost $16,000. But hundreds of thousands of Greeks claim they don't earn that much, and therefore don't pay tax.

But the evidence of wealth is everywhere in Kifissia, as is an atmosphere of denial.

"It's not just a Greek problem," said Afee Falida, a young Athenian journalist we met on the street. "Every country in Europe has a debt problem. It seems we are being punished unfairly."

Tourism Biggest Moneymaker for Greece

Before joining the Euro currency project, Greece was seen by many as one of the poor men of Europe. None of the fundamentals have changed. Its manufacturing base remains weak. More than 75 of its GDP comes from tourism.

Economists fear the bailout loan of $140 billion from reluctant EU partners and the International Monetary Fund will only buy Greece some breathing space. In a year or two, the crisis will reappear, they say, because the economy is so unproductive and uncompetitive.

They doubt the present socialist government has the resolve to see through the spending cuts necessary to balance the books.

They also know that images of violent protest and political unrest threaten the country's fast-approaching tourist season.

A fear shared by Michael Gasparis, manager of a hotel resort on the island of Crete. He sent an e-mail to all his recent guests pleading for new bookings despite the media images.

"Greece remains a safe and beautiful country to live and to travel to," he wrote. "The sun is still shining and more than one million Greek inhabitants look forward to offering their services to our guests."

If tourists abandon Greece and her sun-kissed beaches and islands this summer, the country's economic crisis will come back to haunt us sooner rather than later.