Struggles Mount for Greeks as Economy Faces Winter

By MARCUS WALKER and MARIANNA KAKAOUNAKI

The Wall Street Journal

...Ms. Katri had a Dickensian image of the former orphanage, she says, as "a place where children are punished." However, she says the foundation has been good to her son,...

...The slumping economy and the retreat of the welfare state under austerity has caused a wave of requests to take children into care...

...Since 2011, more than 700 families have asked the Greek branch of international charity SOS Children's Villages to take in a child for economic reasons...

ATHENS—Maria Katri sent her son to live at a charitable home for poor boys after Greece's economy crashed.

Now, as Greece slides deeper into depression, the widowed mother is so poor that her teenage daughter, who stills lives at home, is "jealous that her brother is having a better time than her in the institution," Ms. Katri says.

The spread of economic hardship is fraying Greece's social fabric and straining its political cohesion as the country enters the harshest winter of its three-year-old debt crisis. Even the tightknit Greek family—an institution that has helped the population to absorb a collapse in employment—is under pressure as household incomes dwindle.

Many families are sliding down the economic ladder that their parents and grandparents climbed, often making them reliant on those same retirees' shrinking pensions. Already-poor families are slipping off the ladder, into the arms of overburdened charities. In a country of 11 million, only 3.7 million people have jobs, down from 4.6 million four years ago. Economic activity has shrunk by over 20% in that time.

The pressure on society is testing the country's political stability. Crumbling establishment parties cling to office. Radical-left populists wait in the wings, promising to restore state largess. Violent neo-Nazis are boosting their political profiles by exploiting fear of immigrants, crime and social breakdown. Many Greeks worry that the current government coalition could collapse in 2013, leading to renewed political turmoil that could revive the specter of national bankruptcy and exit from the euro.

The embattled government hopes this month's €34.4 billion bailout-loan installment, or about $45 billion, from Europe and the International Monetary Fund will lift the depressed national mood. But ordinary Greeks are bracing for the latest austerity package demanded by the country's creditors, which will hit them in January. Fresh pay and pension cuts and tax hikes, totaling about 5% of gross domestic product, will lead to another 4.5% decline in gross domestic product in 2013, the government says. Some economists say the drop could be much bigger.

Greek society's ability to take one more big economic hit this winter could make or break the coalition government's effort to enact the tough bailout program—and Europe's quest to tame its crisis.

In the heart of Athens, the signs are everywhere that Greek society is living off its reserves. Families, businesses and nonprofits are running low on savings and stamina.

Ms. Katri had few reserves to begin with. She lost her husband, a souvlaki cook, to cancer in 2005. She relied on low-paid work for the municipality, such as tending the National Gardens in the city center, and later sweeping the streets. By 2010, when Greece imposed austerity as the price of its bailout, the gaps between her temporary jobs were growing.

"I realized the instability of it all," says the 39-year-old. "I saw I could not provide" for both son Vaggelis, then 14, and daughter Aggeliki, then 12. Ms. Katri approached the Hatzikonsta Foundation, a former 19th-century orphanage turned charitable home for boys.

"I took many steps back and realized I have to put Vaggelis's needs first, and my own need to be with him behind," she says.

Ms. Katri had a Dickensian image of the former orphanage, she says, as "a place where children are punished." However, she says the foundation has been good to her son, who wants to become a captain in the merchant marine. But her daughter, who is becoming emotionally volatile, is frustrated that Vaggelis gets pocket money and new clothes at the foundation, Ms. Katri says.

Early this year, Greece's austerity policies forced Ms. Katri to choose between her temporary cleaning job at a hospital and her €600-a-month widow's pension. She opted to keep the more-secure pension, which includes health insurance for her daughter.

This fall the government cut her pension to €435. She fears losing it altogether in future cuts. Jobs have dried up.

"They've made us afraid to imagine the future," she says.

