The Continuing Greek Saga in which Politics Trumps Economics - November in Greece

By Patricia H. Kushlis

Is this a 21^st century version of Nero fiddling while Rome burns?  And if so, is the modern day Nero the Greek politicians, various players in the Eurozone from Angela Merkel and Nikolas Sarkozy to the leaders of the European Central Bank, the IMF, or all of them put together?  (Photo top left: Greek parliament, by PHKushlis, September 2006).  

In Greece where a tragedy of Herculean proportions plays out on the pavement in and around Constitution Square as well as at the President’s palace, the economic crisis has not only turned into a full blown domestic political crisis but also one which could take down the Eurozone and more with it.  It could and should be contained – but that’s dependent upon the Greeks getting their political house in order and the Europeans with Germany at the helm doing what needs to be done – not just half-way measures – to stave off Armageddon for yet another day.    

In reality, the Greek economy is tiny and composes just 2% of that of the Eurozone but it is still the 32^nd largest in the world. As a result of its dire economic straits, the country’s manufacturing sector declined by over 8% between March 2010 and 2011 and what began as a good year for tourism – a chief money earner – will likely have suffered because of strikes and public demonstrations representing popular discontent.  Moreover, in the first quarter of 2010, youth unemployment had reached over 36%.   

There’s also something amiss when a government is forced to borrow at ever higher interest rates to satisfy its creditors. Greece is locked out of international bond markets because of sky-high interest rates and must rely on its EU partners to avoid default.  A sovereign debt problem that could have been managed early on has turned into a death spiral in and of itself.     

If the Eurozone monetary union had been better conceived and implemented, Greece’s economic weaknesses simply wouldn’t matter that much.  But that didn’t happen. How the Europeans allowed the country’s debt to mushroom to this degree is beyond my expertise but The New York Times November 6, 2011 Business Section report “The Denials that Trapped Greece,” is, I understand, right on the money.

When push comes to shove, Greek politics and economics are usually intertwined.  Politics, as much as economics, is at the heart of this crisis.  

Normally, political parties in healthy democracies keep each other honest.  The watch-dog role of opposition parties is at the heart of democratic governance.  Lord knows, the Greeks invented democracy centuries ago on those very stones in Athens – or at least ones close by – where today’s Greeks have become mired in such a deep sovereign debt crisis that one would think the problem would bring its feuding politicians together to save the country from economic and political ruin.

Apparently not yet.   

The sandbox bickering between former Prime Minister George Papandreou and opposition leader Antonis Samaras, the country’s two major party leaders – once roommates at Amherst College in Massachusetts and later bitter enemies – continued unabated throughout the weekend.  To make matters worse, throw in the shrill fight over leadership between Papandreou and Finance Minister Evangelos Venizelos - within PASOK itself, the country’s majority party.

The country’s president Karolos Papoulias finally stepped in. Papandreou resigned Sunday and the two political leaders have been told to meet on Monday to determine who will next lead the country and serve in the interim cabinet.  The date for new elections will also need to be set.  This is part of the ongoing discussion between officials representing both parties according to AP.

PASOK and ND both culprits

Certainly major mistakes were made along the way – but the country does not have only PASOK to blame.  The previous New Democracy government overspent and over-borrowed in the good times. Then it hid the size of the country’s financial deficit when the global recession hit.  The extent of the problem only came to light when PASOK won the elections in 2009, examined the books and rang the alarm bells.

Promises, promises . . .

What PASOK did not do subsequently was make the unpopular and substantial structural changes needed to reverse course: the wealthy continue to find ways to avoid the tax collector, and the clientage system is simply too strong and deeply entrenched in the political system to be easily shaken off. Moreover, ND, the chief opposition party – although its leadership changed from Karamanlis to Samaras in the interim – thought playing party politics more important than calling for a bipartisan coalition capable of dealing with a country in shock.  It’s still not clear that Samaras really understands that message but one can hope.

In the meantime, both ND and PASOK are perhaps only finally recognizing what 52% of the public apparently already realizes - that the situation has deteriorated so much that neither major party alone can resolve the crisis but that together they might have a chance.

In fact, although PASOK has a shaky 153 vote majority in the parliament, Papandreou's popularity is at a nadir.  ND deputies are only 80, and opinion polls from May indicated that even together (each with about a 20% approval rating), a grand coalition would not survive a popular vote.  Yet, these are the two largest parties by far and at this point have much more to gain from cooperating than not.

