Greece’s economic crisis was a shock to the supposed economic and political stability of the Eurozone. After all, in 2007, just a year prior to the outbreak of the economic collapse, Greece’s economy was thriving. Fresh off joining the Eurozone in 2001 and hosting a wildly successful Olympic Games in Athens in 2004 which introduced the world to modern Greece, everything appeared to be running smoothly. However, this optimism was to be short-lived. The global financial crisis started in the United States in 2008 with a collapse of the subprime lending market and then developed into a full-blown international banking crisis with the crash of banks all around the world. The financial crisis hit Greece in 2009, triggered by structural problems in the Greek economy and the discovery of corruption, fraud and faulty data on the debt levels and deficits of the Greek government. This led to a loss of confidence among fellow European nations, leading to strict economic regulations, constricting austerity measures, and three separate bailouts. Private investment stopped, debt increased, and unemployment reached unprecedented levels of nearly 25% as Greece struggled with its international image, economic stability, and ability to provide social services and jobs for its citizens. Despite the media rhetoric surrounding the Greek debt crisis and Greece’s position as either a perpetrator of the global economic meltdown or a victim of it, the issues surrounding Greece’s economic disaster are not black and white. The debt crisis in Greece was a multi-causal phenomenon, with many factors contributing to the economy’s failures. Chief among these factors are successive government’s failures to regulate and modernize the Greek economy, the prevalence of corruption, fraud and tax evasion throughout Greek society, and the structural weakness displayed at both the European and domestic levels.

           Greece was especially susceptible to economic disaster based on their antiquated economic and political structure and the failure of previous administrations to foresee and prepare for a potential economic collapse. The problems begin with the construction of the Greek political hierarchy, which lends itself to poor “intra-governmental coordination, efficiency, and resources.”[1] The Greek prime minster position maintains many of the formal powers and responsibilities of a president, yet it lacks a central authority, and many of the operational tasks that fall under the prime minister are assigned to ministries, who have the freedom to make important decisions independent of the prime minister’s authority. Furthermore, these ministers often lack the bureaucratic and technological capabilities to actually enact change or reform.[2] A poor system of organization of public spending, tax revenue, and other data clouds the ability to make informed economic and political policy decisions.

             A political climate marked by a juxtaposition of a liberal democratic system and a political culture marked by corruption, tax evasion, and rousfetti contributed heavily to the problems within the Greek economic structure. Under the leadership of PASOK’s Costas Simitis from 1996 until 2004 and New Democracy’s Kostas Karamanlis from 2004 until 2009, the problems prevalent within Greece’s political structure were rarely addressed until under inspection from international powers and organizations. According to the Corruptions Perceptions Index, in 2010 Greece was ranked as the most corrupt nation in southern Europe.[3] One of the worst consequences of Greece’s disjointed political structure and dangerous levels of corruption was tax evasion, which reached extraordinary levels in the years directly preceding the economic crisis. According to the EU Commission, in 2006 uncollected tax revenue amounted to 30%, or approximately 3.4% of Greece’s GDP.[4] Combined with skewed unionization practices, rigid employment laws, and an underdeveloped welfare system, and it should have been apparent to Simitis and Karamanlis that Greek’s economy was laid on a faulty foundation.[5] The high levels of structural unemployment, longer unemployment due to industrial reorganization and technological change, should have signaled to these administrations that drastic changes needed to be made. The fact that neither administration did much to rectify these obvious weaknesses or the epidemic of tax evasion and corruption signaled a major susceptibility to economic collapse.

            While the 2004 Summer Olympic Games held in Athens signaled modern Greece’s emergence to the international world, it also set in motion a troubling landslide of debt and unsustainable spending by the Greek government. Hosting the event cost Greece almost €9 billion, making them the most expensive Olympic Games ever held up to that point, with Greek taxpayers on the hook for €7 billion of that expenditure.[6] That figure doesn’t even include the cost of major infrastructure projects undertaken to modernize the Greek transportation system, as a new airport and metro system were built to handle the incoming influx of visitors from around the world.[7] After a period of economic austerity that allowed Greece to qualify for the Eurozone in 2001, the Greek government participated in unwise and unnecessary spending that plunged the nation into steep economic debt, and the Olympic Games were a prime example of this unsustainable spending. In the days preceding the opening ceremonies, Greece warned the Eurozone that its debt figures would be worse than expected, with the 2004 deficit totaling 6.1% of Greece’s GDP, more than double the Eurozone limit.[8] In 2005, Greece became the first EU nation to be placed under fiscal monitoring by the European Commission.[9] After a brief surge in tourism during and directly following the games, the industry suffered a decline in visitors in the ensuing years as travelers opted for cheaper Mediterranean nations such as Turkey and Croatia.[10] Many of the stadiums and venues built specifically for the Olympic Games have gone unused since, or been used as dumping grounds. The Olympics did a fantastic job in advertising modern Greece to the world, but the government failed to capitalize on this success, leading to the deterioration of Greece’s infrastructure, tourism, and economy. While the Olympics alone didn’t cause the massive debt crisis of 2009, the Athens Olympic Games exemplified the structural problems and poor fiscal decision making that would come to haunt the country for years.

