As of late, Greece has suffered a lot of criticism. Some of it is justified; some is not. Let me try to explain briefly why this is so.
A strict austerity program has been imposed on this country in an effort to deal with the crisis brought about by its own profligate ways. In just three years GDP dropped by a cumulative 13%. It is a harsh regime and society as a whole has paid the price. This much is an undisputed fact. In the presentation that you hold you will have the opportunity of seeing for yourself just what has been the cost/benefit analysis of this program for Greece.
It is also true that Greece did not meet all of its commitments towards its partners and lenders. Its politics are client politics and its politicians found it hard to implement the very important structural reforms that effectively did away with the special benefits that they had rained on their clients. The political system was asked to cut the branch on which it was sitting. No wonder it found it extremely hard to do so. Rather than gain disfavor with their clients the politicians fudged all reforms and opted for horizontal measures that hit all alike. In their mind this tack carried a smaller political cost.
All of this is in the past, though. In November last year a new prime minister took over and the two major parties agreed to support all measures necessary to sign the 2nd MoU. Since then Greece has proceeded with speed, determination and consistency to meet its obligations under the new charter. It has even accepted a degree of overseeing that is not usually associated with modern European countries.
These developments are but a reflection of the determination of the majority of the population to do what is necessary in order to stay in the euro zone. The response of the two major parties to form an alliance to this end is a rare and very unusual occurrence in Greek politics; an occurrence that signals the beginning of some deep and interesting changes in our political system; a change that surely will be for the better.
It is this new social and political consensus that we are now pursuing in Greece, so that its people can upend anachronistic attitudes, institutions and stereotypes and embrace the changes that economic reality mandates. Otherwise, these changes will not produce wealth, jobs and growth. In this respect, we need more time as well as a more sympathetic ear from our partners to go with a better understanding of both the achievements and the realities of Greece.
As of late, we have also had a lot of talk about the singularity of the Greek crisis. In this, our detractors are very wrong. This is not an isolated crisis. It is a European crisis uncovering the deeper political and institutional problems faced by the EU. It is emblematic of the problems inherent in the creation of the euro. To a large extent the Greek crisis is a reflection of the markets’ belief that the euro zone is unable to meet asymmetrical threats because it lacks a lender of last resort as well as the ability to set the standards for risk at a pan-European level. It is no wonder the euro is no longer regarded as a truly sovereign currency and that EU country sovereign debt is not anymore safe. Instead, markets have developed the tendency to treat each euro by reference to the country of issue and not to the euro zone as a single economic entity. This is a challenge, nay a problem that cannot remain unanswered for much longer.
The use of one-dimensional austerity programs in order to deal with “guilty” –i.e. deficit– countries create havoc in societies and puts European Union and national social cohesion under enormous strain. The Union was built on its promise to its people to safeguard the cherished social protection network and to promote prosperity. Instead it is degenerating into a Union that primarily fights inflation and focuses on fiscal discipline. Its citizens are now facing the harsh reality of relentless austerity and high debt. They see their social benefits and incomes threatened. So we are up to the decades-long issue of whether the burden of adjustment should be shared by surplus countries as well. This is also a challenge that can no longer remain without a response. Without exaggeration, I will claim that the future of the euro –if not of the Union itself– depends on the answers that euro and Union members decide to give to these critical challenges, through a new vision for Europe and a renewed promise to its citizens.