The other seats are held by splinter and personality parties on their right and left and the far left has already indicated that it intends to keep its marbles, stay home and cause as many problems as its numbers allow.

For starters

For starters, the two largest parties need to bring the wealthiest into line, gain control over massive corruption and excessive perks for politicians, reduce the size of the state sector in terms of numbers of and special benefits for civil servants, and at the same time make needed legal changes to permit the shifting of more employment into private hands.  And I don’t mean fire sales of state assets to the highest bidder like happened in Russia during the 1990s.

This does, however, include abolishing all those restrictive work permit related licenses – from truck drivers to pharmacists - that have themselves become objects of expensive bribes to state officials.  

Changing the business climate

A country that ranks 100^th in overall global competitiveness for business start-ups needs to do some serious thinking about more productive ways of managing its economy.  Furthermore, running an established business in Greece is a challenge because of the legal prohibitions that just beg the energetic and innovative to break the law.  Thereby reinforcing the scourge of tax avoidance and adding to corruption in the state sector. This is just one of the reasons quality university education happens abroad.   Greeks value education – but the country’s laws make it nigh impossible for them to obtain a quality product at home.

Taken to the streets

No wonder Greeks across the board have taken to the streets in some of the largest and most widespread demonstrations since the fall of the junta in 1974.  And let that be a warning – not just for Greek politicians but for the Europeans and other democracies as well.

An austerity program that is focused on removing a social safety net yet allows outrageous usury rates to prevail thereby throwing a country’s economy into a tailspin is just plain folly.  It is a recipe for major social upheaval and worse.   

The Greek worker works longer hours than any other in Europe. Labor productivity in some sectors, however, is likely another story.  The economy is primarily service based.

Social Media Organized Non-traditional demonstrations   

Traditionally, Greek political parties or movements have controlled labor strikes and popular demonstrations in coordination with closely allied labor unions.  

Yet, the huge demonstrations in late May as well as those held more recently have a different flavor - one of non-partisanship, organized through social media not unions or the political parties, at first poorly covered by the mainstream media and ignited by the Spanish indignatos’ call for  Greeks to take to the streets.

Like the Occupy Wall Street movement the Greek protestors’ social base is broad. The use of excessive police force against them has brought charges of police brutality – harder to dismiss with cell phone photos and videos posted on the Internet and published in newspapers as evidence – but the demonstrations have also brought out the tiny minority of hard core destructive militants spoiling for a fight. 

A little instructive political history

In 1967 a coup d’état by an unknown group of Greek army colonels ended a period of intense political instability brought about by feuding between the former royal family and the country’s center-left prime minister George Papandreou and his son Andreas, the younger George Papandreou's grandfather and father.  The issue then was personality-based.

The intensity of the feud and King Constantine’s poor handling of it resulted in a situation whereby the king overstepped his authority and the country lurched from one unelected cabinet to another and labor strike after labor strike for nearly two years until he finally agreed to call elections for May 28, 1967. Those elections were never held because a military junta composed mostly of colonels imposed martial law on April 21, 1967.

Seven years of dictatorship followed – a period first welcomed by many Greeks because it stopped the chaos on the streets and sent the garbage collectors, fire fighters and bus drivers back to work. But as days turned to months and months to years and the government was not returned to civilian hands – the more normal pattern in Greek politics, the military government itself became the center of controversy and incompetency.  The fallout?  A sluggish economy, the birth of N-17 an indigenous and deadly terrorist cell, and the divided Cyprus of today.

It’s now November in Greece – the saddest time of the year.  Cold, dreariness and darkness fall heavy over the country.  Even though done clumsily in a move that backfired on him politically, Papandreou may well have been right to call for a popular referendum on the Eurozone – which 70% of Greeks have said they support.  This despite the shock, awe and dismay his announcement caused in Berlin, Paris and among his own party members.  Kicking that can down the road yet again did need to stop. So does the political infighting ans well asthe excessive interest charged by the money lenders sitting in their financial temples demanding their pound of flesh.

The Eurozone leaders can  best work closely with Karolos Papoulias, the country’s president and elder statesman, to stem the political feuding and get a rapid agreement to the terms of the latest EU bailout package - otherwise the country will be unable to pay its bills by December 15 - as well as establish a government of national unity that will lead to elections thereafter to do what needs to be done.