            International concern surrounding Greece’s finances emerged in October of 2009, when George Papakonstantinou, the new finance minister under recently elected PASOK Prime Minister George Papandreou, announced the tripling of government debt for 2009.[11] The debt figure reported by Karamanlis, which accounted for 3.6% of Greece’s GDP, was found to be inaccurate, and was upgraded to 12.8% of the GDP, then again to 13.6% in 2010.[12] This led to the questioning of the credibility of Greek financial data, with even Papandreou referring to the National Statistic Service of Greece as a “joke.”[13] Following these disturbing revelations, the Greek statistics agency was made fully independent, but the damage had already been done. Greek bonds were downgraded as Greece’s sizable foreign debt matured, and since Greece was part of the Eurozone, the ability to balance their accounts by devaluing their currency no longer existed. Foreign investors pulled out of Greece in droves, Greek banks were suddenly stuck with billions in bad loans, and as Greece’s bond ratings dropped, the interest rate on their payments rose, enlarging the debts.[14] Papandreou made an agreement with the Troika, the combination of the European Commission, IMF, and ECB, to undertake harsh austerity measures in exchange for €110 billion in loans.[15] The austerity measures imposed by the Troika, which included massive budget cuts and an increase in Greece’s value added tax, only made Greece’s situation worse, as they depressed demand and led to higher unemployment.[16] When confronted with the Greek crisis, the Eurozone governments and the EU displayed slowness, division, and ineptness, with their first response being that Greece should work out its problems itself. The 2010 bailout deal and austerity measures only exaggerated the debt, with Greece borrowing just to fund its interest payments instead of pushing the money back into the economy. In summation, the EU and the Troika were ill-equipped to deal with the debt crisis, lacking the capacity for a quick reaction, conducive policy, and centralized action.

            Beyond the economic costs of the crisis and ensuing austerity measures, which included cuts of public sector positions, salaries and pensions as well as the liberalization of previously non-competitive industries, Greece’s society and reputation suffered as well. The international media largely portrayed Greece as the perpetrator of the global economic crisis, when more realistically they were just the first and most vulnerable victim of a faulty economic system. Greece was identified as the weakest like in the Eurozone, the starting point of a contagious crisis.[17] Portugal, Italy, and Greece, among the first nations to fall victim to the economic crisis, were given the offensive moniker “PIGS,” and were widely mocked by op-eds and political cartoons. The consequences of this worldwide scorn were considerable, and beyond the economic effects of the crisis, it has had serious political and social ramifications.

The political reactions within Greece were far from homogenous; some called for Grexit, a departure from the EU, while others for stricter austerity measures.[18] The most apparent change in Greece’s political climate following the crisis has been the sudden rise in popularity of radical political parties like the leftwing populist party Syriza and the neo-Nazi Golden Dawn Party. In the October 2009 elections, Syriza only got 4.6% event, paltry compared to PASOK’s 43.9%.[19] Following the PASOK government’s agreement to the EU’s harsh austerity measures in 2010, demonstrators flooded the streets of Athens and other large Greek cities. The crowds of demonstrators were primarily made up of students and unemployed youths, but were also joined by striking and discontented workers. At the 2012 elections, Syriza was led by Alexis Tsipras, a civil engineer and former member of the communist youth organization, who led a campaign targeting PASOK’s concessions to the EU. The promises he made if his party were elected included rescinding the memorandum with the EU, nationalizing Greek banks, raising taxes on the wealthy, and suspending debt repayment until Greece had recovered from the recession.[20] This election cycle, Syriza fared much better, winning 26.9% of the vote, while PASOK only won 12.3%.[21] Most of the party’s support came from young voters, the unemployed, and the employed urban workers. Seeing an opportunity to win the next election as his party gained momentum, Tsipras began relying on a rhetoric based upon “the people.”[22] He framed the coming election as a confrontation between Syriza and “the people” against the establishment which had failed them. He also shifted towards a more moderate stance on the Eurozone, wanting Greece to remain in the Eurozone but not under the Troika’s current conditions. In the January 2015 elections, Tsipras and Syriza came out on top, winning 36.3% of the vote compared to New Democracy’s 27.8%.[23]

