No Exit? Greece's Ongoing Crisis | The Nation


No Exit? Greece's Ongoing Crisis

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Yet the underlying problems of the economy not only remained unresolved; they were about to become much worse. Financial globalization, easy access to European and international funds, and large state disbursements combined to create the perfect conditions for a new, deeply unhealthy interpenetration of the state and the private sector. It was not true that Greek-style neoliberalism meant a weakening of the role of the state. On the contrary, while some sectors of Greek society were getting worse off, the state (and behind it, the ruling party) was cozying up to new bedfellows like Goldman Sachs, the few large Greek banks that emerged triumphant from the mergers and takeovers of the 1990s, and foreign telecommunications and armaments firms.

Lixiprothesma daneia
By Petros Markaris.
Gavriilides. 432 pp. €22.

Oikonomiki krisi kai Ellada
Edited by Adriana Vlachou, Nikos
Theocharakis and Dimitris Mylonakis.
Gutenberg. 411 pp. €25.

The Global Minotaur
America, the True Origins of the
Financial Crisis and the Future of
the World Economy.

By Yanis Varoufakis.
Zed Books. 296 pp. Paper. $14.95.
Buy this book

Sozetai o Titanikos?
Apo to Mnimonio, xana stin anaptyxi.
By Nikos Christodoulakis.
Polis. 233 pp. €12.50.

22 Pragmata pou mas lene yia tin
elliniki krisi kai den einai etsi

By Christos Laskos and
Euclid Tsakalotos.
Kentro Psychagogias Monados.
238 pp. €13.85.

To agnosto paraskinio tis prosfygis
sto DNT

Pos kai yiati ftasame sto Mnimonio.
By Panagiotis Roumeliotis.
Livani. 383 pp. €16.50.

Anonymoi chreokopimenoi
By Christoforos Kasdaglis.
Kastanioti. 248 pp. €12.

Kati tha ginei, tha deis
By Christos Ikonomou.
Polis. 264 pp. €15.20.


About the Author

Mark Mazower
Mark Mazower teaches history at Columbia University. His new book, Hitler's Empire: How the Nazis Ruled Europe (Penguin...

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It is perhaps only now that the true dimensions of the Siemens corruption scandal unfolding during these years can be appreciated. Long established in Greece, the Munich-based manufacturing giant—with sales amounting to $96 billion in 2010–11—supplied the country’s telephone and radio networks, ran the capital’s traffic signals and streetlights, and enjoyed a close and lucrative relationship with the spectacularly money-losing state railways as well as with the military. In 2005, Greece began an inquiry into the security system that Siemens was supposed to have put in place for the Olympic Games the previous year. Shortly thereafter, an investigation by the US Justice Department brought to light a worldwide pattern of corruption by Siemens executives. One of the Greek politicians involved is the Pasok veteran and former Defense Minister Akis Tsochatzopoulos. In April 2012, even as popular outrage over the scandal was exacerbated by the misery of austerity, Tsochatzopoulos was photographed being led away in handcuffs from his central Athens mansion to face charges of money laundering. But his was not an isolated case: Siemens appears to have had numerous politicians from both parties on its payroll. The company’s chief executive in Greece, Mihalis Christoforakos, fled the country in May 2009; he was arrested in Germany and ordered jailed by a Munich court later that year. After paying a large fine to secure his release, Christoforakos has since disappeared from public view.

The Siemens case not only reveals the close connections between German business and Greek politicians; it also confirms how deeply the rot of corruption spread into the privatization process and state procurement policy in general. But as several of the authors in Oikonomiki krisi kai Ellada stress, an even bigger problem than corruption and money laundering is the fiscal irresponsibility of the Greek state itself. Siemens was ideologically neutral, paying off politicians on the left and right alike. But on the larger issue of budget policy, ideology was a bankable asset, and the Simitis era looks like a model of probity and common sense when set against the New Democracy government that followed it between 2004 and 2009.

The scope of the damage done in these years can be gleaned from Sozetai o Titanikos? (Can the Titanic Be Saved?), written by the economist Nikos Christodoulakis, a former finance minister under Simitis. The title refers to an unfortunate remark made at the onset of the crisis by George Papakonstantinou, who was finance minister at the time (and was recently expelled from Pasok after charges of malfeasance): he compared his task to “trying to change the course of the Titanic.” Christodoulakis argues that the real damage was done on New Democracy’s watch; naturally, he claims that Greek finances were in good shape when the Simitis government fell in 2004, which the contributors to Oikonomiki krisi kai Ellada would dispute. But Christodoulakis is on much stronger ground in attacking New Democracy’s record. At least under Simitis, revenue growth outstripped increases in spending. Under his successor Karamanlis, the opposite happened: an even more business-friendly government lost all interest in boosting tax collection and eased off on several sources of revenue for the sake of encouraging entrepreneurs to invest. The result was not a business boom but a splurge on Porsches, fancy yachts and mega-villas with huge swimming pools on water-starved Greek islands.