Before the debt crisis, Greek children's homes such the Hatzikonsta Foundation used to deal mainly with social problems such as abuse, neglect or alcoholism. The slumping economy and the retreat of the welfare state under austerity has caused a wave of requests to take children into care because of simple penury. The requests are coming from jobless parents whose benefits have ended, struggling single mothers and extended families living off a grandparent's pension.

"The demand is limitless," says Hatzikonsta's director Leonidas Dragoumanos.

Since 2011, more than 700 families have asked the Greek branch of international charity SOS Children's Villages to take in a child for economic reasons—usually because parents can't get work or welfare, and are panicking. "This is an entirely new category," says SOS's Greek director George Protopapas.

Both Hatzikonsta and SOS, short of resources and reluctant to split families, have turned down most such requests. Instead they have created or expanded programs to subsidize children to live at home.

The nonprofits are under financial pressure themselves. Donations and rental income are dwindling. Hatzikonsta has used up half of its precrisis savings, which will run out in 2014, Mr. Dragoumanos says.

In Athens's low-rent Kipseli neighborhood, the Kotsolaras family is one of many who visit SOS for financial support and counseling. Stamatis Kotsolaras was a goldsmith at a jewelry workshop that closed down. Now he drives a taxi 12 hours a day, seven days a week, to bring home around €40 a day.

"We were living a dignified life before," says his wife Giota, a jobless shop assistant. "We had no savings in Switzerland, but at least we could buy new clothes." The couple have become supporters of radical-left Syriza, but they aren't sure even Syriza can offer "a light at the end of the tunnel," Ms. Kotsolaras says.

During a general strike last month, she joined a march on Parliament to protest the latest austerity legislation. "I felt the need to shout," she says. For her husband, the strike was a rare chance to spend time with his 4-year-old son, Constantinos. They played basketball together. The boy was ecstatic.

Most struggling Greeks don't qualify for charity. The family is their fallback.

Retired civil servant Sotirios Tzovaras was always proud when his wife, sons and daughter, their spouses and the grandchildren gathered for Sunday lunch. Now his pension is supporting all 11 of them wholly or partly. Austerity has cut it by one third to €1,000 a month. It doesn't go far in an expensive Western European city. He is still pleased to see the extended family at the table. "But they eat so much," he says.

His children and their partners have either lost their jobs or they are working irregularly or for little money. Mr. Tzovaras and his wife had hoped to retire to their village in the mountains of northern Greece, but they can't. One son still lives with them. "We can't not support" the next two generations, the 70-year-old says. "It's our mentality."

Mr. Tzovaras and his wife have owned their mortgage-free apartment for decades. Greece's tradition of widespread property ownership has been another vital shock absorber. Greece has one of the highest rates of owner-occupancy in Europe, and heavy mortgages are less common than in Spain or Ireland. But the government, desperate for revenues, is taxing property heavily even as household incomes decline.

The couple's apartment block, like most residential buildings in Athens, is gripped by disagreement over whether to buy fuel for the central heating this winter, when outside temperatures can touch freezing. New taxes have made heating oil nearly as costly as gasoline. Half of the Tzovaras' neighbors can't afford it and voted to leave the heating off. "We'll be using more blankets this winter," Mr. Tzovaras says.

He was born in 1942 during a famine under wartime German occupation. "There was hunger then. Now it's more depression," he says. When he takes the bus or metro, "no one talks or laughs anymore. It's like a cemetery. Everyone has their own pain. People sometimes talk to themselves in the street."

The conservative son of a British-trained royal guardsman never used to take part in Athens's frequent political protests. Now he joins many a march on Greece's Parliament. He was tear-gassed there several times when riot police fought with hooded youths on Syntagma Square, site of Parliament.

The political fallout from the hardship is visible in Athens's poorer neighborhoods. On Attiki Square, the rising fascist movement Golden Dawn was giving free food to residents one morning recently—provided they could prove they were Greek and not immigrants.

Over a thousand pensioners and unemployed queued around the square while Golden Dawn's muscular, black-clad activists, sporting the party's swastika-like logo, stockpiled pasta, fruit, vegetables, olive oil and fish.