           After a period of negotiations following his election, Tsipras called for a referendum on whether or not to accept the Troika’s most recent deal, which demanded more spending cuts and tax increases, new taxes on small businesses, and the sale of the state’s remaining assets.[24] 62% of Greeks voted to reject the Troika’s offer, but in a shocking move, Tsipras returned to the negotiation table and agreed to measures even more severe than before. The agreement was widely condemned by economists and political theorists alike, and amongst the widespread dissatisfaction with the agreement, Tsipras called for new elections, which Syriza won by a slim margin. With the creation of a new European institution, the European Stability Mechanism, Greece is under more scrutiny than ever, and in an odd turn of events, Syriza has practically replaced PASOK, the party it once opposed, as the primary center-left Greek party. In a difficult bind, the party’s best remaining course of action may be a departure from the Eurozone.

On the opposite end of the spectrum, the Golden Dawn party has seen an emergence in Greece after spending most of its existence on the periphery of Greek society. The fascist neo-Nazi group believes in ultra-nationalism and the use of violence, is staunchly anti-bailout, anti-austerity, and anti-immigrants, and uses symbols from Greek antiquity such as Sparta to represent the party. However, the saddest part about the party’s recent rise hasn’t been its controversial stances, but the fact that it has provided more social services in certain areas than the government has. With the Greek hospitals overcrowded and underfunded, many Greeks needing medical attention have been able to seek out the Golden Dawn party, which has provided blood transfusions and other needs to Greek citizens only. The fact that Greek citizens are left to rely on a neo-Nazi extremist party for basic medical needs is all that needs to be said about the state of Greek society.

            Greece isn’t solely responsible for its economic crisis, as many media outlets would have you believe, but it certainly shoulders a fair share of the blame. Its weak political and economic structure made Greece a vulnerable subject to economic failure, as did the government’s negligence on matters of tax evasion, corruption, and fraud. Greece’s unnecessary spending following its inclusion into the Eurozone, such as the massive expenditures on Olympic venues that would never be used again, are a prime example of the poor fiscal decisions made leading up to the economy’s collapse. Yet while Greece could have done a better job preventing such a catastrophic collapse, the EU and the international community share some of the blame for their slow reactions and measures that only aggravated Greece’s economic struggles. Almost everything that could have gone wrong for Greece, did, and now, with a sputtering economy, massive debt, and a depressed and largely unemployed society, the future looks bleak. The actions of Syriza and the governments that come after it carry more importance than ever, and will determine whether Greece can recover from the debt crisis or if its economic, political, and social issues will continue their downward spiral. 

 

[1] Featherstone, 195

[2] Ibid.

[3] Ibid., 196

[4] Featherstone, 196

[5] Ibid., 197

[6] Malkoutzis

[7] Ibid.

[8] Malkoutzis

[9] Ibid.

[10] Ibid.

[11] Featherstone, 199

[12] Ibid.

[13] Ibid.

[14] Judis, 112

[15] Ibid., 113

[16] Ibid.

[17] Wodak and Angouri, 417

[18] Ibid., 418

[19] Judis, 115

[20] Ibid.

[21] Ibid.

[22] Judis, 116

[23] Ibid.

[24] Ibid., 117

​

.....................................

JSIS 240 GREECE TODAY
A small state in the southeastern corner of Europe, modern Greece features on the global juncture more often than one might anticipate from a state of its size, economy and demographics.  Taking this paradox as its starting-point, the course focuses on various issues in contemporary political, social, economic and cultural Greek history that have attracted international attention, and seeks to provide a concise interdisciplinary introduction to these issues.  Topics that will be examined include the 1967-74 dictatorship and the transition to democracy; the post-1974 Graeco-Turkish relations and the Aegean sea dispute; the ambivalent relationship of Greece to the EU; the Macedonia question; immigration and minority rights; the 2004 Olympic Games; the debate over the Parthenon marbles; the Greek debt crisis; Grexit; the rise of the Golden Dawn, and the refugee crisis.

​