It was a lot worse than that, however. With very bad timing, the government proceeded to go on a pre-election spending binge at exactly the moment that the global financial system went into meltdown. Christodoulakis is surely right that it was the policy decisions made by the Karamanlis government in 2008 and 2009, and not those made any earlier, that left the country horribly exposed when the sentiment suddenly shifted in the international money markets and the credit ratings agencies took fright. Even after the first ratings downgrade, the Karamanlis government poured “petrol on the flames” in 2009 by passing an extraordinarily lax budget as well as by its handling of the banking crisis: forcing sound banks to take government assistance and thereby exacerbating the debt problem. In short, the sheer irresponsibility of the 2009 budget was almost designed to cause the country serious problems abroad.

Like several former Pasok members, Christodoulakis doesn’t spare the rod when analyzing the actions of the incoming government of the time. George Papandreou was late, he charges, in sizing up the scale of the problem, and his team was both excessively alarmist in its public announcements to its European partners and excessively complacent with the Greek public. For Christodoulakis, the prime minister was out of his depth: the Pasok founder’s much less charismatic heir, “Georgaki” kept promising all things to all people, buffeted between the reformers and the restive currents of the so-called “deep Pasok,” which wanted a return to full-throated support for the public sector.

Straight out of the Syriza playbook, but nonetheless interesting for all that, is 22 Pragmata pou mas lene yia tin elliniki krisi kai den einai etsi (22 Things They Tell Us About the Greek Crisis That Aren’t So). Recalling Ha-Joon Chang’s 23 Things They Don’t Tell You About Capitalism (2010), Christos Laskos and Euclid Tsakalotos’s book sets about dispelling some common myths concerning the Greek economy. The authors score a number of direct hits: Greek productivity levels are not particularly low, and Greek export volumes grew quickly after 1995. The Greek state is not especially large, and there is little evidence for any “crowding out” of private investment. They also underscore the profoundly inegalitarian impact of the privatization and financialization that got underway with Simitis: in a relatively short period, Greece has moved from being one of the most equal societies in Europe to one of the most unequal. And as they rightly point out, many of the criticisms leveled at Greece (deindustrialization, the reluctance to improve revenue collection or raise taxes) are problems found across the developed world and not peculiar to that country. The implication here is that the troika’s medicine will not work—not only because it has tipped the economy into a self-defeating recession that ensures old targets will be missed time and time again, but more fundamentally because the troika’s pro-business, anti-labor approach ignores some vital truths: that the country needs more taxes paid by businesses and the wealthy, not less, and that productivity growth will not come unless there is much more investment (both public and private) in research and development.

At the start of the crisis, Panagiotis Roumeliotis was chosen by Papandreou to be Greece’s representative to the IMF, mostly on the strength of his longtime friendship with Dominique Strauss-Kahn, then the organization’s head. In To agnosto paraskinio tis prosfygis sto DNT: Pos kai yiati ftasame sto Mnimonio (The Unknown Background to the Flight to the IMF: How and Why We Arrived at the Memorandum), Roumeliotis provides a blow-by-blow account of his experiences as well as a revealing chronicle of the IMF’s role in the crisis. Strauss-Kahn comes off well, sympathetic to the Greeks and immediately worried about the larger implications. The Europeans come off badly: fractious, slow to respond. Merkel simply does not get it for a very long time, causing the Americans in particular much aggravation. The book lays bare the ideological shift taking place inside the IMF: the Russian, Chinese and Brazilian delegates are all sympathetic because they have so little confidence in what once passed as the Washington Consensus. In this respect, the IMF’s approach to the Greek crisis may well prove the harbinger of a new kind of institutional response in the future. But for the moment, we shouldn’t make too much of it, because the traditional prescription was dispensed nonetheless: cutting wages (as though this were the magic road to improved productivity and competitiveness); fostering entrepreneurship by eliminating red tape, no matter the likely environmental results; and focusing on spending cuts rather than raising taxes to improve the health of public finances. The main difference between Strauss-Kahn and the other Europeans was over the length of time it would take Greece to return to something like financial stability; on much of the prescription itself, they seem to have agreed.

Unlike the Europeans, the IMF, with its more global perspective, was at least willing to admit that German balance-of-payments surpluses were as much a cause of the eurozone’s basic problems as Greek deficits. (Currently topping China’s, the German surpluses—accumulated throughout the crisis and showing no signs of diminishing—simply siphon capital from the impoverished, indebted periphery to the wealthy eurocore, and testify to the debtors’ inability to earn their way back to solvency anytime soon. And the currency union prevents competitive devaluations, thus making the latter’s recovery even harder to bring about.) As Keynes enjoys a revival internationally, commentators are returning to his original conception of the IMF, back at Bretton Woods in 1944, as a value-free agent righting the global disequilibrium in trade and capital flows that, as he understood it, capitalism invariably creates. We must probably wait until after the German election later this year to see whether the penny has dropped in Berlin; but until then, the chorus denouncing the German surpluses is likely to grow louder, and Roumeliotis’s book adds further confirmation that since early 2010, the crisis has been deepened as much by German policies as by Greek ones.

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