Golden Dawn was a fringe party until this year's two Greek elections, notorious for racist tirades, violence against immigrants, Holocaust denial and Nazi-style stiff-arm salutes. Now it is trying to play down its neo-Nazi background and present itself as Robin Hood.

The woman in charge of the macaroni was Themis Skordeli, who is awaiting trial for alleged involvement in the stabbing of an Afghan refugee. (She denies injuring anyone.) A close-cropped man in a leather jacket was Ilias Kasidiaris, who told a recent party rally: "Our goal is to strike down those who work for the Jews and who have made our country a miserable protectorate of foreign powers." Jewish and human-rights groups have called on Greek authorities and mainstream parties to take a stronger stand against Golden Dawn's extremism.

Those queuing for food mostly didn't care. "They're the only party that is close to the people," said Yannis Mamadakis, a bankrupt shopkeeper hoping to get some sardines. "No one else gives food," he said. Attacks on immigrants by party activists and supporters are "a fairy tale," he said. "Golden Dawn just responds to crime faster than police do."

"See what is happening now," said Ilias Panagiotaros, one of the 18 Golden Dawn lawmakers elected to Parliament in June, gesturing at the swelling numbers on the square. "We will be in first place in a couple of years," he said, referring to Parliament.

Such boasts are "fantasy," says Ilias Nikolakopoulos, political scientist at Athens University. Golden Dawn currently polls around 12%, up from 7% of votes in the June elections. It could reach 20% support if the economy continues to sink, Mr. Nikolakopoulos says.

"Everything depends on the economic situation," Mr. Nikolakopoulos says. "If the economy stabilizes, the expansion of this party will be stopped. If not…we don't know what will happen."

Tim Ananiadis is yearning for stabilization after years of unrest. He is the manager of the luxury Hotel Grande Bretagne, whose neoclassical facade on Syntagma Square has formed an elegant backdrop to the antiausterity riots televised around the world since 2010. When the street-fighting starts, hooded youths often smash the hotel's white marble steps into rocks to hurl at police.

Repairing the steps costs thousands of euros each time, but the damage to Athens's international image is much greater, says Mr. Ananiadis.

Like other luxury hotels, the Grande Bretagne relied heavily on business travelers and conferences, which now mostly avoid the city. Well-heeled leisure travelers still come, and are even mildly curious about the demonstrations outside, Mr. Ananiadis says. But revenues are down nearly 50% from four years ago. If the decline doesn't end, Mr. Ananiadis says, "either the owner has to fund the losses, or you close."

On a rainy November night, the Grande Bretagne shuttered its doors and windows once again while a crowd that police estimated at 80,000 gathered in the square to hurl anger at Parliament, where lawmakers debated the latest austerity package.

Vasiliki Tasiouli, a garbage collector supporting two unemployed daughters, said she can't cope with any more cuts. Only a radical-left government might stop the ever-deeper austerity, she said. "It's time for them. We've tried all the others."

Two mustachioed sea captains who identified themselves as Gerasimos and Panagiotis shared an umbrella as the rain hardened. They are veterans of Atlantic storms where ships that lose power and get cross-ways to the huge waves can capsize. Their generation's savings are the engine that is keeping Greece going, they said.

"We are supporting our children. One day this money will run out," said Panagiotis. "Greece is at 45 degrees to the waves. When we reach 90, we will be finished."

Fighting broke out outside the Grande Bretagne, as around 500 youths lobbed Molotov cocktails and chunks of hotel steps at police. The peaceful majority booed and shuffled away from clouds of tear gas. The rioters claimed the square, setting piles of trash on fire, but the heavy downpour doused them.

Riot-police officer Dimosthenis Pakos said later he had "never seen rain like this in Athens." His drenched squad fought the fizzling riot, while Parliament cut their pay by another 15%. Fed up with the crisis and the violence, Mr. Pakos dreams of going back to his village in northern Greece and being a regular policeman. "Life is easier there," he says.

Write to Marcus Walker at marcus.walker@wsj.com