Turkey for its part has become a regional role model for how to establish democracy and for its sound economic policies. I am of course aware of the fact that February’s inflation rate stood at 1.45 percent but compared to the pre-2003 era, which witnessed periods of up to 100 percent inflation, the current Turkish government was successful in first stabilizing, then completely overhauling the economy. While much remains to be done, of course, the word “Tur(k)quality” has been added to our economic vocabulary. Besides, we should not forget that the economic scenario current Turkish Prime Minister Recep Tayyip Erdoğan inherited after the November 2002 elections was much worse than the one his Greek counterpart, George Papandreou, must deal with today.So how come Greece ran into trouble despite being an EU member state and part of the euro zone? The 12.7 percent budget deficit Greece has accumulated certainly did not occur overnight.
Greece has had economic problems before, including facing reductions in EU subsidies due to misappropriation of funds, or in more recent times, not complying with the EU’s Maastricht criteria. Greece was not always making negative headlines though, as years ago politicians and observers alike agreed that upgrading its infrastructure and making economic adjustments in line with EU stipulations would take time. For many years, nearly all of Greece except for a rather wealthy suburb north of Athens had been classified as being underdeveloped according to the EEC’s/EU’s own regional development guidelines. However, the least developed region in the EEC was Italy’s Mezzogiorno region, and not Greece. Hence, there were always system inherent obstacles to a speedy recovery should an economic crisis strike on top of other, more permanent structural deficiencies.
Greece over time joined the bandwagon of modernization, and when the country became a member of the euro zone in 2001, all seemed fine as stringent stability criteria and preceding austerity measures formed part of Brussels’ positive assessment of the Greek economy. Personally speaking, I always had my doubts whether a single currency without a coherent economic policy could work out in favor of Europe’s citizens. According to past EEC/EU treaties, Brussels, through its Council of Ministers, was only mandated to set “broad guidelines” in the economic domain, not run it.
A few years into the euro, a Greek bus driver had told me that the introduction of the euro resulted in a near doubling of prices. By now Greece competes with the United Kingdom when it comes to which nation tops the list of being Europe’s most expensive country (for Greece, measured in comparative, not net terms, referring to the relative price of a similar product compared with disposable income). Public sector salaries have reached 1,400 euros per month on a 14-salary per year basis, which in turn reflects on the constantly rising cost of living in the country.
A complex global economic climate -- to put it mildly -- makes matters worse, and today Athens is considering its options.
One solution is to drastically cut public spending, an austerity measure not necessarily a hot pick with the electorate but unavoidable. An alternative is to ask fellow individual EU member states for help; however, how much support is possible depends in turn on, for example, the German government’s impression of what its own electorate thinks about the matter.
A third possibility is to go straight to the International Monetary Fund (IMF), a scenario which is feared in Brussels as it would expose the EU’s own economic weaknesses to adequately support its members. The fourth scenario is “self-help,” and this is what the Greek government tried to kick-start two days ago by issuing government bonds for up to 10 years’ maturity ultimately raking in around 5 billion euro.
You may wonder why I left out a fifth option, but after the EU “Lisbonized” itself, it is surprisingly quiet on the solidarity front and Papandreou came back from Brussels nearly empty-handed and very disappointed.
I hope our neighbors will be able to stop their deficit from increasing any further and regain their strength both in economic and political terms soon.
